This Essay is CopyLeft. USING ELECTRONIC BANKING (1986) --- BY DUNCAN FRISSELL --- Two years ago, the idea of government as electronic "Big Brother" was riding high. In a spate of articles appearing during the Orwellian year of 1984, commentators warned that an alliance of the State and the Computer would eliminate privacy --- particularly financial privacy. For various reasons, I believe that these doomsayers were wrong. Far from aiding the government, electronic banking has provided the individual with new opportunities for *increased* financial privacy --- if he knows the new rules of the game. Let's explore the specific fears of most writers about privacy and electronic banking to see what they may have overlooked. Most observers have said that the "cashless society," in which everyone uses some form of credit card or electronic payment to complete transactions will give the government an instant, detailed profile of everyone's financial activities. Automatic teller machines, home banking by computer, credit cards, debit card, and point-of-sale electronic payment terminals are part of a general move away from the anonymity of cash. Critics of the new technologies fear that these forms of payment leave a record of all transactions to be read by government computers that will tell where an individual went, what he bought, and who he bought it from. The concern is that privacy will disappear since the Super-State will know all. What is the reality of electronic banking as it has developed? What can individuals do to protect their privacy from computer prying? What future technological developments may *increase* the financial freedom of individuals? The first innovation of the new order to achieve widespread popularity is the Automatic Teller Machine (ATM). You insert your teller card into the ATM, punch in your Personal Identification Number (PIN), and take out cash. But remember: an automatic teller card is a bearer instrument. *Anyone* with the right card and proper PIN can get cash or perform other electronic transactions at an ATM. Automatic Tellers Compare this with the traditional problems one has convincing a human teller to cash a check where you have to present two or more identity documents --- and even then the check may not be honored. An ATM transaction is anonymous by comparison. The government may know who holds the bank account for which the ATM card is being used, but it does not know who is making the withdrawals. *This* is the one fact that has been overlooked about electronic banking. The State can only track an individual's electronic transactions if that individual can be linked to the accounts involved. Since the first teller machines were introduced 10 years ago, several nationwide networks have formed which give you access to your money from ATMs all across the country. The two leading networks are the PLUS system and Cirrus. Each network has associated teller machines throughout the U.S. PLUS has recently been linked to the Royal Bank of Canada so that customers in each nation now have access to their accounts in the other. PLUS has announced plans to link up with European teller systems by 1987. Once one of the domestic teller networks links up with Eurocheque, the large European check-cashing and ATM network, you will be able to access your Swiss, Austrian, or British bank account from ATMs in the U.S. (without anyone having information about your account). Here's an example of an anonymous banking transaction that would not have been private if performed before the advent of electronic banking. Suppose an individual has money overseas that he would like to spend in the U.S. --- perhaps to supplement his income, without breaking any laws and without anyone in the U.S. being aware of the existence of the funds. To accomplish this transaction electronically one would first direct an agent overseas to open a bank account in the U.S. agent's own name. Alternatively a U.S. resident could open a U.S. account from another country by mail. Next our subject obtains the teller card and PIN for the account either from his agent or directly from the U.S. bank. He then orders his overseas bank to regularly transfer funds from his overseas account to the stateside account. Whenever he likes, he can go to a nearby teller machine and withdraw money. If he is a big spender and doesn't like the $500 a day limit on ATM withdrawals imposed by some banks, he can obtain a second card on the same account. Or he can open multiple accounts. Using this method, anyone can obtain hundreds of dollars in cash each day anonymously and legally. In Florida and California ATM cards are being used in the first point-of-sale terminals. In these systems you insert your teller card into a terminal near the cash register at a business and you order a payment from your account directly into the merchant's account to cover the total of your purchases. This is an example of a pure "cashless" transaction --- and yet, no identification is required since the use of the proper PIN serves as a form of identification. Anonymous ATM card holders, like the person in our previous example, will be able to complete these transactions without compromising their privacy. Home Banking A few banks, primarily in major cities, allow their customers to perform certain transactions via personal computers. These customers can pay bills to creditors (who have registered with the system), switch funds among accounts, obtain cash advances from or make payments to credit cards, and see an up-to-date statement of checks clearing their account and deposits that have been credited. As such services expand, it will eventually be possible to order electronic payments or transfers to almost anyone in the developed world. And this will be without the cumbersome registration process now used. Securities firms have started to permit customers to buy and sell securities by computer. This gives sophisticated investors new control over their financial affairs and is likely to increase the volatility of the securities markets. Home banking and home securities trading is an extension to ordinary customers of the sophisticated funds management prerogatives long enjoyed by the money managers of large corporations. Note that "home" banking is not restricted to home but can be accomplished anywhere from any computer, even a cheap portable attached to a pay telephone. It is already possible to access your U.S. home banking account from Europe using the existing computer telecommunication networks. Credit cards Even credit cards have a role to play in private electronic banking. Although credit cards and debit cards (a card that looks like a credit card but deducts purchases from your bank account automatically) require credit approval and identification before they can be used, the transaction trail they leave is linked by the credit card number --- not by the user's name. As with other electronic payment systems, the user must be linked with the card at the issuing financial institution. If that institution is in another country, the cards can be used in the U.S. without leaving an easily accessible record. Sophisticated travelers have for years used credit cards issued by European banks to protect their privacy. Conclusion Once you know how the systems work, it is clear exactly what has been overlooked by those who fear that electronic banking will destroy privacy. If the account on which an electronic transaction is performed is not connected to the user (or if the account is located in another country, particularly a country that practices bank secrecy), a government's ability to gain any useful information about the user's affairs is limited. Nation states, by definition, have geographic limitations. Each nation is jealous of its own sovereignty and it is expensive and difficult for the U.S. government to perform investigations overseas. Individuals do not have geographic limits but can enhance their ability to manage their financial affairs privately by using the new systems. The new technology will soon make it as cheap and easy to use overseas accounts as it is to use accounts in local banks. Thus, the technology should be hailed as a savior, not as a destroyer of privacy. ===BOX========================================================= ROUTING ELECTRONIC TRANSACTIONS Teller machine withdrawals, home banking, and other electronic transfers all work the same way. The user communicates with a central computer (Computer A) using either an Automatic Teller Machine (ATM) or a personal computer connected to a telephone. The user supplies an electronic transaction card or account number and a Personal Identification Number (PIN) to Computer A. He orders some sort of transaction. Computer A contacts the central computer (Computer B) at the user's financial institution, transmits the two identification numbers, and tells Computer B the nature of the user's proposed transaction. Computer B then verifies that the electronic transaction card number or account number and the PIN are correct and that there are sufficient funds or credits in the account to complete the transaction. Note that names are not involved at any point in the process and that the card number and PIN the user has given are arbitrary numbers assigned by the user's financial institution. If everything checks out, Computer B sends a message to Computer A telling it to carry out the user's request. ===BOX==========================================================