Why Some Payments Should Remain Anonymous

Second in a series

Moving to a cashless society is all well and good. But even after we phase out those crumply bills and germy coins, the option of anonymous, untraceable payments must remain.

Otherwise, we, or our descendants, are going to be miserable.

Cash, although not extinct, is increasingly at the margins, making up less than one-third of consumer payments in 2010, according to the Federal Reserve Bank of Boston. Credit and debit cards accounted for close to half of transactions, while checks and electronic payments, such as online bill payments, each had about a 10% share.

Proponents of this ongoing shift to electronic payments point out that physical cash is inefficient and imposes unseen costs on the economy (think of armored trucks, for example). David Wolman, in his book "The End of Money," makes a powerful case that accelerating the shift to electronic payments would help the poorest among us, as he explained to me last year:

In the one infuriating passage in Wolman's otherwise wonderful book, he asserts that "ordinary consumers don't care about absolute anonymity." He then quotes a law professor who repeats the mantra of busybodies and moral scolds the world over: "The main people who are excited about a wholly anonymous payment system are people who are violating the law."

Felix Salmon, the influential Reuters blogger, also dismissed the value of anonymous payments in a 2011 blog post:

If I'm making a payment by swiping my phone, I don't really feel the need to be anonymous at all. In fact, if the payments system knows not only my identity but also my location when the payment is made, there are lots of ways that it can use that information in ways I could find extremely valuable. … Every time I walk into my local coffee shop, say, I can just pick up my regular order and walk out, and the payment will happen automatically. As will the free coffee I get after paying for ten at a regular price.

Granted, ordinary consumers probably don't yearn for, or even give a thought to, absolute anonymity when they're buying coffee or aspirin or toilet paper. In such prosaic situations they're more apt to put as much as they can on the credit card to rack up rewards. In doing so, they'll appreciate the sophisticated location and loyalty features Salmon describes. 

But what about when someone goes to the same pharmacy where she usually gets aspirin or mouthwash to buy a home pregnancy test kit? Wouldn't she want the option of leaving no transaction record that a spouse or parent might find?

What about someone who goes to a clinic specializing in confidential HIV tests?

The old saw that "only criminals or terrorists care about anonymity" (or "…about privacy," depending on the context) is a cheap smear of those of us who object to surveillance—a group, I'd wager, that includes most people, certainly most Americans.

It's not only that people sometimes make purchases they don't want the cops (or their nosy neighbors or judgmental in-laws or overbearing parents) to know about. A December Wall Street Journal article about a chilling government domestic surveillance program put it well:

The risk … is that innocent behavior gets misunderstood—say, a man buying chemicals (for a child's science fair) and a timer (for the sprinkler) sets off false alarms.