Red lights for cash

Down at the PayExpo Middle East and North Africa (MENA) in Dubai this year, I saw an excellent presentation from Uber India. One of the most interesting things I learned was that because most Indian Uber rides are paid for in cash, the Modi government’s racial experiment in currency reform hit them hard. As cash vanished from circulation, so there was a downturn in business.

Uber India

That was bad news for the Uber drivers who need to drive to survive, but I’m still of the general opinion that the Indian push for a “less cash” (as opposed to cashless) economy makes sense, even for people who are poor, as many in India are. A couple of years ago, I wrote about the misguided view that cash is good for the less well-off. It is not.

People who live on the margin get screwed by cash.

From Cash hits the excluded | Consult Hyperion

This was a comment on a story about counterfeiting, and I concluded it by noting an interesting problem that I had not previously heard about, which was about sex workers being swindled through counterfeit cash:

In a country where counterfeits are widespread, it is obviously the marginalised groups trapped in the cash economy who are the big losers.

From Cash hits the excluded | Consult Hyperion

India’s experiment with demonetisation has accelerated the evolution of the retail payments environment not only for Uber but also for those marginalised people in the less-regulated parts of the Indian economy. As you will recall, with high-value banknotes, more than four-fifths the cash in circulation, vanishing many different  parts of the Indian economy have been affected and, clearly, groups dependent on cash will have been hit hardest.

From the time the notes of the denominations of Rs 500 and Rs 1000 ceased to be legal tenders, the number of customers visiting the red-light area have dwindled to negligible numbers.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

The response of at least one group of such marginalised people will have gladdened the heart of Mr. Modi and other advocates of cash-free commerce (e.g., me). They moved quickly to adopt new technology.

Commercial Sex Workers offering services at Nagpur’s Redlight area Ganga Jamuna have started offering [sex] in exchange of payments made through Paytm.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

Yes, mobile payments. There is no reason why mobile payments cannot step in to the breach and take over from cash and, as I constantly opine, deliver something better to the poor, since it is the poor whose money is lost and stolen, it is the poor who cannot pay remotely for better deals and it is the poor who cannot be paid efficiently.

[sex workers said] we have also adapted to the changing times and have adopted the newer mode of payments for the services. They opined that this will also prevent the customers from getting their cash looted by unscrupulous elements who dwell in this disrepute lanes (Badnaam Gali) of Ganga Jamuna area.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

Note that last sentence. Getting rid of cash will make people safer. So not only will these marginalised people no longer have to worry about counterfeiting or the value of foreign currency, but their money will be stored more safely. 

I was in Dubai to take part in a fun end-of-event discussion about the coming year for fintech, so I took the first three predictions from the Consult Hyperion “Live Five” for 2017 and shared these with the audience. Then I took the first three cakes, and shared them with me.

 Yes, you can have your cake and eat it

 I hope I’ll back asked back next year and called to account!

Inclusion, identity and privacy

Financial inclusion is necessarily built on a foundation of customer identity, but the rush to inclusion and the consequent focus on mass registration in many countries has placed at risk the citizens’ rights to privacy – even where these are recognised in law.  But the mere fact of being excluded should never mean that someones right to privacy is in any way diminished.

With support from Omidyar Network, Consult Hyperion has undertaken a global review of the privacy and data protection aspects of digital identity services, with particular reference to their relevance for financial inclusion. We have reviewed the various digital identity initiatives around the world from a privacy perspective. Building on this framework, we have developed a ‘roadmap’ for digital identity that ensures that privacy, and the needs of regulatory authorities, can be built into digital identity services, ensuring the drive towards financial inclusion can be at its most effective. We hope that this roadmap will be a useful contribution to the industry as it considers how best to deliver digital identity to those most in need.

The key elements of this roadmap are as follows.

Put the individual at the centre of privacy protection

This does not only mean giving individuals control over how their personal data is used; it needs to be reflected in the entire approach to the digital identity system. In order to avoid low levels of take-up and use, it is essential that the emphasis be placed on user needs, rather than vendor-driven use cases or so-called “gold standard” solutions.

Provide an effective legal environment

An effective legal environment must be in place that contains, and can enforce, legal remedies to prevent or punish abuses of personal data.  An effective legal environment will also increase confidence that any contractual measures put in place as part of the trust framework to ensure privacy can be enforced.

Design in privacy from the start

There is widespread recognition that privacy should be designed into any system from the start rather than bolted on as an afterthought.  Privacy–by–design requires a careful understanding of the expected goals of the identity system, an appreciation of the distinctive characteristics of the context of use and an awareness of the technological capabilities and privacy risks associated with proposed next generation digital identity systems.

Separate identification from authentication and authorisation

Many existing identity systems combine identification and authentication activities within the scope of the identity provider. Separating out identification from authentication allows for the relatively rapid roll out of basic digital identity credentials, perhaps issued to all but based on low assurance identity data. The quality of the digital identity can be enhanced over time, in part simply through a history of ownership and use or by incorporating additional data points.

Furthermore, if the basic digital identity credentials only show that the citizen is unique and identifiable and not include other data attributes by default, this will allow future developments to minimise disclosure of data. Today identity systems often include a default data set that is always shared, even when it is not necessary for the service being accessed.

Improve authentication then identification

In an ideal world, it would be desirable to move directly to high quality identification and high quality authentication.  In practice, however, the time and effort to improve the quality of these aspects of digital identity are different.  In general, improvements to authentication quality are likely to be quicker to achieve than improvements in identification quality.

Provide a viable commercial model that disincentivises abuse of personal data

Whilst the monolithic identity providers like Facebook and Google offer easy to use digital identity credentials, their business models could run counter to consumer privacy as key revenue streams come from sharing individual and aggregate customer data. Whilst it is possible to constrain such actions contractually and technologically, long term the commercial model must be designed so that incentives to protect privacy are aligned.

Consider who will pay for the identity system

If identity credentials are to become a key infrastructure for a society, then important questions of how they are to be paid for arise.  There are different models of charging for infrastructure provision that can be drawn upon, but choosing the right payment model can be problematic whether the identity provider is a government agency or a commercial body.

Address questions of liability

Service providers should not be held liable for actions based on properly authenticated identity claims. What then of the liability of the identity providers?  Here the complexity of the liability model grows as benefits and risks are shared unequally.  In extremis, the identity provider privatises the some of the benefits (e.g. payments for authentications) but socialises the risks (e.g. complete failure of trust in the identity system as a whole).

Review the role of compulsion

For countries introducing new identity credentials, questions of consent and compulsion become particularly significant from a market and rights perspective.  They may cause significant disruption to the roll out of system.  In such cases it is frequently stated that the new identity system is voluntary, not compulsory and that individuals can always choose not to have an identity credential. In this case, as the critical mass of credential holders develops, effective compulsion can arise. However, evidence from Europe suggests that the various electronic identity cards are used infrequently because most people have infrequent access to public services and those that do have more frequent access rarely need to formally identify themselves each time.

All of the underlying issues, and the elements of the proposed roadmap, are explored in detail in the report available here. It’s very detailed piece of work, so you might want to being with the Executive Summary that is available here. We are genuinely curious about your views and look forward to all feedback.


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