Anonymous payment options in the world of 2021
“I’ll pay in cash” — a phrase we hear less frequently these days. People prefer contactless transactions instead of carrying handfuls of dollar bills. Digital payments shove traditional cash operations aside and threaten their position as a legal tender. Instead, more services are in favor of credit card transactions.
Cash transactions guarantee simplicity and bring another vital variable to the equation: anonymity. It is difficult to track cash payments, while banks carefully log clients’ credit card transactions. So, can we achieve the same or a higher level of anonymity in the cashless world-to-be? Yes, cryptocurrencies made their debut as seemingly untraceable digital assets. But is that all?
Full-speed ahead towards cashless future
A cashless future is a trend that industries move towards aggressively. On paper, cash is still a legal tender. However, many institutions refuse to serve people offering bills in exchange for goods. For some, this is not an issue: credit cards or other means of payment take over. But what does this abandonment of cash as a globally-accepted currency mean?
- Middle-man participation. When you pay in cash, the transaction happens between you and a merchant. Other alternatives usually leave a trail of evidence, like bank statements reflecting payments applied to your account. As a result, you lose a degree of privacy when opting for digital payment options. Governments might impose restrictions or leave gaps for potential misuse of such data depending on the country.
- Extra taxes for small businesses. Companies pay anywhere from 2 or 3% from every purchase to the credit card companies. So, while massive corporations have no issue covering such fees, small enterprises are at a considerable disadvantage. To make matters worse, small businesses compete with industry giants for clients. One of the perks nowadays is the ability to pay via credit card. Hence, entrepreneurs hit a roadblock. They must either step up and pay taxes or stick to a cash-only policy.
- Limited access to services and goods. Getting a credit card is a no brainer for millions of people. However, low-income families, undocumented citizens, and people of color have limited access to essential financial services. Therefore, a gap opens: only the privileged portion of the society can take the full role as a consumer. If the cash-supporting society would cease to exist, “unbanked” people would no longer be equal participants.
Let’s say the cashless future would come with the next dawn. What other alternatives would you have for anonymous payments? Could you divert from the closely-monitored credit card transactions and use more anonymous options? Let’s review the trends of 2020 and dive deeper into the trends to thrive or come into play in 2021.
Why some oppose anonymous payments
Money flows in this era of digitalization require a calculated and premeditated ecosystem. Some specialists and customers underline the potential lack of balance if anonymous payments were to be mainstream. Credit card logs prevent money laundering and financing of terrorist groups. This explanation seems to be trendy these days: we sacrifice our privacy for physical protection. E-money already operates with strict limitations, discouraging people from trying alternative payment methods.
One of the steps backwards in terms of anonymous payments is the EU Directive 2018/843, more commonly known as AMLD5. Originally intended as a measure against money laundering, the directive reduces thresholds for using e-cash. For instance, while you can use e-cash to purchase goods, the amount issued cannot be higher than EUR 150.
However, some countries are stricter than others. Germany allows anonymous payments in e-cash up to 100 euros. However, experts believe this legislation to target the wrong source of potential money laundering. The majority of such crimes occur through non-anonymous accounts, fully identified bank customers. Initially, legislative actions leaned towards terminating the anonymous payments via e-money entirely. However, the European Parliament delayed such drastic measures and entered a three-year transitional period.
From the governments’ perspective, anonymity in financial transactions is a bad thing. In their ideal world, bank institutions act as intermediates to all purchases and transfers. This power allows financial institutions to pry into users’ financial lives. The rabbit hole goes even deeper: the major credit card companies monetize consumers’ data. 2009 in the US brought a regulation, demanding credit card companies to reveal the extent of collected data. The disturbing discoveries showed that credit card companies evaluated clients’ creditworthiness according to purchasing habits. Translation: if you shop at thrift stores or bail bond services, banks might be less willing to give you a loan. However, for any healthy democratic society, anonymous payments should be a thing of value, not dispute.
Prepaid debit cards will continue to be popular
Evading the overly controlling and monitoring payment systems is not that easy. Prepaid debit cards do not revolve around banks and are ideal for payments, both offline and online. While they are a way to avert the financial surveillance apparatus, there are limitations to them as well. For instance, department stores or pharmacies in the UK and the US need some private information if the value of cards exceeds $1000. The reason is simple: larger amounts could facilitate crime.
But the situation regarding prepaid cards has another side: activation fees. If you purchase a $250 card, you will need to pay approximately $8 just to use it. Hence, you pay an extra fee for anonymity. So, while governments would love to close this anonymity window, there are no plans for regulations on prepaid credit cards. In 2021, this will probably be a viable option for anyone looking to make anonymous payments.
Google Pay and Apple Pay Cash as a new standard?
Both Google Pay and Apple Pay Cash work on the same principle, supported by NFC. They foster digital wallets, supported by an online payment system. They offer a variety of perks, from anonymous transactions to rewards that you can redeem. However, the current integration of Google and Apple Pay is not enough to please customers. The inability to pay via these systems at any store seems unattractive to an everyday shopper. Despite this, 2018-2020 statistics reveal that mobile wallet profiles will continue to grow steadily. While Apple Pay takes the lead, Google Pay is also becoming a worldwide phenomenon to consider for anonymous payments.
Digital euro to rescue?
The race to introduce digital wallets is an ongoing process both for banks and services. The European Central Bank (ECB) is one of the showrunners that considers the introduction of the digital euro. Since privacy is one of the ever-growing concerns, ECB is likely to consider anonymous payments as a variable. However, the current plans state that the digital euro might go in two ways. It can either come as a means for financial institutions exclusively or an universal payment option.
The original model of the digital euro payment system still allowed close participation from banks. Hence, it was not anonymous enough. ECB still works on prototypes in an attempt to offer complete anonymity for its clients. Achieving cash-like anonymity for digital euros can take time. However, in 2021, we can expect some new developments or maybe even the beginning of its integration across Europe. Italian Banking Association (ABI) expressed support for this digital currency and agreed to participate in possible usage tests.
Strives for full-on anonymity with cryptocurrencies
People tend to believe that all cryptocurrency transactions are anonymous. However, a more appropriate term is pseudonymous. With enough effort, such financial exchanges can lead back to the parties involved. To initiate the shift from “pseudonymous” to “anonymous”, companies offer solutions. One recently came from Zerolink, with a combination of Wallet Privacy framework and Chaumian Coinjoin methods. This technology’s principle helps users make transactions anonymously via masked versions of senders’ and recipients’ addresses. Will it gain more recognition in the year to come? Depends on clients’ willingness to enter the blockchain game.
Anonymous payment apps to become more popular
Some digital payment systems operate with additional value in mind: fun. Who does not want to add a funny picture when transferring money to their friends? There are many apps that revolutionize the way people exchange financial assets: Venmo, TransferWise, Skrill, Cash App, Paysafecard, etc. Do any of them nurture and facilitate anonymous payments? It depends.
You can use some of them without a bank account. However, there are drawbacks as well. By using an independent e-commerce payment platform, you might not be viable for FDIC insurances. While it is convenient for transactions between relatives and friends, exchanging goods and services is not always possible. Will we see a broader integration of such anonymous payment apps? We might if more services include them as a payment option.
Final notes: what can we have for anonymity in 2021?
The bottom line is that anonymous payments are not widely available. Customers need to get creative and apply alternatives, while such payments should be nurtured and accepted. You can use Venmo or Paysafecard, but there are downsides of losing certain warranties.
Can 2021 be the year the pool of anonymous payment methods will fill up more? Not necessarily, but new technologies like the digital euro sound quite promising. We put up with the loss of privacy daily, and sometimes, we have limited options to change anything. However, the dire situation of helplessness is not always the case. We are free to try anonymous connections and make our digital life more private. It is our obligation and right, although some attempt to take it away.
Lastly, while looking for digital anonymity options, treat the cashless future more skeptically. It might not be the paradise we assume it to be.
Cybersecurity Researcher and Publisher at Atlas VPN. Interested in cybercrime, online security, and privacy-related topics.