[Dave Birch] Sebastien Taveau, the CTO of Validity Inc. (who will be speaking at our Tomorrow’s Transactions Forum in March, by the way), was kind enough to quote me in his review of 2012.

He coined the following statement that has become my favorite of the year.

“Identity is the new money”.

It is simple, powerful and summarizes exactly where the ecosystem is going.

[From Looking Back Forward | Validity Inc. | Biometric Sensors for Mobile Devices]

Seb is much too kind. I may well be guilty of popularising the aphorism in the context of payments and organisational strategies towards secure electronic transactions in the retail space, but I didn’t invent it. I heard it for the first time a few years ago in connection with the ill-fated UK national identity card scheme. I was at the time a member of the Home Office’s Advisory Forum and was interviewed by Sir James Crobsy, who had been called in by the then-Chancellor Gordon Brown to prepare a report on the scheme. It was Sir James who brought the phrase to my attention.

If, as Sir James Crosby said in his report on the U.K. ID card scheme, “identity is the new money”, then banks should already have generated strategic plans to accumulate the former, now that they’ve run out of the latter.

[From Digital Identity: I’m sure banks have a strategy for this kind of thing]

As time has gone by, I have become more convinced that there is a deep truth in the apparently simple statement and I’d like to explain why. But to do that, we have to first explore what money means. One of the problems that always comes up when discussing money is that the word means several different things. I want to focus on just two here: money as a generalised means of exchange between buyer and seller and money the subset of means of exchange that do not involve credit. In other word, cash. Identity changes the requirements for and use of both kinds of money.

If you know who all of the counterparties to a transaction are, and can establish their “credit” then there is no need for cash. Identity substitutes for cash: when I go into Waitrose and pay with my John Lewis MasterCard, it’s an identity transaction. The terminal in Waitrose establishes that I have access to a line of credit that means that Waitrose will be paid. No actual money moves between my card and the Waitrose till. On the other hand, when I buy an apple from a market stall and pay for it with a pound coin, the stallholder doesn’t need to waste any time or money trying to establish who I am, because he doesn’t need to trust me. He just needs to trust the pound coin, which he self-assays. It’s not that there are no counterfeit pound coins, because there are, but that there are too few of them to disrupt commerce (and, to be honest, if you give the smallholder a counterfeit coin and he later detects the fraud, he will probably just palm it off on someone else).

As a thought experiment, then, imagine that cash vanishes and we interact through identity. In that case, identity becomes the key to transactions and a crucial individual resource that needs to be looked after by responsible organisations. This is the idea behind the Digital Asset Grid put forward by the Innotribe team at SWIFT, the worldwide interbank messaging service, at last year’s SIBOS. Whether you think DAG is the right specific approach or not, there’s something to be said for begin strategic planning around the transition to identity-based transactions.

What does all this mean at a macro level? It means that the action in the payments world will shift further toward identity over the coming year. One of the reasons why the Single European Payment Area (SEPA) hasn’t transformed cross-border commerce in the way that had been hoped is that a great deal of cross-border commerce rests on identity, which is undoubtedly why the Commission has switched its attention and proposed new rules to enable cross-border and secure electronic transactions in Europe.

The proposed Regulation will ensure people and businesses can use their own national electronic identification schemes (e-IDs) to access public services in other EU countries where e-IDs are available. It also creates an internal market for e-Signatures and related online trust services across borders, by ensuring these services will work across borders and have the same legal status as traditional paper based processes.

[From EUROPA – Press Releases – Digital Agenda: new Regulation to enable cross-border electronic signatures and to get more value out of electronic identification in Digital Single Market]

You can see where they are coming from. The UK, however, does not have a national e-ID and is unlikely to have one for the foreseeable future. We’ve taken another path, using a framework approach and private sector identities, so a pan-European solution will have to work with public and private sector identities in a single framework. This line of thinking suggests that a fruitful line of enquiry might be to look into a pan-European trust framework that these identities can belong to.

In digital identity systems, a trust framework is a certification program that enables a party who accepts a digital identity credential (called the relying party) to trust the identity, security, and privacy policies of the party who issues the credential (called the identity service provider) and vice versa

[From What is a Trust Framework? | Open Identity Exchange]

Let’s hope that the Commission can help something like this to develop, because the real barrier to cross-border trade within the Single Market is not money, but identity.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers


  1. Dave you open up new vistas for your criminal clients to exploit. Not content with robbing me blind banks are now seeking custodianship of my ‘identity’.
    They will collateralise my identity and sell it to the Chinese while I’m asleep. But answer me this, Dave, what happens when I wake up and my identity didn’t make it back from China? What then?

  2. Hi David, this is a great thought.

    Do you see an oppurtunity for private players in Europe (e.g. Mobile operators, Insurance co’s, Banks) to encash the identity information they store? Can they become identity brokers for other countries?. I’m sure no government thinks about encashing this as it helps them track money flow, but what’s in it for the private players?

  3. Dave, lucid and relevant, as ever – I just have two comments:
    (1) I am still puzzled by the Commission’s assertion about the Regulation’s ‘creation of an internal market for e-Signatures’, ensuring that there’s equivalence between digital and paper, because I thought that was exactly what the original European Signature Directive did 13 years ago… Just re-stating the same wish as a Regulation won’t change it from a wish to a reality. But hey ho.

    (2) I think you’re right about trustworthy assertions being a barrier to cross-border trade, but think we need to broaden the problem statement beyond ‘assertions of identity’ and ensure that we’re designing for ‘assertions of attributes’ (including, as you say, ‘assertions of creditworthiness’).

  4. … and in late news, the ID exchanges took fright today, falling 3%, making one Birch worth 1.24 Crosbys …

    Back in the 1970s when we were designing computerised business systems we just did it and sometimes they worked. Sometimes we wondered how we did it. Could we improve our methods? Was there a method? Could we teach it?

    There were lots of little bits of tradecraft. For example, if a client said “we always pay monthly”, you soon learnt to ask what they meant by “monthly”. But there was no single unifying philosophy until, at some point, someone said “the structure of the system must follow the structure of the data”. That sounded pretty good. It’s gibberish, of course, it didn’t help anyone design a system, but it sounded good.

    Ditto “identity is the new money”.

    I only bother to write this because it’s you and because you set high standards. “Identity is the new money” is gibberish. Don’t get hung up on it, don’t waste any time trying to explain it or developing a theory about it, just carry on doing the practical, sensible, helpful things that you do well.

    “Identity substitutes for cash: when I go into Waitrose and pay with my John Lewis MasterCard, it’s an identity transaction.”

    “It’s an identity transaction”. Is it? Only if you say so.

    It’s a transaction alright, but why call it an “identity transaction”?

    Waitrose see the MC on your card and know they’ll be paid. They don’t care who you are. They just want to be sure they’ll be paid. Their systems may they check to see if the card has been revoked. They’re still not checking your identity, they’re just checking that they’ll be paid irrespective of who you are.

    “Identity is the new money” is eye-catching, it’s entertaining, it probably doesn’t do any harm to say it, any more than it hurt to say “the structure of the system is determined by the structure of the data”, saying it is a polite but glib way of ending a boring conversation, you might even tell new recruits on day one of their induction course that it summarises the job.

    But “deep truth”?

    I don’t fink so.

    Those new recruits may think they know what it means but even so they’re no use to you, CHyp or the clients without the tradecraft.

  5. Dave;
    Agree with your points- esp Robin about the attributes/entitlements (ie the applications that sit atop of the underlying “identity credential”). To me this is all about Risk and Liability Management- and hence is a space not for Government but for (highly regulated) entities namely the Ops/Transactional mgt ends of Financial Institutions. And this is why those banks spent a ton of money in building IdenTrusts Trust Network (with its Policy Legal Operational aswell as Tech dimensions)- not least learning from all that has been done pre-internet era in the card payments space re global interoperability etc. We need to build on this.

  6. A thought in perception:

    Some people say that, Totnes is 5 square miles surrounded by reality.

    The US debt situation is going to increase at $1 trillion a year for the foreseeable future, around 2015/16 the US reaches the same level of debt as Greece in 2012. 130% of GDP.

    Does anyone on Dave’s blog think this is sustainable to the wider financial system?

    2013 Is Bernanke’s Year: Unlimited QE And Total Control Of The Fed

    “Thus, interest rates will remain repressed through 2013, the U.S. dollar should depreciate moderately, and stock markets will continue to receive masses of liquidity.

    Bernanke and several of his central bank colleagues around the world have unleashed a new era of monetary policy, marked by zero-bound nominal interest rates coupled with unprecedented and massive balance sheet expansion. In this post-financial crisis world, the Fed has taken a Keynesian edict and turned it on its head: instead of the government stepping in after a crisis to make up for the loss of aggregate demand from the private sector, it has fallen to central banks.

    Through that process, the Federal Reserve has become the most important market participant, flooding markets with liquidity and owning more than a third of the Treasury market by the end of next year, according to Barclays’ economics team. The latest iteration of their asset purchases, or QE4, consists of $40 billion a month in RMBS purchases and $45 billion in unsterilized Treasury purchases, meaning the Fed’s balance sheet will grow at a rate of $85 billion until the Fed sees a substantial improvement in labor markets.”


    Would the people arguing against the motion that “Identity is the new money” please state how much of their assets are invested in the stock market as a percentage? (Excluding their pension).

    And the people who do believe that “Identity is the new money” state their percentage?

    I do believe that “Identity is the new money” (always has been), I presently have no stock holdings and my pension is in a cash position.

  7. re: Waitrose ” They don’t care who you are.”

    They do, but it should be a separate transaction.

  8. re: stock holding

    Money as a means of exchange and money as a store of value and money as a mechanism for deferred payment are, as economist insist, different. Using identity infrastructure to remove cash has no bearing on the substitution of demand deposits with, say, energy currencies or whatever. A fascinating topic, to me, different.


  9. “economist” – I’m now thinking of “leaves” and the Hitch Hikers Guide to the Galaxy.

    Cheers Mark

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