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