Thursday, 30 March 2017

Cash free for a month: an experiment in new ways to pay

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"But did paying for everything with a card mean he spent more? ‘It’s certainly less tangible, you don’t see the money flowing in and out but I don’t think I’ve spent more or less than I would otherwise have,’ he says, adding that it can be even easier to keep a track on mobile payments with your phone, as you get the detail immediately on how much you’ve just spent – and on what. ‘It certainly makes expenditure on small transactions much more visible,’ he says. So, if you’re spending an excessive amount on regular coffees for example, you’ll learn soon enough once you start using the app."

Cash free for a month: an experiment in new ways to pay

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How do you define RegTech?

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RegTech has been supplying some of the best use cases in banking. From the early customer engagement stages like KYC and Identity to compliance management, risk and reporting, the potential to reduce costs and create new customer engagement opportunities is tremendous for RegTech. Banks are also actively looking for solutions to better interfaces with regulators.

From How do you define RegTech?

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How do you define RegTech?

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RegTech is thus officially a larger space (in terms of startup numbers) than InsurTech, Challenger Banking and most other fintech segments.

From How do you define RegTech?

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Don't force people to use tap and go cards, banks are told | Daily Mail Online

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n a letter written to the committee and published today, the chairman of the Financial Conduct Authority, John Griffith-Jones, said the regulator is already working with banks to provide more protection for customers.

He said measures being looked at include ‘removing any onus on customers to identify fraudulent transactions’

From Don't force people to use tap and go cards, banks are told | Daily Mail Online

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Financial fraud data for 2016 published : Financial Fraud Action UK

The new card fraud figures for the UK have just been released. Basically things can only get worse.

Losses due to payment card fraud were £618.0 million, an increase of nine per cent from £567.5 million in 2015.

From Financial fraud data for 2016 published : Financial Fraud Action UK

Card spending only increased six per cent in comparison. In other words, fraud is growing 50% faster than spending. That doesn’t sound an acceptable state of affairs to me. Something should be done.

It isn’t only card fraud that’s worrying.

Remote banking fraud losses totalled £137.1 million, a 19 per cent decrease from £168.6 million in 2015.

From Financial fraud data for 2016 published : Financial Fraud Action UK

You have to be careful with this figure because it is giving the losses to banks

Tuesday, 28 March 2017

Danish banks add Dankort payments to mobile wallets

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"Nets is using HCE technology from Japanese card issuer JCB as the foundation for the mobile payment system. The firm says Danish supermarkets are among the first merchants to accept Dankort mobile payments, via a Bluetooth acceptance device that sits next to their conventional payment terminals. "

Danish banks add Dankort payments to mobile wallets

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Sunday, 26 March 2017

Government must have power to spy on Whatsapp users' messages, Home Secretary Amber Rudd demands | The Independent

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"Whatsapp must allow security services to access users’ messages in the wake of the Westminster terror attack, Home Secretary Amber Rudd has demanded.

Ms Rudd said it was ‘unacceptable’ that the security services were unable to see messages sent by terrorists."

Government must have power to spy on Whatsapp users' messages, Home Secretary Amber Rudd demands | The Independent

The flaw with this argument is, of course, that if there is a backdoor in WhatsApp so that police can read terrorists messages, then the terrorists will be able to use the same backdoor to read the message between law enforcement, MPs and everybody else.

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"A police officer has been jailed today after she accessed the police national computer database to help a friend who was once suspected of involvement in Britain's biggest ever cash robbery. "

Police officer jailed after using her force computer to help a criminal suspect in Britain's biggest cash robbery | Daily Mail Online

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"Her Majesty's Inspectorate of Constabulary (HMIC), which inspects Britain's police forces, has reported on several cases of misuse of the Police National Computer (PNC) by non-police organisations."

Non-police orgs merrily accessed PNC without authority, says HMIC • The Register

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"A woman who got a job at Hammersmith Police station so she could track a witness whose evidence helped convict her gangster boyfriend of murder has been jailed."

Murderer's girlfriend who got job at Hammersmith Police Station to access secret files on key witness is jailed - Get West London

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POST Passport, boarding pass, face, Amex card, paperback

 

 

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"British Airways is introducing technology that will allow passengers to go through boarding gates at Heathrow using facial recognition."

British Airways introduces boarding without passports as it installs facial recognition at Heathrow

Once again, this is about biometrics as a convenience technology, not as a security technology. If you been in a BA boarding queue recently, you’ll know how convenient it is to board using the QR code on your phone and how inconvenient it is to fumble around getting your passport out to show at the gate and how annoying it is to be in the line behind people who put the phone down to rummage around in a bag to find the passport and then have to mess around unlocking the phone again because it locked while they were rummaging. So: if BA can do the passport scan and face capture away from the boarding gate they can make for a much smoother boarding process. It helps if the boarding pass is real, of course.

"Britain on the Fiddle returned to our TV screens last night with more fraudsters trying to scam the British taxpayer."

From a benefit cheat with multiple identities to a cigarette smuggler who thinks he should be knighted - what is Britain on the Fiddle all about? - Mirror Online

The program, which was excellent by the way, included reports of ID fraud that I found fascinating, but also featured Mickey Pitt, an engaging cigarette smuggler who masterminded an operation that used fake boarding passes to get in and out of airports undetected. Perhaps we can fix that problem with the same technology.

"A digital facial scan of the customer is recorded when they travel through security, and when they arrive at the gate, their face is matched with this representation when they present their boarding pass – allowing them to board the aircraft."

British Airways introduces new automated biometric technology - International Airport Review

I hope Terminal 5 will move to remote capture. Surely as an Executive Club member I should be able to have them capture a picture of my passport at home using Au10tix or similar and store it with my account so that next time I go to the airport I can breeze through the boarding process: they should get rid of the “priority” boarding line (which on many BA flights seems to include almost all passengers) and replace it with a mobile/biometric line.

Let’s analyse the problem. Breaking it down using Consult Hyperion’s three-domain identity model (3DID), we can see there are problems with

  • identifying the person travelling (we need to bind a passport);

  • authenticating that the boarding pass is in the hand of the correct person; and

  • authorising the person with the boarding pass to go through the gate on to the plane.

The way to do this is, in my opinion, is to create a digital identity for the purposes of travelling (the travel ID) and to bind this identity to a mundane identity by linking it to a specific passport. Then British Airways can bind this identity to my Executive Club by creating a BA virtual identity, Delta can create a Delta identity and so on. Now, when I make a booking, the booking is connected to my BA ID.

That BA ID could, of course, contain either my face (in the form of a biometric template) or it could contain some other biometric that is optimised for speed at convenience at the airport. Say fingervein, for example. That way, we could restructure the airport experience around technology instead of electronic simulations of paper.

Biometrics continue to advance in Japan with the news that Hitachi is teaming with Japanese issuer JCB to develop a biometric payment system based on its finger vein authentication technology that can be used as an alternative to cards and cash at the point of sale.

From Fingering suspects | Consult Hyperion (November 2007)

In this way, I can check in for the flight on my phone and then put my phone away. When I get to the airport, I go through security (at which point my face is checked against the passport photo in my BA ID) and then go to experience the Terminal 5 shopping experience. When it is time to board the plane, I put my finger into a scanner at the gate and off I go.

Saturday, 25 March 2017

Using Personal Information Like Money? Not So Fast, the EU Privacy Adviser Warns | Bloomberg BNA

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The EU needs to avoid any laws that allow people to pay for digital content with their personal information instead of money, the European Data Protection Supervisor warned.

From Using Personal Information Like Money? Not So Fast, the EU Privacy Adviser Warns | Bloomberg BNA

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Thursday, 23 March 2017

UK visionaries drag us kicking and screaming into the 1770s

You can’t say that London isn’t a fintech powerhouse and epicentre of the revolution that is forging a new financial services industry in the white heat of old technology. Wait, what?

"The UK is to roll out an image-based cheque clearing system in October that will slash processing times from six 'weekdays' to one day"

UK to roll out image-based cheque clearing system

I’d forgotten that some people still use cheques. I haven’t seen one for ages and haven’t the slightest idea where my chequebook is. I can’t even think what I might need a cheque for. In the last couple of weeks I’ve paid our gardener, window cleaner, a building contractor and my youngest son using my mobile phone. I have absolutely no need for cheques. Still, they are important to the powers that be.

"These changes will put cheques firmly in the 21st century"

UK to roll out image-based cheque clearing system

Actually, it will put cheques firmly in the 18th century, which is when they used to clear in one day because the clerks of the London banks had set up their own informal clearing system down the pub.

"Daily cheque clearing began around 1770 when the bank clerks met at the Five Bells, a tavern in Lombard Street in the City of London, to exchange all their cheques in one place and settle the balances in cash."

Cheque clearing - Wikipedia

Why waste money supporting the declining cheque business (cheque use fell another 15% in the UK last year) when we should be spending the money on identity infrastructure that is need to support the transition to open banking. It could all have been so different!

Thursday, 16 March 2017

Why Ethereum is great for payments – Medium

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"A clear lesson from the early days of bitcoin is that regular users suck at managing private keys."

via Why Ethereum is great for payments – Medium

They do indeed. And speaking as user, I don’t want to get better and managing private keys. I want someone else to do it, preferably someone who has some experience of this sort of thing, someone who has issued millions of keys and had to manage them, and ideally someone who is heavily regulated so that I have some expectation of redress in the event of a problem. Such would be a significant “incentive function” of banks if they can get their act together to do it.

For Credit Cards, Canceling The Need To Cancel | PYMNTS.com

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"A dashboard helps create separate card numbers and one-time-use numbers or merchant-specific ones. In this manner, a user can set up a ‘Netflix card or a Geico card’ that attends to payments for each of those relationships,"

via For Credit Cards, Canceling The Need To Cancel | PYMNTS.com

This is certainly an interesting proposition and good luck to Aaron and his team with taking it forward. But I don’t want a Netflix card or a Geico card, I want a Netflix identity and a Geico identity. Not just a card number, but a name and address and e-mail and… reputation. If I use a different card number at Ashley Madison and William Hill, then hackers (or, worse still, marketers) can still see that the name and address is the same and then reasonably conclude the same person is behind both usernames.

We need to make it hard for attackers of any kind to do this kind of thing.

 

Monday, 13 March 2017

POST Food for thought on the blockchain

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"Combined with state data on things like temperature, motion or chemical composition collected from sensors on equipment (aka the internet of things) blockchain could cost-effectively confirm everything that has ever happened to the food someone is about to eat."

via Blockchain For Supply Chain: Enormous Potential Down The Road

That sounds appealing, but it’s not the straightforward. As I explained in a Tomorrow’s Transactions blog post on this subject, the blockchain may be amazing but it isn’t magic. I share this authors suspicion that there may be a very fundamental and very disruptive connection between shared ledger technologies and thingternet technologies, but how would this help in practice?

Let’s look at a specific supply chain failure. The example I used before was that of the famous Amex salad oil scandal.          

"The Great Salad Oil Swindle was carried out by Anthony ‘Tino’ De Angelis, who traded vegetable oil (soybean oil) futures which was an important ingredient in salad oil. "

via How The Salad Oil Swindle Of 1963 Nearly Crippled The NYSE

The swindle involved falsifying records of the amount of vegetable oil that was being held in the supply chain. At one level, it was a simple and old-fashioned scam.

"American Express had recently created a new division that specialized in field warehousing, which made loans to businesses using inventories as collateral. American Express wrote De Angelis warehouse receipts for millions of pounds of vegetable oil, which he took to a broker and discounted the receipts for cash. This proved to be an easy way to get money, so De Angelis began falsifying warehouse receipts for vegetable oil he didn’t have. "

via How The Salad Oil Swindle Of 1963 Nearly Crippled The NYSE

The execution of the scam was, though, rather sophisticated.

"American Express sent out inspectors to make sure that De Angelis had the vegetable oil that acted as collateral, but what they didn’t know is that many of the tanks were filled mostly with water with a minimum of oil floating on the top to fool the inspectors, or that some of the tanks were connected with pipes to other tanks so the oil could be transferred between tanks when the inspectors went from one tank to the other."

via How The Salad Oil Swindle Of 1963 Nearly Crippled The NYSE

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So where could shared ledgers help, if not as a supply chain guarantor. Well...

"If American Express had done their homework, they would have realized that De Angelis’s reported vegetable oil ‘holdings’ were greater than the inventories of the entire United States as reported by the Department of Agriculture. "

via How The Salad Oil Swindle Of 1963 Nearly Crippled The NYSE

So if there had been some sort of salad oil blockchain, and every entry in the ledger was encrypted so that only American Express could read entries relating to their holdings and only Company X could read entries relating to their holdings but that actual amounts of the holdings in litres were in the clear then everyone, including the regulators, would have been able to easily calculate that the total amount of oil was greater than the total amount being produced. It’s the partial transparency that’s the key point here, which is why we refer to “translucent transactions” on shared ledgers as the platform for new kinds of financial marketplaces that will be cheaper and safer. It’s the shared ledger as a regtech again.

Blockchain For Supply Chain: Enormous Potential Down The Road

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"Combined with state data on things like temperature, motion or chemical composition collected from sensors on equipment (aka the internet of things) blockchain could cost-effectively confirm everything that has ever happened to the food someone is about to eat."

via Blockchain For Supply Chain: Enormous Potential Down The Road

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Sunday, 12 March 2017

POST Inclusion is about identity not bank accounts

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"If the plans of the upcoming payment bank by IndiaPost are to go by, over 112 crore Indians who have an Aadhaar number till now will be able to transact - send and receive money - only on the basis of the Aadhaar number irrespective of the fact whether it is linked to a bank account or not."

Pocket: Your 12-digit Aadhaar number could soon be your single point payment address

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Pocket: World of Warcraft's gold rush has upended Blizzard’s economy

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"The WoW Token is a simple market. All the tokens are identical, and have a static real-money cost. When there are more people wanting to buy gold than people wanting to sell gold, the price falls. When there are more people looking to sell gold than buy it, the price rises."

Pocket: World of Warcraft's gold rush has upended Blizzard’s economy

When Blizzard (the people who run World of Warcraft) first

"Prices fluctuated so much because nobody knows what a WoW Token is worth now. Since the WoW Token interface also doesn’t let you know how many tokens are actually for sale at any given time, it’s unclear whether buyers and sellers are rushing into and out of the market at different price points, or whether a single gold-rich buyer using a low point as an opportunity to liquidate can send the price skyrocketing."

Pocket: World of Warcraft's gold rush has upended Blizzard’s economy

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Wednesday, 8 March 2017

European Payment Summit

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Talent follows the cash into transaction banking

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Bankers are also attracted by the stability of transaction banking, which gives some respite from the volatility of earnings in investment banking and trading.

From Talent follows the cash into transaction banking

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Crystal clear: Creating hyper-transparent property markets - JLL Real Views

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At the moment, bond and equity markets are far more transparent than the real estate sector:

From Crystal clear: Creating hyper-transparent property markets - JLL Real Views

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Crystal clear: Creating hyper-transparent property markets - JLL Real Views

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The issue of transparency is going to play a major role in the allocation of an avalanche of global commercial investment into real estate over the next decade. With total sums at stake predicted to rise from US$700 billion to over $1 trillion a year by the mid 2020s, according to JLL, countries and cities which meet investor demands on transparency will be best placed to attract these capital flows.

From Crystal clear: Creating hyper-transparent property markets - JLL Real Views

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Talent follows the cash into transaction banking

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In 2016, banks made $209bn from transaction banking, compared with the $172bn made by their trading arms, according to the data, which cover global, regional and local banks. This is almost three times the $77bn that banks made from advising clients on M&A and helping them raise finance. Transaction services also eclipsed lending revenues for every year since 2011.

From Talent follows the cash into transaction banking

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US banks’ profits leave European rivals in the shade

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In 2006 the top five European banks had a combined 20 per cent share of the worldwide investment-banking fee pool, according to Dealogic. Last year that share dropped to 16 per cent, even though Barclays had swallowed much of Lehman Brothers in the meantime.

From US banks’ profits leave European rivals in the shade

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Tuesday, 7 March 2017

POST Accounting is so last millenium

In my book “Before Babylon, Beyond Bitcoin” I look at how this infrastructure hs evolved.

Double entry

Accounting is one thing, but it is not the whole story. When the

At very high level, then, accounting led to the creation of modern markets and it’s cousin, auditing, set in place the infrastructure necessary for large-scale enterprise and modern prosperity. But they are not perfect. They are backward looking. But there is another way. I co-authored a paper on this some time ago and co-opted the architectural term “ambient accountability” to describe the combination of practical Byazantine fault tolerance consensus protocols and replicated incorruptible data structure (together forming “shared ledger” technology) to deliver a transactional environment that has a form of controlled transparency (“translucency”).  As XXX from R3CEV describes this new environment, it is much simpler to operate and regulate

The reconciliation comes as part of the fact recording; not after. Organisations can “confirm as they go“, rather than recording something, then checking externally afterwards. How? Distributed ledgers build in connectivity and validation criteria.

From Distributed ledgers: “Confirm-as-you-go” | Bits on blocks

Thus accounting and auditing are combined and embedded in the data structure.

If the relevant parties do not agree on a fact, it doesn’t get recorded for either party.

From Distributed ledgers: “Confirm-as-you-go” | Bits on blocks

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Smart condoms: like Fitbit for sex – and you can even share your stats | Life and style | The Guardian

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So it’s a Fitbit for your old chap? Basically, yes, although I doubt that will be the slogan, for a number of reasons. You charge it with a USB cable and sync the data with your phone in the usual way. Then share it online, if you wish.

From Smart condoms: like Fitbit for sex – and you can even share your stats | Life and style | The Guardian

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Council earned £17,000 from ‘no change’ Chichester car parks - Chichester Observer

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The ‘no change given’ rule at Chichester car park meters saw the council earn an extra £17,000 last year

From Council earned £17,000 from ‘no change’ Chichester car parks - Chichester Observer

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Monday, 6 March 2017

CommBank provides ID verification for gig economy marketplace users

 

 

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Now, in an effort designed to provide an extra layer of trust, a pilot will see members who bank with CBA able to add a 'CommBank Identified' badge to their Airtasker profile if the two firms have the same name and date of birth on file.

From CommBank provides ID verification for gig economy marketplace users

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Tim Fung, CEO, Airtasker, says:

"We’re creating a reputation passport, which will help people know exactly who they are dealing with and what they are qualified for."

From CommBank provides ID verification for gig economy marketplace users

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POST Cash and its alternatives

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BBC World Service

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Saturday, 4 March 2017

Why bother with the blockchain for identity?

As my former colleague Salome Parulava rather succinctly described last year, we must distinguish between two different areas of overlap between 

First, “Identity for Blockchain”, assumes that if blockchain platforms… gain adoption that is at least 10% as widespread as the industry’s attention to them today, there will be a need for a robust and reliable identity layer to manage KYC, AML, authentication and authorisation processes for shared ledger applications.

From “Identity for Blockchain” vs “Blockchain for identity”. What’s in it for Airbnb? | Consult Hyperion

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Second approach could be called “Blockchain for Identity” and it formulates a separate self-sustained class of use cases. It assumes that blockchain technology can enable solutions to known identity problems

From “Identity for Blockchain” vs “Blockchain for identity”. What’s in it for Airbnb? | Consult Hyperion

It’s this latter category that interests me at the moment. As Sally pointed out last year, there are some specific problems to do with interoperability and discoverability that might be approached in a different way. Let’s to pause to clarify a couple of definitions. First, I want to distinguish between attributes (such as IS_OVER_18) and credentials (such as dave.birch!Barclays#IS_OVER_18).

Oh wait. As you can see here, I’ve invented a new shorthand. So the attributes are facts about me (the first party) that you (the second party) want to know. Credentials are attributes about me that are not useful to you unless they are attested to by a third party and they can be presented by the first party for verification by the second party. So you, the pub, want to see an IS_OVER_18 credential and I present you with an identity dave.birch!Barclays (that’s a public key of mine signed by Barclays private key) and you can check that identity, see that it includes the IS_OVER_18 attribute and then (assuming that the identity hasn’t expired ) you can serve me a drink. In the case of some other credentials (IS_A_UK_RESIDENT) you might want to ping Barclays to make sure that the identity has been cancelled (because I’ve moved out of the UK). So you get the general idea.

Note one particularly interesting aspect of this architecture. In the example I used, my identity was dave.birch!Barclays but it could just as easily have been mr.x!Barclays and that wouldn’t make any different whether you serve me a drink or not. As I have written here approximately monthly for a decade or so, we need to make our transactional space one where attributes, not identities, are transaction enablers.

My good friends at Meeco along with a group of people I take very seriously in this space have just published their report “The Rise of the Attribute Economy 2.0” that explores and examines this kind of thinking.

Now, suppose all of the banks issue these credentials to their customers. This would be immensely useful for several reasons. 

 

I could store the CRUD on my phone or on my laptop. But then I might lose it. So instead, let’s assume that the banks get together a create a shared ledger to hold all of their CRUD in one place. Now, when I want to open a new bank account or start internet dating or put a monkey on Man City half way through a game courtesy of noted actor Ray Winstone, all I have to do is point to a relevant piece of CRUD. Now the pointers to the CRUD will easily fit on my phone so no problem - I can download them from my bank whenever I get a new phone, it’s no big deal -

Let’s try a worked example. I want to start internet dating. I go to Ashley Match and click to open an account. Ashley Match Asks for a virtual identity. I choose Mr X at Barclays, an identity that contains only two facts about me: that I’m over 18 and I am resident in the UK. The fact that the credentials are attested to by Barclays also tells Ashley match that Barclays know who I am, which as I have mentioned before, means that I cannot misbehave behind my pseudonym. Ashley match now go to the chain and look for this identity. They find the Mr X creation records and look along the ledger to see if that identity has been updated or deleted (they don’t care if it’s been read by someone else). It hasn’t. But now they need to know that I am the actual owner of Mr X so to speak

UK card payments continued upward trend in 2016

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210000UK card payments continued upward trend in 201602 March 2017  |  1961 views  |  0Source: UK Cards AssociationConsumers spent £647 billion using payment cards in 2016, new figures show. There were 14.8 billion card transactions in 2016, equivalent to 40.5 million transactions a day or 469 a second, data from The UK Cards Association shows.

Three-quarters of retail spending (76.4 per cent) was on payment cards. Retail spending on cards in 2016 was £298 billion, compared to £290 billion in 2015.

The majority of card spending in 2016 was made via debit cards, which accounted for £461 billion of spending. Total card spending in 2015 was £620 billion.

Contactless payments accounted for £25 billion of spending

[From

UK card payments continued upward trend in 2016

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Friday, 3 March 2017

Commenters don’t read articles. Here’s how one site is fighting back.

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A Norwegian news site is now asking its readers to take a short reading comprehension quiz before allowing them to post comments below certain articles

[From

Commenters don’t read articles. Here’s how one site is fighting back.

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New Blockchain Partnership Proposes Solution for Remote Voting - CryptoCoinsNews

The news that somewhere in South Korea some sort of local government had some sort of election and recorded the votes on some sort of blockchain restarted some discussions about whether electronic voting might be just around the corner. As I have often suggested, the idea of using smartphones instead of ballot papers seems rather obvious.

With a sample ballot on their smartphone a voter will only need to bring their phone with them when the polls open;

[From New Blockchain Partnership Proposes Solution for Remote Voting - CryptoCoinsNews]

Great. But hold on...

it’s projected that through an app built on the blockchain voters won’t have to make the trip to polls in the future.

[From New Blockchain Partnership Proposes Solution for Remote Voting - CryptoCoinsNews]

Oh dear. This sort of system might be acceptable for shareholder voting and that sort of thing, but it certainly isn’t acceptable for either local or national government elections for a variety of reasons all of which have been reiterated endlessly on this very blog (principal among them the issue of voter intimidation). I am firmly of the opinion that voting should be a public act.

That doesn’t mean, however, that new technology cannot make a very big difference to the electoral process. Just to illustrate on sensible use of blockchain technology in this context, imagine a voting system whereby the elector authenticates access to a private key and is returned a cryptographically-blinded permission to vote. They go down to the polling both a tap their phone or bluetooth or QR or whatever to communicate their vote. Then they choose their candidate. Let’s say they vote for President Camacho. When they get home they can log in to traverse the election block chain and they can see if their vote has indeed ended up in the right bucket. In fact, they can see every vote in every vote (although they don’t know who those votes came from).

Pensioners incomes exceeds working families | Government Business

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Research has revealed that pensioners in the UK are now an average of £20 a week better off than working households.

[From Pensioners incomes exceeds working families | Government Business]

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Median income among pensioners is projected to rise twice as quickly as that for the rest of the population

[From Historically weak growth in living standards set to continue; low-income households with children to fare worst - Institute For Fiscal Studies - IFS]

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Thursday, 2 March 2017

SIX to support WIR Bank in launch of SME payment card WIRcard plus - FX-MM

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Users of WIRcard plus can pay at approximately 10,000 WIR acceptance points in Switzerland, but moreover, the card can be used worldwide through the V PAY network.

From SIX to support WIR Bank in launch of SME payment card WIRcard plus - FX-MM

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Getting into the Flows – Project Breakthrough – Medium

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Regulation — ‘aligning financial regulation with the Global Goals … to make sustainable asset classes more investible at lower cost.’

From Getting into the Flows – Project Breakthrough – Medium

So, if we look at the patten of the co-evolution of money and technology what we would expect to see is the sustainable assets classes as a mechanism for deferred payment that becomes a store of value and then a means of exchange. The means of exchange then becomes a currency that denominates other transactions. Richard Roberts goes on to identify candidate currencies based on which 

AWS's S3 outage was so bad Amazon couldn't get into its own dashboard to warn the world • The Register

Remember, the blockchain is uncensorable and resilient, a permanent record of transactions always available everywhere, so in cases of (for example) natural disasters then it can provide an identity infrastructure.

In fact, the five-hour breakdown was so bad, Amazon couldn't even update its own AWS status dashboard: its red warning icons were stranded, hosted on the broken-down side of the cloud.

From AWS's S3 outage was so bad Amazon couldn't get into its own dashboard to warn the world • The Register

Ah. Well, let’s suppose that wise organisations employ people who know how to design blockchains properly (so that all the consensus-forming nodes do not sit in virtual machines in a single data centre, for example).

Virtual currency needs one regulator, not 50 | American Banker

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It is a fair question to ask whether there should be state regulation of virtual currency.

From Virtual currency needs one regulator, not 50 | American Banker

It is, I would imagine,  a byproduct of state regulation of banks.

Money and intelligent design

The good people at BBVA Research recently published a paper on central bank digital currencies (Central Bank Digital Currencies, Gouveia et al, March 2017) in which, amongst other conclusions, the authors say that “we also consider it likely that a scenario in which CBDC is anonymous, universal and non-yield bearing will be implemented”. But why is this “likely”? Why would any central bank bother setting up the form of distributed ledger that the authors envisage in order to implement something of such obvious utility to criminals, terrorists, money-launderers, tax-evaders and corrupt politicians? I’m not sure about this as a trajectory for money in the always-on robo-economy.

While this report talks in general about central bank digital currency (or “digital fiat” as I prefer to label it), it refers repeatedly to distributed ledger technology (i.e., shared ledgers) as the mechanism for managing this currency. It also refers to “blockchain technology” in the Executive Summary, although I would have thought this least-likely form of shared ledger architecture to implement such a system. Bitcoin uses a blockchain is that it is resistant to attacks from untrusted actors who are part of the consensus-forming network while rewarding participation in that network with currency. But a central bank will want to regulate the supply of digital fiat itself. If it doesn’t, then what’s the point of digital fiat? And if the central bank is going to, for example, use commercial banks as the nodes in the consensus-forming network then surely these must be trusted actors? If a rogue bank starts introducing bogus transactions, the central bank has a lot more to worry about than maintaining retail balances.

To put it more succinctly: why would we use 21st-century technology to emulate 17-th century money? Are we going to use new technology merely as a band-aid to cover up the flaws in the existing system or are we going to do something different? J.P. Koning came up with a lovely way of thinking about this, with the added bonus of evocative imagery and a core analogy that holds true: money is indeed imaginary.

Like Inception, our monetary system is a layer upon a layer upon a layer… Monetary history a story of how these layers have evolved over time.

From Moneyness: Money as layers

Great movie, with the wonderful line “yes, but how did you get here”. Physiology recapitulates phylogeny, as they (used) to say. In other words, the structure of the monetary system shows its evolution, just like our knees do. It did not arise by intelligent design. In fact, quite the contrary: it demonstrates some pretty unintelligent design on a daily basis (like have people instruct instant payment transfers by typing in account numbers and sort codes).

So: do we revolutionise money (whether using a blockchain or not) by adding layers or replacing them? It’s really hard to replace a layer without disturbing the layers above so you end up having to replace the whole stack and that is hard to co-ordinate, so conservatism wins, and we end up hacking money to make it work in the modern world. Yet, as I will point out in my forthcoming book “Before Babylon, Beyond Bitcoin”, the future of money actually began back in the 1970s when it went virtual. So the money of the future, money that is nothing more than bits, is already here. Yet the institutions we use to create and control it (central banks and the IMF, monetary policy and capital ratios) date back generations, indeed centuries. No wonder it doesn’t work properly.

Things, however, are about to change. Suppose that we apply intelligent design to create forms of money that are grounded in a world of mobile phones and shared ledgers and such like to operate in a fundamentally more efficient way.? Then what would that money look like? And who should take part in the consensus-forming process (but that’s for another day!).

In intelligent design, we ought to start out by deciding what is best for society as whole rather than what is best for (say) banks. We want to have regulations that are good for society but we do not want regulations that are expensive, beyond cost-benefit analysis and a burden on stakeholders. Nor do we want regulations, as we have now, that have spiralling costs with no end in sight. We might ask, for example, in the case of America whether it makes sense to have one virtual currency regulator or 50:

It is a fair question to ask whether there should be state regulation of virtual currency.

From Virtual currency needs one regulator, not 50 | American Banker

In this case it is, I would imagine, a byproduct of state regulation of banks and it perpetuates because regulators at the state level mistakenly imagine money to be something to do with banking. And, I suppose, they are currently underemployed, what with everything being so stable and efficient in the financial services world. Our first step to a better system, then, is not based on fintech but on regtech:

Regulation — ‘aligning financial regulation with the Global Goals … to make sustainable asset classes more investible at lower cost.’

From Getting into the Flows – Project Breakthrough – Medium

If we look at the patten of the co-evolution of money and technology what we see (yes I know this is a gross simplification) is that sustainable asset classes as a mechanism for deferred payment that becomes a store of value and then a means of exchange. The means of exchange then becomes a currency that denominates other transactions. OK, so what would these assets be? Richard Roberts goes on to identify candidate currencies based on “flows”, which is a useful way of thinking. 

We’ve identified four key flows — you could also think of them as currencies — that we believe will define tomorrow’s economy: money, data, carbon and genes.

From Getting into the Flows – Project Breakthrough – Medium

This accords with another perspective that I have written about before, the Long Finance perspective. In Gill Ringland’s examination of plausible financial services scenarios for 2050, she talks about the key assets being a person’s identity, credit rating and parking space (alluding to a new demographic asset class of residence). I think that there will be many more currencies, because I see currencies linked to communities, but I agree with the general thrust, so let’s imagine that there is a framework in place for creating the currencies (a privacy-enhancing framework with all sorts of goodies such a homomorphic encryption and zero-knowledge proofs baked in to it) and that it has been intelligently design to meet the goals of society.

Now this is where fintech comes into things, helping people to manage these currencies in a more sophisticated and efficient way within that regtech framework (e.g., shared ledgers). Fintech helps me to track whether I’m buying too much coffee, make loans to people in the developing world and to crowdfunding a new board game. I love it. And it works within a regtech framework that allows it to do all of things cost-effectively. This seems to me to be a much more realistic vision of the future than the “Star Trek” alternative, even though I do enjoy that version:

One of my favorite moments from Star Trek is in ST IV: The Voyage Home, when Kirk and the gang are stranded in 1980s San Francisco. They try to board a Muni bus and are promptly turned away.

Spock: What does it mean, “exact change”?

Kirk: They’re still using money. We need to find some.

Not only is money a foreign concept to the crew, it’s so foreign they didn’t even remember it was used in the Twentieth Century.

From Why Star Trek’s Future Without Money Is Bogus — Brain Knows Better

It’s tempting to imagine a post-scarcity future where money (as a system for allocating scarce resources) has vanished and the vast communist galactic super state takes care of everyone’s needs. But like the writer here, I don’t buy it. Some things will always remain scarce and desirable, like my attention span, and money will remain necessary. But it won’t be the same money that we have today.

Orange places 1,700 ID card readers at prepaid sales points - Telecompaper

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Orange is forecasting 1,700 outlets with a Famoco terminal, which can verify the identify of a prepaid customer. This has become a requirement since December for all prepaid providers in Belgium…The system can within seconds make an identification using the government’s CheckDoc database.From Orange places 1,700 ID card readers at prepaid sales points - Telecompaper

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Orange Digital Ventures recently made an investment of EUR 11 million into Famoco, a maker of scanners…. Orange started using the terminals in its own shops. Now, supermarket gas stations and other sales points will use the technology.

From Orange places 1,700 ID card readers at prepaid sales points - Telecompaper

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