It’s that time of year again. I’ve had a chat with my colleagues at Consult Hyperion, gone back over my notes from the year’s events, taken a look at our most interesting projects around the world and brought together our “live five” for 2019. Now, as in previous years, I don’t expect you to pay any attention to our prognostications without first reviewing our previous attempts, otherwise you won’t have any basis for taking us seriously! So, let’s begin by looking back over the past year and then we’ll take a shot at the future.
As we start to wind down 2018, let’s see how we did…
- 1. Open Banking. Well, it was hardly a tough call and we were bang on with this one. We’ve been working on open banking projects in the UK, on the continent and beyond. What seems to be an obviously European issue, is of course a global one and we’ve been helping the global payment brands understand the opportunities. Helping existing market participants and new market entrants to develop and implement responses to open banking has turned out to be intellectually challenging and complex, and we continue to build our expertise in the field. Planning for the unintended consequences of open banking and the potentially un-level playing field that’s been created by the asymmetry of data, was not the obvious angle of opportunity for traditional tier one banks.
- 2. Conversational Transactions. Yes, we were spot on with this one and not only in financial services. Many organisations are shifting to messaging channels for customer support and for transactions, in both the banking and retail sectors. The opportunity for this continues with the advancements of new messaging enablers, such as the GSMA backed RCS. But as new channels for support and service are introduced to the customer experience, so are new points of vulnerability.
- 3. The Internet of Cars. This is evolving although the security concerns that we spoke about before, continue to add friction to the development of new products and services in this area. Vulnerabilities to card payments or building entry systems are security threats, vulnerabilities to connected or autonomous vehicles are potentially public safety threats.
- 4. Artificial Intelligence. Again, this was an easy prediction because many of our clients were already active. Where we did add to thinking this past year, it was about the interactive landscape of the future (i.e. bots interacting with bots) and how the identity infrastructure needs to evolve to support this.
- 5. Tokens/ICOs. Well, we were right to highlight the importance of “tokens” (the basis of Initial Coin Offerings, or ICOs) and our prediction that once the craziness is out of the way, then regulated token markets will become significant looks to be borne out by mainstream commentary. At Money2020 Asia in Singapore, I had the privilege of interviewing Jonathan Larsen, Corporate Venture Capital Manager at Ping An and CEO of their Global Voyager Fund (which has a $billion or so under management). When I put to him that the tokenisation of assets will be a revolution, he said that “tokenisation is a really massive trend… a much bigger story than cryptocurrencies, initial coin offerings (ICOs), and even blockchain”.
As we said, 2018 has seen disruption because the shift to open banking, starting in the UK,has meant the reshaping of financial services while at the same time the advance of AI into the transaction flow (transactions of all types, from buying a train ticket to selling corporate bonds) begins to reshape the way we do business.
This year we are organising our “live five” in a slightly different way, listing them by priority to our clients rather than as a simple list. So here are the four key technologies that we think will be hot throughout the coming year together with the new technology that we are looking at out of the corner of our eyes, so to speak. The mainstream technologies are authentication,cross-sector digital identity, digital wallets for ticketing and secure IoT in the insurance sector. The one coming up on the outside is post-quantum cryptography.
So here we go…
- 1. With our financial services customers we are moving from developing strategies about open banking to developing implementation plans and supporting the development of new systems and services. The most important technology at the customer interface from the secure transactions perspective is going to be the technology of Secure Customer Authentication (SCA). Understanding the rules around which transactions need SCA or not is complicated enough, and that’s before you even start working out which technologies have the right balance of security and convenience for the relevant customer journeys. Luckily, we know how to help on both counts!
As it happens, better authentication technology is going to make life easier for clients in a number of ways, not only because of PSD2. We are already planning 3D Secure v2 (3DSv2) and Secure Remote Commerce (SRC) implementations for customers. Preventing “authentication friction” (using e.g. FIDO) is central to the new customer journeys.
- 2. Forward thinking jurisdictions such as Canada and Australia have already started to deliver cross-sector digital identity (where in both cases we’ve been advising stakeholders). New technologies such as machine learning, shared ledgers and self-sovereign identity, if implemented correctly, will start to address the real issues and improvements in know your customer (KYC), anti-money laundering (AML), counter-terrorist financing (CTF) and the management of a politically-exposed person (PEP). The skewed cost-benefit around regtech and the friction that flawed digitised identity systems cause, mean that there is considerable pressure to shift the balance and in the coming year I think more organisations around the world will look at models adopted and take action.
- 3. In our work on ticketing around the world, we see a renewed focus on the deployment of real digital wallets. Transit and other forms of ticketing (such as for sporting events) are the effective anchor tenants of the digital wallet, not payments. In the UK and in some other countries there has been little traction for the smartphone digital wallet because of the effectiveness of the deployment and use of contactless cards. If you look in your real wallets, most of what your find isn’t really about payments. In our markets, payments alone do not drive consumers to digital wallets, but take-up might be about to accelerate. It’s one thing to have xPay put cards into a digital wallet but putting your train tickets, your sports rights and your concert passes into a digital wallet makes all the difference to take-up and means serious traction. Our expertise in using the digital wallets for applications beyond payments will give our clients confidence in setting their strategies.
- 4. In the insurance world we see the business cases building around the Internet of Things (IoT). The recent landmark decision of John Hancock, one of the oldest and largest North American life insurers, to stop selling traditional life insurance and instead sell only “interactive” policies that track fitness and health data through wearable devices and smartphones is a significant step both in terms of business model and security infrastructure. We think more organisations in the insurance sector will develop similar new services. Securing IoT systems becomes a priority. Fortunately, our very structured risk analysis for IoT and considerable experience in the practical assessment of countermeasures, deliver a cost-effective approach.
- 5. In our core field of security, we think it’s time to start taking post-quantum cryptography (PQC) seriously not as a research topic but as a strategic imperative around the development and deployment of new transaction systems. As many of you will know, Consult Hyperion’s reputation has been founded on the mass-market deployments of new transactions systems and services and this means we understand the long-term planning of secure platforms. We’re proud to say that we have helped to develop the security infrastructure for services ranging from the Hong Kong smart identity card, to the Euroclear settlement system and from contactless payments to open loop ticketing in major cities. Systems going into service now may well find themselves overlapping with the first practical quantum computer systems that render certain kinds of cryptography worthless, so it’s time to add PQC to strategies for the mass market.
And there you have it! Consult Hyperion’s Live 5 for 2019. Brexit does not mean the end of SCA in the UK (since PSD2 has already been transcribed into UK law) and SCA means that secure digital identities can support transactions conducted from digital wallets, and those digital wallets will contain things other than payment instruments. They might also start to store transit tickets or your right to travel, health and fitness data for your insurance company. Oh, and all of that data will end up in the public sphere unless the organisations charged with protecting it start thinking about post-quantum cryptography or,as Adi Shamir (one of the inventors of public key cryptography) said five years ago, post-cryptographysecurity.