Written by I stuck my head around the corner of a conference session, and to my surprise found that it was people talking about the blockchain again. Someone said that putting identity on the blockchain would help refugees and I said that I thought that might well be true, but I couldn’t be sure as no-one had defined what they meant by “identity” or “the blockchain”. I wasn’t entirely sure what they meant by “refugees” either. Talking of which, I found one wandering aimlessly through the corridors of the Venetian. Since I couldn’t offer him an identity, I decided to offer him breakfast instead.
Mr X, as I shall call him, was a refugee from IBM’s World of Watson. I’d been sent an invitation for this and had registered, but I never got a confirmation. I’m not sure why, but it might have been something to do with the form I had to fill in. The form said that if you told Watson the reason for your visit, then Watson would set up an agenda for you at the event. So I told Watson that the reason for my visit was to overthrow the United States government and to set up a workers and peasants’ anarcho-syndicalist commune. So not only did I not get my invite, but now I’m on the no-fly list as well. Anyway, Mr. X told me that there was a lot of fun stuff going on over in the AI world and I don’t doubt it. But I didn’t have time to stay and chat because I was off to the theatre.
It turns out that I couldn’t get a ticket for the actual theatre so I decided to set up a security theatre instead. All week, I kept getting asked for “photo ID”. The first time it happened, I explained to the young woman that carrying identity around with you is something that I associate with continental socialism and that since I came from the Disunited Kingdom and not North Korea I was not in the habit of carrying and presenting my papers. In fact, as I further explained to her, since my identity is important and valuable and hard to replace, I had locked it up in the safe in my hotel room. She remained unmoved and demanded photo ID. So I showed her the expired building pass for CHYP Tower in New York. This is apparently perfectly acceptable as proof of identity throughout the continental United States and the woman was happy to charge my card following its presentation. Throughout the rest of my visit, every time I was asked for photo ID I presented by expired building pass and every time it was accepted without question. Every. time.
Meanwhile, it was time to go downtown and get involved in some serious fintech shenanigans. I decided to sniff around payments, but most of the camp fire talk was about the transition to in-app and the use of tokenisation to move chip and PIN security online (see the MasterCard announcement, for example) and I read one of the chaps from Bell ID talking about “in-apptitude” (which I rather like) to describe the new strategies for secure and convenient remote payments. But this is old hat. I’ve been boring our clients to death with this stuff for years. And no-one would disagree that #appandpay is going to be more important than #tapandpay. Right?
I decided to seek out more controversial opinions. Here I am engaged in a heated debate with a noted retail banker over the likely future identity and verification ecosystem. He said that given the dynamics of the space, and given that banks already have to carry out rigorous KYC, it makes sense for banks to develop a co-operative sector-wide kind of financial services passport that could be used cost-effectively by third-parties while the underlying identities are strongly protected by tried and tested cryptographic techniques including tokenisation and blinding. I said “wha-hey you’re my best mate you are! Up the Blues!” and we agreed that Terry Phelan was a great player.
By the final morning, I was going about my normal business, albeit in a persistent vegetative state, when I ran into the shy and retiring head of the Emerging Payments Association. We had a fruitful discussion about using strong biometric authentication against revocable tokens to use pseudonyms (with strongly-attested attributes) in transactional environments and making it the de facto model that will deliver both security and privacy for transactions of many kinds. He said that he thought that this might be where the blockchain makes sense because the transparency around shared reputation management was a positive, whereas sharing private transactions was a negative and would require complex strategies to maintain commercial confidence. I said “stop shouting”.
I think that for our clients and friends in the USA, the most important commercial announcement was the launch of Zelle by EarlyWarning. Zelle will launch in 2017, the equivalent of Paym/PingIt in the UK: instant account-to-account payments. It launched with 19 banks: Ally Bank, Bank of America, Bank of the West, BB&T, BECU, Capital One, Citi, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, Frost Bank, JP Morgan Chase, Morgan Stanley, PNC, USAA, U.S. Bank and Wells Fargo. Pretty impressive. If you look at Venmo’s hockey stick, it’s clear that a P2P proposition has a ready market. But my sense of Venmo is that it suceeded because of social media integration so I suspect that Zelle’s long term role will be as an API for other platforms (e.g., Facebook) to use rather than as a standalone app or something that is tucked away in bank apps. This is the sort of thing that is best considered with a Mai Tai, by the way.
I was left trying to work out exactly how much I lost in the casinos. I think it might have been as much as $80, because I’m pretty much of a high roller, especially when egged on by VocaLink Vixens and Money2020 Molls. It’s well known that men take risks in the presence of attractive women and I have a suspicion that this may form part of the casinos’ business model. Just a suspicion. Still. Vegas.
It’s amazing who you bump into at Money2020. I caught up with a great many old friends and made quite a few new ones. It’s hard for me to say what the key takeaways from the event were this year but I’ll try to name a top three and then see if any of you agree with me via the comments section!
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Fintech isn’t the wild west any more and the use of new technologies to drive new business models in financial services is mainstream. Yes, legacy profit pools will be attacked, but unless the incumbents are totally stupid (and the ones that Consult Hyperion works for are, I can assure you, not) they will assimilate them: biometrics, chatbots, AI etc. The threats to my clients’ businesses are not their traditional competitors and not the fintechs, but Amazon, Apple, Google, Facebook and Alipay because these are where customers check in but may well never check out. Bumper sticker: It’s the discovery, stupid.
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The ramifications of the shift to instant payments (of one form or another) and the switch to low cost push payments in retail remain unexplored. Although I can’t prove it with bar charts or spreadsheets, I have an uneasy feeling that the incumbents in developed markets are overconfident about the status quo and the regulatory times are a changin’ (© Nobel Committee 2016). The transaction margins in payments remain asymptotic to zero in the medium term, so new business models are needed. I tend to focus on the business models around identity, but I’m sure there are others in big data, analytics, risk management and so on. Bumper sticker: The bank is place to store your identity, not your money.
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People talk a lot of rubbish about the blockchain. Bumper sticker: They’re not smart and they’re not contracts.
On which topic, one last tale.
The Tale of the Emporer’s New Blockchain
Once up time, there was an Emperor. He ran a marvellous financial institution. One day, a stranger came to town and she went to see the Emperor and showed him a blockchain. The Emperor said “I can’t see anything”. The stranger told him that only very clever people and management consultants could see the blockchain. The Emperor didn’t want to seem stupid, or provincial, or behind the times, so he told himself that he could see the blockchain after all and that it was beautiful.
The Emperor went and told all of the people about his blockchain and the people were very happy.
After a while, though, the people shouted that they wanted to see the blockchain, so the Emperor decided that he would show it to them and impress them. And he took out the blockchain that the stranger had given him and showed it to the crowed.
But then one small boy consultant standing at the back said “I can’t see a blockchain. And you have only one node so there is no need for a consensus mechanism”. And then everyone in crowd realised that was the boy said was true. There was no blockchain, just a database run by the Emperor as before.
The Emperor was upset at first, because everyone else had a blockchain and he didn’t. But then he realised that no-one else had one either, so he cheered up and started to invest in artificial intelligence chatbots instead and he lived happily ever after because he had a defined benefit pension.
Thinking about it, almost all of the interesting things I saw or heard about weren’t really about fintech and payments, they were about regtech and identity. It’s almost as if Identity2020 is the new Money2020, so to speak. See you next year.
