For most of modern history, national and global economic crises have been accompanied by a run on the banks.
Dating back to the 16th century, banking runs have accompanied the British South Sea Bubble, the Great Depression, and even the 2007 financial crisis included market-liquidity failures that were comparable to a bank run.
While people's impulse to get their money out before the banking system or economy collapses is understandable, this kind of panic usually exacerbates the situation. It should hardly be surprising then that banks and governments alike have tried to prevent or mitigate the impact of panic-induced runs on banks. But as society becomes increasingly cashless, could the classic bank run become a thing of the past? Advances in technology mean that banks and consumers alike are safer from the impact of bank runs than ever.
The ever-increasing number of customers who have direct access to their bank accounts through digital portals and mobile interfaces, might accelerate the possibility of early redemptions in a stressed environment. Nevertheless, banks can always implement maximum transfer limits per account, which has the same effect as limiting cash withdrawal at ATMs.
It is worth noting that alternatives to that issue exist. Indeed, securities such as bonds or equities can be segregated on the bank balance sheet and could be a good way of protecting assets. In fact, some of the big changes driven by fintech dovetail neatly with the evolution of existing financial systems. For decades, our financial system has relied on banks to lend more than they hold as collateral. This is known as the money multiplier effect. A purely cashless environment wouldn't drastically worsen the current imbalance.