Chapter Twenty-Two: Banking

Sam was processing money orders at a table. Jennifer was talking to Carlos nearby. “The problem here is how to develop an encryption algorithm for secure on-line banking, one that’s unique.”

Sam spoke up. “Why not just use one-time pads? That’s the most secure form of encryption.”

Jennifer answered, “The problem with that is, how do you generate truly random numbers? The computer-generated ones aren’t really random, and a hacker could break the algorithm and log on, impersonating somebody else.”

Sam said, “Well, look what happens when I open the calculator that comes with Microsoft Windows on this PC. Let me enter the number ‘1.001.’ Now, I type ‘y’ and ‘=’.”

The number 1.001001000500333416741658356732 appeared.

“That’s an irrational number. You can compute that to any number of decimal places. Also, I can hold down the ‘=’ key and watch the digits blur by. To make it random, you’d have to add some random digits after the 1.001 and then raise it to the power of itself. With your programming expertise, I’m sure you could figure out how to do that. But let’s think outside the box for a moment. All you need is to take a digital picture of some sand from the beach. That’s plenty random. You know, you could develop a machine that pours sand onto a flat trap door for about one second, then photographs it into a bitmap, then dumps that sand into a bucket below, then dumps more sand onto the trap door, taking another photo. When the sand runs out, reload it by hand. There’s plenty of randomness in the scattering of sand out of a bucket into another. Another way to generate a random number is by shuffling a deck of cards.”

Jennifer liked the idea. “What I think I’ll do, is generate a random bit string that way, another random bit string raising a decimal to the power of itself, as you describe, and a third by just pulling tons of files off the internet. The server can crawl the internet, following links, and just pulling down tons of megabytes. Then take a gigabyte of internet files, a gigabyte of the computed bits, and a gigabyte of sand bitmaps, and add those binary numbers together.”

Sam said, “Then you can take the sum, and shuffle the binary digits by shuffling a deck of cards. Your server reads the shuffled deck of cards, and shuffles every set of fifty-two binary digits the same way that the deck of cards is shuffled.”

Carlos asked, “But how will we transmit the one-time pad to the customer securely?”

Sam had another idea. “You know how you see all those free CD-ROM disks from internet services? Well, produce CD-ROM disks with the one-time pads on them. Let people use the disks to open deposit accounts, and then they fund the new accounts by mailing in money orders or receiving direct deposits. We don’t really care if people open accounts under fake names anymore. The advantage of using their right name is that they can recover their money even if they lose their data. We can still mail them a check to the name and address on their account. Only after we’ve verified their identity can we accept deposits of checks made out to them, though.”

Jennifer and Carlos liked the idea. Then Sam offered another. “You know how there are companies that specialize in payroll service for other companies? Well, write the software that does payroll for free. Let employers transfer their money on our books, for free. Then they’ll need to have money in Remesa Banking Company, and Remesa gets interest lending that money out. Once the payroll goes through, the employees will have money in this banking company, and they can pay their bills on-line. You simply transfer the money from their account here, to the payee’s account here. The payees could move the money to a competing bank, but then they’d have to pay service charges to wire it back here if they wanted to spend it through our server.”

Jennifer observed, “The potential there is almost unlimited! We could get landlords to accept the rent in the form of a credit to their account here, and they’d save the hassle of tenants paying at inconvenient times, and waiting for checks to clear. They can pay their mortgage lender the same way. If the mortgage lender won’t open an account here, we’d have to transfer some of Remesa’s money from our account to the mortgage lender’s account, at a bank where the mortgage lender does have an account. If we have positively identified the depositor, then the account paperwork can ask them if direct deposits to their Remesa account will be legal tender. If they sign saying it is, then anybody can pay any money they owe that person, by direct deposit. One account number for direct deposits, another for withdrawals, so they can give out their account number to somebody they cannot trust. Then there’s no disagreement about whether they paid the person, or when, because they can always check the banking records on our server.”

Carlos observed, “You might think a factory in California would not want to be paid by direct deposit to an East Coast banking company they don’t even like, but there’s a good reason why they would. Let’s say a retailer is behind in making payments on invoices. The factory has to put the retailer on credit hold. Well, the retailer in New Hampshire could bring the day’s sales proceeds to Remesa Banking Company for deposit, then log onto the server and transfer it to the California factory’s account. This means, first of all, the factory can release the credit hold and start running the production line to make more money, and second, they have the money to pay their own bills, either on our server or by having it transferred to a California bank. If they pay the temp agency, then the temp agency can release the credit hold and start calling up workers, sending them to that factory again. There’s billions of dollars worth of checks in the mail at any given time, money that’s not doing anybody any good. Imagine the repo people taking everything out of a business office, and in the next day’s mail, there’s a check. Too late, and even if the check arrived in time, it would have to clear.”

Jennifer observed, “The government had a lot of nerve imposing some of the regulations that prevented this in the past. They wanted banks to identify every depositor positively, to make sure taxes were reported accurately, when the government has no right to tax people anyway. Under the Patriot Act, banks weren’t even allowed to sell a money order without identification, even as the U.S. Postal Service was doing so. The feds imposed regulations saying just what identification the government approved. This made it tough to open accounts by mail. The government could have let the banks mail out the account forms by certified mail, restricted delivery, and the letter carrier would have to see positive identification to deliver the envelope, but that would make the postal union unhappy. They’d rather impose the homeland security burden on banks than on a federal agency.”

Carlos said, “The State governments also had to repeal part of the cost of money orders. Some stores now sell them without even a fee. A tiny percentage of these become lost or destroyed. The issuer cannot write them off, though, because they cannot establish that the money order won’t be presented someday. State laws required the money order companies to hand this loot over to the State government as abandoned property, and the State government collected this hidden tax. Now, the money order company gets to hold it, and collect interest on it, so they are more profitable.”

Jennifer said, “Let’s not fail to claim our credit in that. We’ve processed millions of dollars in money orders at Remesa Banking Company, and a lot of those senders would have mailed the money orders to the Dominican Republic, which is risky. We’ve helped reduce crime and the losses of the money order companies. Government policies in the United States promoted the theft of money orders in the Dominican Republic, and a lot of other countries, before Operation U.S.A. Freedom.”

Carlos observed, “All they would have had to do was work with Inposdom, where one secure postal facility in the Dominican Republic would host post office boxes of the competing banks, and U.S. Postal Service machinery would identify letters addressed to that postal facility, placing them in separate bags, for more secure handling in transit. Government bureaucrats had no incentive to reduce the theft problem.”

Copyright © 2004 Tom Alciere