Do we have a right to anonymous payments? If so, is this right linked to certain payment instruments, such as cash? Does this right apply equally to payers in the analogue and the digital world? For most people, the daily payments initiated as market participants are unavoidable. It has therefore become one of our basic needs, like sleeping and eating. The right to anonymity, which can be regarded as an essential pillar of a modern democratic society, is generally derived from the fundamental rights to freedom of expression and informational self-determination.
This right is by no means limited to the analogue world. For example, we have the right to browse the internet anonymously, using appropriate software and pseudonyms. Does this right also apply to the payment act? In the analogue world, this right is indirectly established by the existence of cash. Cash leaves no traces of data and, due to its special status as legal tender, it is a means of payment
which nobody can refuse to fulfil a monetary claim without suffering legal disadvantages.
(quote from the Bundesbank)
As long as there is still cash as legal tender, we therefore do not only have the option, but also the right to anonymous payments. The interesting question of whether this right can also be enforced anywhere and at any time (e.g. when paying the broadcasting licence fee) has been debated by the German courts for quite some time, at ever higher levels.
Right to anonymous cashless payments
As a means of payment, cash, which is still dominant today, is gradually losing in importance (not, however, as a means to store value). The shift in demand in favour of online retailing has contributed to this, as cashless payments are usually the only option in that area. In the future digital world with, for example, the Internet of Things and automotive payment applications (pay per car), the only thing that will remain are cashless digital payments. In Germany, the right to anonymous online payments is only protected by law for the use of telemedia (Sec. 13 No. 6 of the German Telemedia Act – Telemediengesetz).
The German party SPD was the only party who was consistent and future-oriented in its election campaign program in 2017 in this regard as it demanded a general right to anonymous cashless payment. And rightly so, as why should I have to forfeit my elementary rights from the analogue world when entering the digital world, which is inevitable nowadays? The demand of the SPD party was an important step forward, which unfortunately was again deeply buried in the slightly childish games in the sandpit of the grand coalition.
Is this demand even technically feasible? “Cashless + anonymous” is not an inherent contradiction. In contrast to a cash payment, there is always data on the payment process, but not necessarily on the identities of the payer and the payee. This means that digital payments can also be made while maintaining anonymity. You don’t have to surf the Darknet and pay with Bitcoins to achieve this. Digital payments with an anonymous prepaid card (e.g. a gift card) demonstrate how easily this can be done. Since the mid-1990s, analogue cash has been capable of being used digitally 1:1 as an anonymous bearer instrument without any further complications. If technology is not the problem, then what is?
5AMLD: The right through the back door
Let us recall the chutzpah of EU Directive 2018/843 (better known as AMLD5), which has to be implemented by 10 January 2020. In its first draft (2016), the Commission wanted to ban anonymous cashless online payments using e-money. Anonymous e-money payments at the physical POS have not yet been banned, but the thresholds have been significantly lowered (from EUR 250 to EUR 150). In this segment, the door should not be slammed shut completely, as prepaid cards currently still make an important contribution to social and financial inclusion according to recital 14. In addition, according to the Commission’s Impact Assessment Analysis on the draft directive, a ban on anonymous payments in this segment would not be very effective as cash can still be used here.
AMLD is obviously intended to prevent money laundering and terrorism financing. There was no evidence of money laundering with anonymous prepaid cards. On the contrary, the current scandals show that money laundering in the billions is mainly carried out via non-anonymous accounts by fully identified bank customers (Danske Bank in Estonia, ING Bank in the Netherlands, Deutsche Bank in Russia, etc.). The only remaining argument is therefore terrorism financing. There was vague evidence, which has not yet been verified, that in the Paris attack (November 2015) the Islamic terrorists used an (anonymous?) prepaid card.
The consequence is to abolish the right to anonymous cashless payment on the internet for half a billion EU citizens. As a passionate cyclist, I am delighted that the terrorists did not use an anonymous bicycle when they fled, for otherwise the Commission would have introduced the same questionable logic of compulsory bicycle registration and the use of number plates throughout Europe.
In recital 14, the Commission expresses itself somewhat more cautiously: anonymous prepaid cards could be (instead of are) used to finance terrorist attacks or for their logistical preparation. The European Data Protection Supervisor, who was not consulted until 2017, when the legislative process of the Directive was already at a very advanced stage, rightly criticises the proportionality of the measures with regard to the objectives pursued by the Directive. During the legislative process, the ban on anonymous online payments was first postponed with the help of a three-year transitional period and finally relaxed by the introduction of an exception for online payments of up to EUR 50 per transaction. It seems there were still some freedom fighters in the European Parliament.
What are the conclusions from all this?
Firstly, the right to anonymous payment in the analogue world is ensured by the existence of cash; in the digital world the door has now almost been closed by legislators throughout Europe.
Secondly, after terrorist attacks, governments tend to provide very fast legislative actions, which increases the perceived security of citizens, but de facto limits their civil liberties. The Commission wanted to torpedo anonymous payments on the internet within 6 months (!) in 2016 due to the threat of terrorism. It would be advisable to think about such important interventions a little longer and discuss them a bit more.
Lack of information or interest?
Thirdly, the executive and the legislature take socio-political discussions into account. The right to anonymous cashless payments in the digital world is (as far as I am aware) not the subject of public debate anywhere in Europe, despite the fact that this issue is increasingly affecting all consumers. There would have actually been enough time between the first draft of 5AMLD (July 2016) and its adoption (May 2018). There were only a few data protectors and small business associations who raised their concerns. Hardly any newspaper reported on the Commission’s plans. Are consumers in their role as payers not sufficiently informed or simply not interested?
New data currency
Fourthly: There is understandably no support for this right from the Big Data industry. On the contrary. Non-anonymous payers are most welcome as data producers and even indispensable for many Big Data business models. It can be assumed that such payers will gladly and willingly use their payment data (amount, when, to whom and for what purpose) as a means of exchange. With PSD2, the necessary infrastructure for account data (“open banking”, account information services, etc.) has already been created in the EU. Legally regulated data sovereignty in favour of the human data producer (based on the principle “who is the cause”) leads to an additional income for all those who want to use their data as a new complementary currency. Many will be pleased about this material improvement, especially as this new data currency can be used to purchase exclusive services that cannot be bought with the traditional currency (e.g. it is currently only possible to purchase WhatsApp with data currency). It can be assumed that payment data will be the highest denomination of the new currency. For people who still value their privacy, however, the new currency is worthless. They are the material losers, as the production of privacy leads to higher costs (e.g. higher car insurance rates and health insurance contributions, etc.).
Anonymous payments: Hidden Agenda?
The right to anonymous digital payments appears to run counter to the interests of the digital economy. In this context, an interesting but somewhat unclear quote from the European Data Protection Supervisor when asked for his opinion on 5AMLD might make sense:
While we do not express any merit judgment on the policy purposes pursued by the law, in this specific case, we are concerned with the fact that the amendments also introduce other policy purposes — other than countering anti-money laundering and terrorism financing — that do not seem clearly identified.
The media regularly report about the, from our western point of view, dystopia that is the Chinese surveillance capitalism, in which the use of digital payment data plays an important role. It appears that no Chinese person is upset about this (provided they still have the right to do so without fear of reprisals). Most people even think such a society is great. Maybe this will also be the case with us in Europe. OK, but let’s at least talk about it first.
Let me conclude with a tip for a book. A good basis for this discussion is the new and well-researched book “Schönes Neues Geld” (“brave new money”) by Handelsblatt journalist Dr. Norbert Häring. The subheading shows the direction of his far from optimistic views: “PayPal, WeChat, Amazon Go – a totalitarian world currency is looming”. You possibly won’t share all of the conclusions he draws from the facts. Nevertheless, in my opinion the book is a must-read so that we at least do not lose more rights in the future without being aware thereof.
Cover picture: Copyright © fotolia