Our Live Five for 2019

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 a couple of years and then we’ll take a shot at the future!

Remember 2017?

This was the “live five” of technology-driven changes in the secure transactions field that we thought would have a real business impact over the previous year. In the spirit of openness and honesty and disclosure that we are famed for, let’s see how those predictions fared.

1. RegTech. I think we did pretty well with this prediction. Interest in regtech has grown throughout the year and the ability of regtech to make real differences in major markets is established.
2. Digital Identity. As we noted, one of the key regtechs, if not the key regtech, is digital identity. It did shoot up the agenda over the year and some interesting initiatives opened up.
3. PSD2 (still). No commentary is needed!.
4. Paying on the Go. We thought that a key use of open APIs will be payments, and very likely mobile payments. MasterCard’s purchase of VocaLink would tend to support this view!
5. Invisible POS.  The shift from “check out to check in” paradigms is underway but it is fair to observe that we did not see the number of launches we were expecting as many of the projects remain in beta and will be holding to wait for the arrival of PSD2 (and CMA remedies in the UK).

Not bad. In fact, pretty good. So now let’s take a look at how we did last year. We thought that you’d agree with four out of the five...

Goodbye 2018

This was the “live five” for last year. 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. Helping market participants to develop and implement responses to open banking as turned out to be intellectually challenging and complex, and we continue to build our expertise in the field.
2. Conversational Transactions. Yes, we were spot on with this one and not only in financial services. Many organisations are shifting messaging both for customer support and for transactions.
3. The Internet of Cars. This continues to develop, although the security concerns that we spoke about before continue to add friction to the development of new products and services in this space.
4. Artificial Intelligence. Again, this was an easy prediction because many of our clients were already active. Where we did add to thinking this year it was about the interactive landscape of the future (ie, 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.

As we said, 2018 saw disruption because the shift to open banking, starting in the UK, means the reshaping of financial services while at the same time the advance of AI into the transaction space (transactions of all types, from buying a train ticket to selling corporate bonds) begins to reshape the way we do business.

Hello 2019

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 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, and preventing "authentication friction" (using eg FIDO) is central to the new customer journeys.

2. In the identity space we are moving from PowerPoint to implementing new approaches to know your customer (KYC), anti-money laundering (AML), counter-terrorist financing (CTF) and the management of a politically-exposed person (PEP) risks bringing together a basket of new technologies including machine learning, shared ledgers and self-sovereign identity. 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 the cross-sector digital identity initiatives coming out of forward-thinking jurisdictions such as Canada and Australia as a vector for beneficial change and our experience in both will help such organisation to move quickly.

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 the 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 to 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 this space will develop similar new services this means securing IoT system becomes a priority. Fortunately, our very structured risk analysis for IoT and considerable experience in the practical assessment of countermeasures deliver as 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 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 and from contactless payments to open loop ticketing in major cities. Systems are going into service now may well find themselves overlap overlapping with the first practical quantum computer systems that render certain kinds cryptography worthless, so It's time to add PQC to strategies for the mass market.

There you go then! Brexit does not mean the end of SCA (since PSD2 has already been transcribed into UK law) and SCA means that secure digital identities can anchor digital wallets, and those digital wallets will contain things other than payments. They might also start to store 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-cryptography security.