[Dave Birch] There’s a letter in The Economist concerning their recent story on cashlessness.  It comes from someone who works in a bank fraud department and they paint an apocalyptic picture: "The potential for digital piracy of cash soon dwarfing the piracy of digital content is very real… Not only will the value of national currencies be undermined, but they will also be open to manipulation when effectively privatised and under corporate control.  If digital money becomes standard, those insisting on paying with cash will be penalised. I am currently charged a ‘non-Direct Debit fee’ each time I pay my cable bill over the phone – speaking with an automated voice, no less – because I refuse the ‘convenience’ of Direct Debit. My local lunch restaurant no longer accepts debit or credit card payments under GBP10 because the banking fees are too high.  Cash works just fine."  Now I’m confused: as a law-abiding, tax-paying citizen (well, subject), should I be for cash or against it?

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Now, setting aside for one moment the privatisation of national currencies and whether it might a good thing or a bad thing — I promise to return to this issue on the blog sometime — is this person right that the risk of electronic cash is just too great?  Is sticking with the cash the only way to avoid national calamity?  Is the risk of e-payment just too great?  The folks over at Terror Finance seem to agree.  They think that a combination of mobile phones and electronic cash  is asking for destruction….

This is how it works: You buy a stored value card for X amount of dollars and a prepaid mobile phone. Next, you register with the m-payment service provider using a free anonymous e-mail account, your prepaid mobile phone number and the money on the stored value card. Using your mobile phone, you log on to the m-payment service provider and give them the number of the mobile phone to which you wish to transfer the funds from your stored value card. The m-payment service provider sends a message to the receiver’s phone number asking where to transfer the money. The recipient can request the transfer to his stored value card and withdraw the funds from any ATM.

They go on to say that "Since the Near Field Communication security technology (which is the basis of the m-payment system) features sophisticated encryption, it represents a formidable impediment to law enforcers and intelligence services trying to detect suspicious money transactions".  I think this is based on an incomplete understanding of e-cash, mobile payments and NFC but other than I suppose it’s a fair point.

But here is what is most puzzling, something that I’ve remarked on before. They say that "The challenge is compounded by the fact that the m-payment process can leave little to no audit trail; perhaps, two mobile-phone numbers; the amount; and short and simple instructions on transmission and reception".  So law enforcement officials have only the mobile phones numbers (therefore the locations) of the perps?  I’m no expert on international money laundering, but that sounds like a bit of a head start to me.

Incidentally, if you’ve ever wondered what $53 million in cash looks like, here it is piled up at the house of someone else who is much in favour of keeping notes and coins in circulation: a Mexican drug baron.

My opinions are my own (I think) and are presented solely in my capacity as an interested member of the general public. [posted with ecto]

1 comment

  1. Fraud is much harder with cash–the authentication features are more easily layered. “Money laundering” might be easier, depending on what you mean by that.

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