Most of us love the fact that we can get cash from an ATM machine, and don’t have to line up in the bank and get money direct from the teller.
And more and more of us now have apps on our phones that allow us to check our balances, transfer funds and even make payments.
That’s all good.
However, in a world where our money is managed less and less by people and more and more by software, there are some pretty big risks involved.
One risk is the simple failure of the hardware and software that tracks and manages our money within the banking system.
Incredibly, many of the computers used by banks are decades old and clunky, as is the software that runs them. It seems that instead of updating from the ground up, most banks keep up with the times simply by adding patches on top of old, legacy systems. That’s a recipe for disaster.
Banking giant HSBC, Bank of America, Commonwealth Bank of Australia, ANZ Bank, Royal Bank of Scotland and others have all experienced what they euphemistically call “outages” as a result.
It’s only a matter of time before one of these outages cascades into something more serious – like the loss of all the money in their customer’s accounts.
When your money is all digital, it takes just one glitch to wipe out your savings.
Perhaps more worrying still is the rise of cyberattacks on banks, where hackers get into these old, clunky and vulnerable systems and simply withdraw the money from your accounts.
This month the Justice Department indicted seven hackers who work for Iran’s Islamic Revolutionary Guards Corps, charging them with cyberattacks on dozens of American banks.
In 2015 a gang of cybercriminals infiltrated more than 100 banks across 30 different countries and made off with up to one billion dollars.
Ben Lawsky, head of New York’s Department of Financial Services (DFS), said recently, “We are concerned that within the next decade, or perhaps sooner, we will experience an Armageddon-type cyber event that causes a significant disruption in the financial system…”
Here is the thing…
While banks stagger on, tweaking and patching their legacy computer and software systems, hackers are becoming more and more sophisticated and brazen.
Some of these hackers are lone wolves, some are part of organized crime syndicates, and others are supported by sovereign governments, like Iran and China.
The end game is not hard to see. Sooner rather than later, one or more massive cyberattacks is going to hit your own bank. Your money will either be stolen, or it will simply disappear as part of a software failure.
While I’m not suggesting anyone stop using banks, I do think we need to be aware of the risks.
As always, my own solution is to take out some insurance against an event like this by moving some of my wealth into the form of physical assets.
And by that I mean gold. Gold is a physical asset but is also as good as cash. You can sell gold to a dealer at any time, in any country in the world, for a known price.
Gold is portable, liquid and the perfect insurance policy against an Armageddon-type cyber event or banking software failure.
Some of that gold I would buy in its physical form. In other words, you take personal delivery of some of your gold, so you have the physical coins or bars in your possession.
The balance, for an additional layer of safety, I would keep in the form of an allocated gold purchase. This means you don’t take personal delivery today, but that you can at any time in the future. You can choose to have your allocated gold stored close to home, or overseas.
For overseas, allocated gold purchases, I recommend BullionVault.