Anonymous payment scheme

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This idea just popped into my head, just as I was about to fall asleep.
Being the idiot that I am, I had to get up to write it down. This idea has
probably been presented before...but I haven't seen it here yet.

Let's suppose myself and 10,000 of my closest friends form the First
National Cypherpunk Bank and Trust. We go through all of the hassles in
order to be the issuer of a Master Card or Visa. Now instead of having a
credit line, it is set up as a debit card. The card's limit is how ever
much you have prepaid the bank in advance. Once you have hit your prepaid
amount the card no longer gets approved. Now because everything is prepaid,
there is no risk to me, so I'll put any name you want on the card. The
questions I have are:

Is this legal in the U.S.?

If so, is anyone doing it?

If it's not legal in the U.S., is it legal anyplace else.

If this is a gray area, why wouldn't this scheme work?

If this scheme was set up, it appears to me that the infrastructure for
anonymous payments/netcash is already in place. Of course the issuer would
get a healthy fee for issuing the card...but then again, there truly is
no such thing as a free lunch. As my 10,000 friends and I have no plans to
set this up, feel free to pick it apart at will. (which I'm sure it will
be)

Sam

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On Mon, 2 Jan 1995, Samuel Kaplin wrote:

> -----BEGIN PGP SIGNED MESSAGE-----
> 
> This idea just popped into my head, just as I was about to fall asleep.
> Being the idiot that I am, I had to get up to write it down. This idea has

....best time for ideas....between sleep and wakefulness.....:>


> 
> Let's suppose myself and 10,000 of my closest friends form the First
> National Cypherpunk Bank and Trust. We go through all of the hassles in
> order to be the issuer of a Master Card or Visa. Now instead of having a
> credit line, it is set up as a debit card. The card's limit is how ever


Why jump through the hoops Visa or M/C would send you through if its a DEBIT
card??? You don't need them for something like that, simply the 
acceptance of the Internet community, that credits from another user 
drawn on the Cypherpunk Bank would be accepted.....which leads to your next
paragraph...

> much you have prepaid the bank in advance. Once you have hit your prepaid
> amount the card no longer gets approved. Now because everything is prepaid,
> there is no risk to me, so I'll put any name you want on the card. The
> questions I have are:

Sounds good.....and practical. ANY citizen in the world deposits with your
"Bank" legal tender in an account. US dollars would likely fit the bill as
they are pretty well accepted from North America to North Korea (black market
maybe.....but still accepted :>).

Then, when someone presents to your Bank proof of purchase/transfer etc
(a digitally signed message with your PGP Key perhaps?) then you transfer
a dollar figure from one account to another ...... assuming both purchaser
and seller have accounts atthe Cypherpunk Bank.

If the purchaser does.....but the SELLER doesn't, then (if so desired by
the seller) you have three choices:

   1) open an account, f/o (favour of.....sorry....I'm a Banker so pardon
      my lapsing now and agin into our jargon) of the seller, transferring
      in the requisite amount of US $ for the seller's later use (ie...
      then HE goes out and buys something over the 'Net).

   2) wire to the sellers account (overseas?) through a correspondent bank
      to the sellers bank where he has an account the US $.

   3) mail a draft in the appropriate US $ to the seller's designated address
      .....either snail mail or Fed Express, or whatever courier is selected.

> Is this legal in the U.S.?

Dunno....I'm in Canada. But I know that U.S. banking arrangements are
medieaval so I doubt it.

> If so, is anyone doing it?

See above :>

> If it's not legal in the U.S., is it legal anyplace else.

Sure.....Canada right now has a fully operational debit card system in place.
You go to a supplier to make a purchase and they run your bank card through
a machine just like your credit card for the purchase. Difference being, $$$
from your chequing account are debited, as opposed to to the line of credit
on your credit card being debited. You have dollars in the bank 
sufficient for the purchase, then no problem.


> If this is a gray area, why wouldn't this scheme work?

Its a perfectly workable scheme....IF...the BANK in question is trusted as
the medium of exchange. Thats the ONLY thing stopping its implementation,
namely having a trusted institution to handle the deposits/transfers.

Lets put it this way, I think the scheme would have ALOT more acceptance if
you as a seller presented your invoice for settlement at Chase Manhattan or
Bank of Montreal as opposed to the Cypherpunk Bank :>. 

> If this scheme was set up, it appears to me that the infrastructure for
> anonymous payments/netcash is already in place. Of course the issuer would

Sure it is....co-ordinating the infastructure would be interesting, but 
doable. The main thing is....is it economically viable for the institution
in question? Would there be enough commerce doneover the 'Net to justify
implementation of the supporting infrastructure (ie Internet hook-up's,
training of staff, etc).

Once there exists a demand for the service, coupled with a reasonable rate
of return to the Bank for provision of the service, then you'll see ALL
the top 20 banks in the world do it.

Until then, nobody will do it simply because the Cypherpunks think it is
a good idea. :>


<Sorry guys...I answered this online so no PGP sig this time.....>



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> > Let's suppose myself and 10,000 of my closest friends form the First
> > National Cypherpunk Bank and Trust. We go through all of the hassles in
> > order to be the issuer of a Master Card or Visa. Now instead of having a
> > credit line, it is set up as a debit card. The card's limit is how ever
>
>
> Why jump through the hoops Visa or M/C would send you through if its a DEBIT
> card??? You don't need them for something like that, simply the
> acceptance of the Internet community, that credits from another user
> drawn on the Cypherpunk Bank would be accepted.....which leads to your next
> paragraph...

I was looking at at the bigger picture. Any merchant who accepts Visa or MC
could now accept anonymous payments. No hassle at all on their part. They
probably wouldn't even know that it was an anonymous account. It fits into
the existing infrastructure very nicely.

A bank in Minneapolis has a similar system in operation. They issue you a
Visa card. That card automatically debits your checking account. The key
would be not to have the card attached to the account. If the card is
attached to any type of account, then there are reporting requirements. A
more apt analogy would be the prepaid phone cards. Walk into the issuing
authority, plunk your $9999.99 on the counter and ask for your card. When
you've spent it all, toss the card.

Sam
==============================================================================

Marriage is like a cage; one sees the birds outside desperate to get in,
and those inside equally desperate to get out.
                         - Michel Eyquem de Montaigne

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skaplin@skypoint.com                   | Finger skaplin@infinity.c2.org for
                                       | a listing of crypto related files
PGP encrypted mail is accepted and     | available on my auto-responder.
preferred.                             | (Yes...the faqs are there!)
                                       |
E-mail key@four11.com for PGP Key or   | "...vidi vici veni" - Overheard
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From: skaplin@skypoint.com (Samuel Kaplin)

   I was looking at at the bigger picture. Any merchant who accepts Visa or MC
   could now accept anonymous payments. No hassle at all on their part. 
   [...]
   The key
   would be not to have the card attached to the account. If the card is
   attached to any type of account, then there are reporting requirements. 

Visa was talking about an electronic traveller's check, which, from
what I could tell, instantiated an account in the sum of the value of
the card purchased, which was then drawn down by purchase.  The card,
evidently, had no embossing on it.  Personalization was limited to
some account id which would last the lifetime of the balance and then
disappear.

Eric

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In article <199501021344.FAA11566@largo.remailer.net>, you wrote:
>    From: skaplin@skypoint.com (Samuel Kaplin)
>
>    I was looking at at the bigger picture. Any merchant who accepts Visa or MC
>    could now accept anonymous payments. No hassle at all on their part.
>    [...]
>    The key
>    would be not to have the card attached to the account. If the card is
>    attached to any type of account, then there are reporting requirements.
>
> Visa was talking about an electronic traveller's check, which, from
> what I could tell, instantiated an account in the sum of the value of
> the card purchased, which was then drawn down by purchase.  The card,
> evidently, had no embossing on it.  Personalization was limited to
> some account id which would last the lifetime of the balance and then
> disappear.

This is EXACTLY what I was contemplating. I really wish they would
implement it. Then I can get the traveler's cheques out of my wallet.
(unsigned in both spots of, course.)

- --
==============================================================================
skaplin@skypoint.com                   | Finger skaplin@infinity.c2.org for
                                       | a listing of crypto related files
PGP encrypted mail is accepted and     | available on my auto-responder.
preferred.                             | (Yes...the faqs are there!)
                                       |
E-mail key@four11.com for PGP Key or   | "...vidi vici veni" - Overheard
Finger skaplin@mirage.skypoint.com     | outside a Roman brothel.
==============================================================================
                 Be careful when playing under the anvil tree.

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On Sun, 8 Jan 1995, Samuel Kaplin wrote:

> Date: Sun, 08 Jan 1995 20:20:18 -0600
> From: Samuel Kaplin <skaplin@mirage.skypoint.com>
> To: Eric Hughes <eric@remailer.net>, cypherpunks@toad.com
> Subject: Re: Anonymous payment scheme
> 
> -----BEGIN PGP SIGNED MESSAGE-----
> 
> In article <199501021344.FAA11566@largo.remailer.net>, you wrote:
> >    From: skaplin@skypoint.com (Samuel Kaplin)
> >
> >    I was looking at at the bigger picture. Any merchant who accepts Visa or MC
> >    could now accept anonymous payments. No hassle at all on their part.
> >    [...]
> >    The key
> >    would be not to have the card attached to the account. If the card is
> >    attached to any type of account, then there are reporting requirements.
> >
> > Visa was talking about an electronic traveller's check, which, from
> > what I could tell, instantiated an account in the sum of the value of
> > the card purchased, which was then drawn down by purchase.  The card,
> > evidently, had no embossing on it.  Personalization was limited to
> > some account id which would last the lifetime of the balance and then
> > disappear.
> 
> This is EXACTLY what I was contemplating. I really wish they would
> implement it. Then I can get the traveler's cheques out of my wallet.
> (unsigned in both spots of, course.)

Is this not essentially the same as the current pre-paid long distance
Phone cards on the market?

One would think the transition as easy for the credit card companies to 
make with a secured, disposable visa card.


> 
> - --
> ==============================================================================
> skaplin@skypoint.com                   | Finger skaplin@infinity.c2.org for
>                                        | a listing of crypto related files
> PGP encrypted mail is accepted and     | available on my auto-responder.
> preferred.                             | (Yes...the faqs are there!)
>                                        |
> E-mail key@four11.com for PGP Key or   | "...vidi vici veni" - Overheard
> Finger skaplin@mirage.skypoint.com     | outside a Roman brothel.
> ==============================================================================
>                  Be careful when playing under the anvil tree.
> 
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> 

073BB885A786F666 nemo repente fuit turpissimus - potestas scientiae in usu est
6E6D4506F6EDBC17 quaere verum ad infinitum, loquitur sub rosa    -    wichtig!

Black Unicorn <unicorn@access.digex.net> wrote:

>> This is EXACTLY what I was contemplating. I really wish they would
>> implement it. Then I can get the traveler's cheques out of my wallet.
>> (unsigned in both spots of, course.)
>
>Is this not essentially the same as the current pre-paid long distance
>Phone cards on the market?
>
>One would think the transition as easy for the credit card companies to
>make with a secured, disposable visa card.

NZ Telecom are conducting an experiment with using phonecards in
softdrink vending machines.  There was an article in The Dominion
newspaper's _InfoTech_ magazine crying out for the Government to stop
it, claiming Telecom's creating an independant (from the Reserve Bank)
currency, will destroy the New Zealand economy, etc., etc.

---
Paul Foley <Paul.Foley@vuw.ac.nz>    -----    PGP encrypted mail preferred

                 PGP key available from keyservers or finger
                    (finger pfoley@akeake.its.vuw.ac.nz)

From: Paul Foley <Paul.Foley@vuw.ac.nz>

   NZ Telecom are conducting an experiment with using phonecards in
   softdrink vending machines.  There was an article in The Dominion
   newspaper's _InfoTech_ magazine crying out for the Government to stop
   it, claiming Telecom's creating an independant (from the Reserve Bank)
   currency, will destroy the New Zealand economy, etc., etc.

Sounds like your basic central banking ignorance.

Look folks, just so y'all don't look like idiots, remember this: A
means of payment is not the same thing as a currency.

Eric

Well, I know some shops have so called 'switch' or 'smart' cards to debit 
your account, some of these are on their own credit line, others are not.

I have an account with a bank in Britain which gives me a "VISA" Card 
which is actually a 'direct-debit' card.  I can use it (and have) all 
around the world as a regular VISA card and in any 'VISA compatible' ATM.

As soon as my balance drops to zero, I can no longer use it.  And when I 
do, the money jumps out of my account immediately and can no longer be used.

This is a bank-issued card, and also acts as my ATM card to access my 
current account - there is NO charge for this.  I'm not sure exactly how 
that works.

Whether or not VISA would accept a proposal from First National 
Cyberphunks or not remains to be seen...

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> Let's suppose myself and 10,000 of my closest friends form the First
> National Cypherpunk Bank and Trust. We go through all of the hassles in
> order to be the issuer of a Master Card or Visa. Now instead of having a
> credit line, it is set up as a debit card. The card's limit is how ever
> much you have prepaid the bank in advance. Once you have hit your prepaid
> amount the card no longer gets approved. Now because everything is prepaid,
> there is no risk to me, so I'll put any name you want on the card. The
> questions I have are:

On Tue, 3 Jan 1995, jRT wrote:

> 
> Well, I know some shops have so called 'switch' or 'smart' cards to debit 
> your account, some of these are on their own credit line, others are not.
> 
> I have an account with a bank in Britain which gives me a "VISA" Card 
> which is actually a 'direct-debit' card.  I can use it (and have) all 
> around the world as a regular VISA card and in any 'VISA compatible' ATM.

  Alot of the banks in the US are now offering these cards for use with 
checking accounts.

> 
> As soon as my balance drops to zero, I can no longer use it.  And when I 
> do, the money jumps out of my account immediately and can no longer be used.
> 
> This is a bank-issued card, and also acts as my ATM card to access my 
> current account - there is NO charge for this.  I'm not sure exactly how 
> that works.

  When a charge is made to the card it is subtracted from the balance 
until midnight? of that night. If the actual charge does not come in to 
the bank, the amount is then added back to the balance. (This was learned 
thru my GF who had some trouble with her card -- forgot to write down a 
couple of transactions and ended up at zero).

> 
> Whether or not VISA would accept a proposal from First National 
> Cyberphunks or not remains to be seen...

  I think they should. If they would is another matter. It would be 
similar to having a 'secret' Swiss bank account that can be accessed from 
anywhere in the world, converted to cash at cash machines, transferred to 
others, etc.

  I like the idea of an anonymous Visa better than some sort of new 
net-bank because it is already established, the mechanism for transfer is 
already in place, and for the most part de-bugged.

  If there was an Anonymous Visa debit card I'd defiantly go for it. It 
would certainly keep those marketing types from tracking my spending 
patterns.

    Brian

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------------------------------------------------------------------------------

>   Alot of the banks in the US are now offering these cards for use with 
> checking accounts.

   Yes.  There are also the ``secured'' credit cards where one deposits X 
dollars into the issuing bank and is allowed 1.5 * X in credit.  Many of 
these will promote to ``real'' credit cards after a year or some specific 
amount of charging that's been paid back on time (usually about $1000).  
These are a godsend for those who've gone bankrupt; as such I wouldn't be 
terribly surprised if the issuers didn't even bother to do a credit check 
until the card promotes, if at all.  If this is the case, what's to stop 
someone from filling out the application under a pseudonymous identity 
with a mail drop as the contact address?    

>   I think they should. If they would is another matter. It would be 
> similar to having a 'secret' Swiss bank account that can be accessed from 
> anywhere in the world, converted to cash at cash machines, transferred to 
> others, etc.

   It's a great idea - at last year's Siggraph convention I needed to 
stay in contact with an associate 24 hours a day if need be.  I 
discovered that in the Kinko's in the Orange County Convention Center 
there's a cellular phone rental machine, but it took credit cards and the 
people at the desk wouldn't let me rent one without one - even though 
I offered to leave my ID and a sizable deposit.  

   I'm technically not old enough to get a credit card, and regardless of 
that fact when I spoke to someone at Barnett Bank about getting one and 
listed my occupation as 'Consultant' she laughed in my face.

   Solution: I got a secured card from a bank in Vermont.  They have $500 
of my money in an account, and I have a card with a $500 limit in my 
father's name.  

>   If there was an Anonymous Visa debit card I'd defiantly go for it. It 
> would certainly keep those marketing types from tracking my spending 
> patterns.

   Without a doubt.  I wonder, again, if the issuing bank even _cares_ 
who you are if you get one of these secured cards.  There was discussion 
here about debit/secured cards some time ago - anyone remember the upshot 
of the discussion?

-jon
( --------[ Jonathan D. Cooper ]--------[ entropy@intnet.net ]-------- )
( PGP 2.6.2 keyprint: 31 50 8F 82 B9 79 ED C4  5B 12 A0 35 E0 9B C0 01 )
( home page: http://taz.hyperreal.com/~entropy/ ]---[ Key-ID: 4082CCB5 )