The Bank Argument

May 13, 2016

All of a sudden, two large companies have become champions for privacy. That is suprising, and we have to ask ourselves: Why?

The first one is of course Apple, which very publicly defended our right to privacy on our phones even if the person in question is a known and dead ter'rist. They vehemently fought against the FBI who wanted them to create a software update that can unlock an iphone. Strangely enough, they were compelled to unlock the phone using the "All Writs Act" from 1789. That is, the FBI wanted a backdoored iOS and wanted it installed on a specific phone.

Of course, it can be assumed that this would only be the first phone that the FBI wanted to unlock, which is one reason that Apple fought against the order. The case was dropped only when an outside party offered to unlock the phone for the FBI, so the agency didn't really need the help for Apple in this case any more.

Apple didn't use to be so vehement about their users' privacy, so why this, and why now? Some people think this is about the Bank Argument, and it's interesting enough to look at. But before that, there's another recent example of a company putting user privacy interests forward.

And that company is Facebook. In the beginning of April 2016, Facebook introduced full end-to-end encryption for all users of its WhatsApp messaging service. And it's not even homegrown somewhat-security like some other messaging apps use. This is TextSecure from WhisperSystems, one of the most respected and well-known vendors in that area. This turns WhatsApp into one of the strongest and most widely-reaching encryption deployments of the world. The EFF has upgraded their rating of WhatsApp, and it is now as high as Swiss-made Threema, the only thing keeping it from a top rating being its closed-source-ness. But the question remains: Why would they do that? It costs money, it costs them opportunities For example, if you have access to chat messages, you can mine them for sentiment analysis, or ads, or even just for training your next super-AI., it costs them marketshare and it's not really something that they need to stay on top of the game, being the most widely used messenger anyway.

So, why?

One argument that seems clever and compelling at first is the Bank Argument. Apple and Facebook do this because they want to become banks. To do this, you need the trust of your users and secure ways of contacting them, and secure ways for your users to connect with other users. So people have speculated that both Apple and Face book want to become banks Apple's CEO even very suspiciously stated that they do not want to become a bank. If that's not a giveaway I don't know what is!. The arguments for this are varied. They want to become a bank because they need more money. They want to become a bank to know more about you. They want to become a bank because other banks are shit. They want to become a bank because they have too much money; that last one being particularly amusing.

To be honest: I think it would be a great move for any of the big tech companies to become banks. Simply because banks are shit. We all know this from the last time they crashed our world economy and got paid billions for that. But also because they're slow, expensive and not very customer-oriented; and I think that BigTech can do those things better than BigFinance.
It could also be very profitable for those companies to turn into banks, as online payments already generate billions in revenues for some shady companies.

But I also think that they won't become banks. One indication for that is that they're not already banks. Apple, Facebook and Google already have payment systems. Facebook even had their own currency, the Facebook Credit, which could trivially be turned into a bank account, but was cancelled after a few years. There's no good reason to turn these payment systems into "real" banks, but it would come with hugely increased regulation and oversight. Being a bank is not as easy as many commenters make it sound, so without a really great incentive, becoming a bank isn't such a great proposition. That's probably why Facebook spun out their credits system into a separate company, Facebook Payments Inc.
They might become more like banks, offering services that banks used to offer, but they will probably not become full-blown banks. There are just too many downsides to that.

As Bill Gates said, Banking is neccessary, banks are not.