One of my very favourite authors, David Wolman, kicked the day off by reading from his book “The End of Money”“, a copy of which was provided for each of the delegates, and then he joined me on stage for a “fireside chat” with a couple of questions from me to get things started and then questions from the delegates.
After David and I had spent some time speculating about the trajectory of cash in the retail payment space, Nate Wehunt from City National Bank mounted a strong defence for the physical and took the opportunity to announce their new cardless ATM product, whereby you go to an ATM and ask for money, the ATM displays a QR code that is scanned by your City National app. You authenticate on the handset and then the cash drops out of the machine. Excellent idea, although it still wouldn’t persuade me to use cash anywhere other than strictly necessary, such as Las Vegas, to pick a random example.
Somebody asked me if there was anything that surprised me about the day and I have to say that there was and it came from an unexpected direction. After we gathered in the notes in the morning, I saw that there were quite a number of notes asking questions about payments regulation and making observations about the role of payments regulation in innovation. I thought regulation would be a bit boring and that no one would want to talk about it, so I gathered those notes together for an afternoon session and I thought that, since I couldn’t really ask anybody else to do something I thought would be boring, I chaired the table myself. It turned out to be fantastically interesting. Not only were there people at the table who had practical, day-to-day, experience of dealing with US payment regulations, there were people who had interesting ideas about how the regulations could be improved. It was terrific.
My main takeaway from that session was that the people running payment-related businesses weren’t as upset as I thought that they would be about the patchwork nature of US regulation and, in particular, the need for state-by-state licensing for money transmission businesses, because from a business point of view the costs of identity-based compliance were far, far greater. The people round the table were telling me that the cost of know your customer (KYC), anti-money-laundering (AML), and anti-terrorist financing (ATF) regulations (now collectively known as CDD, “customer due diligence”) were the focus of concerns because the associated costs are high and ongoing. I thought I’d make a useful contribution to the group by bringing in the issue of the Financial Action Task Force recommendations on a risk based approach to payment regulation, which I’ve written about at length before on the blog, and by being optimistic about how improvements in the identity infrastructure might help.
One point I could have made, but didn’t want to make too much of the conversation about the UK, was that there are some discussions underway in a number of fora (such as at Intellect, the UK IT trade association, and the Payments Council) about the idea of some kind of financial services passport. Maybe something like this could really help in the US as well. The FIDO Alliance, which was the subject of informed discussion at one of the other tables (because Phil Dunkelberger, their CEO, took part in the discussions) are providing hope on the authentication front and this might be combined with hope from the federated identity side to at least make the vision plausible. I might imagine such a passport being used to open bank accounts, obtain new credit cards, get insurance, manage investment accounts and so on.
This could greatly reduce the costs of CDD, especially if the federated “recognised” customer identity was mutually recognised by the banks and the regulators. So I show up in the US and open up a Simple account, Simple have to bear the cost of the initial CDD, but in addition to giving me an account they give me my financial services passport so that the next time I go to open an account, get a post-paid mobile phone, or get a new credit card then I can just use that Simple passport and no one has to go through these costs again.
But back to regulation. One topic that came up in passing was the European Commission’s consultation on third-party direct access to bank accounts (the so-called XS2A consultation). I will blog about this properly later on but I do want to make the point that it’s an example of a potential regulatory change that may seem obscure from a distance but is actually quite revolutionary if it is adopted. If I can give a third-party permission to access my bank account, much as I give applications permission to post to my Twitter account, then I would think that a great many service providers will opt to go down that route rather than use conventional card networks and this has obvious strategic implications for people investing in the cards businesses. One of them might be, as I’ve long suspected, that the son-of-EMV will be identity driven and more about the passport than the payment.
There were great tables about EMV in the USA and the impact of recent announcements about tokenization on retail payments strategies, key trends in the security space, the design of new payment networks and so on. As far as I could see every single table generated a buzz of discussion and people came away feeling that they’d learned more than had I forced them to sit in rows and read PowerPoint.
We had a nice interlude before lunch. Through the superpower of Twitter I discovered that Forum friend Heather Schlegel was in town, so I asked her to pop over and tell people about her new project, the Future of Money TV series. Heather is, as she put it, eating her own dog food by raising money for the series on Kickstarter. I’ll be supporting Heather’s project and I hope that you will too.
Then it was out to lunch in the beautiful California sunshine where, as you might expect, we spent most of the time discussing the Umberto Eco’s admonition that we should not be nostalgic for Disneyland as a post-modern explanation for the relationship between the gold standard and Bitcoin, amongst other things.
After my thought-piece reviewing some predictions about the future of money from 1998 (I’ll put these in a separate blog post), we had our second round of discussion tables and then we gathered around to join a terrific session led by Sam Lessin, Head of Identity Products at Facebook.
Sam grabbed a pen and a flip chart and proceeded to make everyone really think about the role of transactions in the future. I will not attempt to repeat any of Sam’s excellent riffs on the balance between financial and social capital except to observe that on the relevant value of social and financial capital. He said that if all of his financial capital vanished then his social capital would mean that he could rebuild it, but conversely if his social capital disappeared than it would be much harder for his financial capital to restore it. (Although, as Spike Milligan famously observed, while money may not buy you friends, it does buy you a better class of enemy.) I hope I didn’t annoy Sam by pointing out that Shakespeare had thought of this first! Anyhow, I intend to refer to Sam’s model in a book I’m writing at the moment, so more on this later.
I hope the implications of what Sam was saying were not lost on delegates from the world of banking (ie, identity is the new money). A decade from now, Visa and MasterCard might well be switching your identity, your credentials and your reputation as much as they are switching your ability to pay for something. Making the bank the place that stores your identity, since you can store your money anywhere, makes sense in a world where (if Sam is right) social capital re-asserts its superiority over financial capital.
We had an extended Q&A with Sam, exploring facets of the reputation economy, and then wrapped with coffee, more dessert and sunshine networking. I’d said at the beginning of the day that we run the Unconferences to get new ideas, and that the best way to get new ideas was to give your ideas away for free. Palo Alto proved that calculus of creativity to be substantially accurate.
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