Cashless as Count Zero

As I wrote recently, China is well on the way to becoming a cashless society. It is not the only country heading in that direction, of course. A cursory examination of the global statistics around the declining use of banknotes and coins make it easy to predict that many countries will soon be effectively cashless within the strategic horizon of corporate planners. But what does this actually? USA Today jut asked what sounded like a pretty dumb question: will there be cash in a cashless society? Well, I don’t think it’s dumb question. And the answer is “yes”. When I talk about a cashless society within a generation, I do not mean that there will be literally no cash at all. That would be stupid. When I say cashless, I mean cashless in the Count Zero sense.

Cash will still be around and it will still be legal tender (although I don’t think people understand what a limited concept this is), but it will disappear from polite society and from the daily lives of most people. We will move from being a debit card society to a mobile society to a biometric society in which cash will still exist. It it just won’t matter. As the brilliant William Gibson wrote in his 1995 classic novel Count Zero, talking about a character adrift in the near future that “he had his cash money, but you couldn’t pay for food with that” going to deliver my favourite line about cash in the whole of modern fiction: “It wasn’t actually illegal to have the stuff, it was just that nobody ever did anything legitimate with it”.


with kind permission of TheOfficeMuse (CC-BY-ND 4.0)

Why am I focusing on this vision? Well, as my friend and top futurist Ross Dawson points out about Gibson, has never claimed to predict the future [but he] has “an unmatched knack for analyzing trends and behaviors inherent to modern life and extrapolating them into vivid themes that reveal a kind of raw truth about humanity”. He has an amazing track record on this, by the way. As the New Yorker highlights, Gibson first used the word “cyberspace” in 1981 and his books, I have to admit, had a huge impact on me and my way of thinking about technology.

Thus by cashless in the Count Zero sense, I mean that cash has ceased to be relevant to monetary policy, become irrelevant to most individuals and vanished from most businesses. As we look to the future, we can begin to ask, quite reasonably, whether developments in digital payment technology and changes in payments and banking regulation will bring us to the point of this kind of cashlessness within, say, a generation. Well, never mind a generation, we’re pretty close to it now as far as I can see. Let’s just say that if you live in Amsterdam, you don’t need cash for the trains and if you live in London you don’t need cash for the coffee shops. No-one is planning or managing this, it’s just happening.

Is this what we want though? This is a form of cashlessness that is too conservative to reap the benefits of a truly cashless economy, too disorganised to reign in the criminal exploitation of cash and too wedded to the symbolism of physical money to switch it off (just as we switched off analogue TV not that long ago). I think that rump cash (and I exclude various categories of post-functional cash from this definition) should be actively managed out of existence.

We need to have a strategy toward cashlessness, and not simply a laissez-faire acceptance that cashlessness will happen to the great benefit of the majority but in a way that excludes and marginalises some. Click To Tweet

A recent survey in the UK found that over 75% of low-income households rely on cash, as well as over 80% of elderly households. The shift to cashless society must be planned to help these groups so that they share in the benefits of cashlessness. Having been to China and seen at first hand the operation of a cashless society, I think it obvious that we should learn from their experiences, beginning with the observation that people in China are well aware of what happens to when society switches from anonymous cash to electronic payments. As observed in the Financial Times, the “scale of data accumulation is beyond our imagination”. The Chinese woman making that comment — while at the same time observing that despite her concerns about privacy, mobile payments are too convenient to opt out of — goes on to say, rather poetically, that she cannot tell whether her compatriots are “constructing a futurist society or a cage for ourselves”

Not everyone in China is part of this digital currency revolution, of course. The World Bank Global Findex database, which measures financial inclusion, estimates that as of lat year some some 200 million Chinese rural citizens remain unbanked, or outside of the formal financial system. As in Sweden, the shift toward cashless is raising issues around exclusion and marginalisation. There are, for example, supermarkets with different lanes for cash or cashless payments that act as physical manifestation of social stratification between, as Foreign Policy notes, the young and the old and between the urban middle class and those left behind. I’ve written before that we will see the same in developed economies as cash vanishes from middle class life to become the preserve of the rich and the poor who will use it for tax evasion and budgeting respectively.

The response should not be, as in some American cities, to force people to continue to use cash despite the expense, inefficiency and inconvenience, but to find effective digital alternatives for those trapped in a cash economy. I think we should start to plan for this now. I am in favour of Count Zero cashlessness, but I am in favour of it as a policy decision by society that is implemented to meet society’s goals. I couldn’t disagree more with the Wall Street Journal’s view that the move to cashless society “should be left to technological advancement”. No, it should not! This is a matter of great importance and with significant implications for society. The strategy should therefore be set by society, not by technologists.

Now, clearly, technological advances deliver new possibilities to policymakers and it is good for technologists to explore these possibilities. But, as they say, just because something can be done does not mean it should be done. We need a proper debate and a regulatory envelope set out to move forward so that anyone who needs to pay for anything will be able to do so electronically and that anyone who does not want to pay electronically will be presented with a method for paying in cash, albeit one that someone will have to pay for. It’s time to start thinking about what the requirements for that infrastructure are and consulting consumer organisations, businesses and government departments on their needs. We need to make a cashless Britain, not simply allow a cashless Britain.

[An edited version of this piece first appeared in Forbes, 18th August 2020.]

The great Chinese money experiment is over

The Chinese were first with the great transition from commodity money to paper money. They had the necessary technologies (you can’t have paper money without paper and you can’t do it at scale without printing) and, more importantly, they had the bureaucracy. In 1260, the new Emporer Kublai Khan  determined that it was a burden on commerce and drag on taxation to have all sorts of currencies in use, ranging from copper coins to iron bars, to pearls to salt to gold and silver, so he decided to implement a new currency. The Khan decided to replace metal, commodities, precious jewels and specie with a paper currency. A paper currency! Imagine how crazy that must have sounded!

China and paper money

with kind permission of TheOfficeMuse (CC-BY-ND 4.0)

Just as Marco Polo and other medieval travellers returned along the Silk Road breathless with astonishing tales of paper money, so modern commentators (e.g., me) came tumbling off of flights from Shanghai with equally astonishing tales of a land of mobile payments, where paper money is vanishing and consumers pay for everything with smartphones.

China was first in to paper money and eight hundred years later looks like being first out of it. Click To Tweet

This thinking has been evolving for some time. Back in 2016, the Governor of the People’s Bank of China (PBOC), Zhou Xiaochuan, set out the Bank’s thinking about digital currency, saying that it is an irresistible trend that paper money will be replaced by new products and new technologies. He went on to say that as a legal tender, digital currency should be controlled by the central bank and after noting that he thought it would take a decade or so for digital currency to completely replace cash in China, he went to state clearly that the bank was working out “how to gradually phase out paper money”. Rather than simply let the cashless society happen, which may not led to the optimum implementation for society, they were developing a plan for a cashless society.

As I have written before, I don’t think a “cashless society” means a society in which notes and coins are outlawed, but a society in which they are irrelevant. Under this definition the PBOC could easily achieve this goal for China. But how will they do it? I got a window into the tactics when I listened to Kevin C. Desouza (Professor of Business, Technology and Strategy in the School of Management at the QUT Business School, a Nonresident Senior Fellow in the Governance Studies Program at the Brookings Institution and a Distinguished Research Fellow at the China Institute for Urban Governance at Shanghai Jiao Tong University), someone who has pretty informed perspectives. I heard him in conversation with Bonnie S. Glaser (senior adviser for Asia and the director of the China Power Project at the Center for Strategic and International Studies, CSIS) on the ChinaPower PODCAST. Kevin and Bonnie were discussing China’s plan to develop a Central Bank Digital Currency (CBDC). I have looked at China’s CBDC system (the Digital Currency/Electronic Payment, DC/EP) in some detail and have speculated on its impact myself, so naturally I wanted to double-check my views (coming from a more technological background) against Kevin and Bonnie’s informed strategic, foreign policy perspective.

One particular part of their discussion concerned China’s ability to advance in digital currency deployment and use because of the co-ordinated plans of the technology providers, the institutions and the state. The technological possibilities are a spectrum, there are a wide variety of business models and there are many institutional arrangements to investigate, balance and optimise. Take, for example, the specific issue of the relationship between central bank money and commercial bank money. Yao Qian, from the PBOC technology department wrote on the subject in 2017, saying that to “offset the shock” to commercial banks that would come from introducing an independent digital currency system (and to protect the investment made by commercial banks on infrastructure), it would be possible to “incorporate digital currency wallet attributes into the existing commercial bank account system” so that electronic currency and digital currency are managed under the same account.

This rationale is clear and, well, rational. The Chinese central bank wants the efficiencies that come from having a digital currency but also understands the implications of removing the privilege of money creation from the commercial banks. Thus you can see the potential problem with digital currency created by the central bank, even if it is now technologically feasible for them to do so. If commercial banks lose both deposits and the privilege of creating money, then their functionality and role in the economy is much reduced. Whether you think that is a good idea or not, you can see that it’s a big step to take. Hence the PBOC position, reinforced by Fan Yifei, Deputy Governor of the People’s Bank of China writing that the PBOC digital currency should adopt a “double-tier delivery system” which allows commercial banks to distribute digital currency under central bank control. I don’t doubt that this will be the approach adopted by the Federal Reserve when the US eventually decides to issue a digital dollar, which is why we in the West should be studying it and learning from it.

I’m fascinated by China’s long experiment with paper money and its imminent demise. This will come about not because of Bitcoin or Libra but because the PBOC has been strategic in its thinking and tactical in its governance, co-ordinating practical solutions the will make digital currency work to the benefit of the nation.  Their comments on the topic from 2016 to now have been consistent. Digital currency is coming and China will take the lead in digital currency just as it did in digital paper currency.

[This is an edited version of an article that first appeared on Forbes, 9th August 2020.]

The future of money? Back to social anthropologists again

In my book “Before Bablyon, Beyond Bitcoin” I made the point that I had turned to the work of social anthropologists to help me to make sense of the impact of new technology on money and the relationship between social, economic, business and technological pressures on the various functions of money. I found the perspectives of the discipline indispensable in formulating scenarios for the future that would be useful for banks and others developing their strategies. This is why I was absolutely delighted to be invited to the European Association of Social Anthropologists (EASA) Annual Conference 2020. I’m going to take part in Panel 057, “Digital encounters, cashless cultures: Ethnographic perspectives on the impact of digital finance on economic communities”.

This panel explores new approaches towards value, economy, money, debt, finance and fiscal relations. In doing so, it discusses how global turns towards digital finance (e.g. mobile wallets; credit and debit cards) impact cash dependent and marginalized groups, communities and families worldwide. In particularly interested in following the narratives around these issue because, as I have long maintained, we need to being to develop strategies toward cashlessness rather than simply allow cashlessness to happen and we need to develop strategies for bringing new kinds of money into existence to serve society more effectively than the current international monetary and financial system does. I am not smart enough to know what all of those strategies should be, although I am smart enough to know that they require knowledge that it far beyond that of the technology and the business model, so I am genuinely keen to learn.

Just to show the variety of topics that will be discussed, here is the list of papers in the session:

  • Economy of lies: Drunk husbands, digital savings and domestic workers in Kolkata, India.

  • Cutting the wire: financial exclusion and online work among Syrians in Lebanon.

  • Debt economies as urban survival strategies in the collapsed economies: examples from post-Soviet economies and Turkey compared
    Spheres of exchange 2.0: Conversions and conveyances in Bitcoin economy.

  • Accessing Cash(lessness): Cash-dependency, Digital Money and Debt Relations Among Homeless Roma in Denmark.

  • Self-making stories: Accounts of cryptocurrencies from the ground
    An ethnography of unsettled debt. Cashlessness and betrayal in Brazil.

  • An ethnography of Italian Bitcoin Users.

  • Coercive Political Economies, the Anthropology of Risk and Social Financing. Ethnographic notes from North India (Rajasthan).

  • Banking on digital money: Swedish cashlessness and the fraying currency tether.

The authors of the papers in this session have produced a series of blogs that explore a fascinating variety of perspectives on money and what it means, from financial inclusion and cashlessness to risk and cryptocurrencies, that will certainly add significant input to the debates that I am involved in around digital currency. In particular, the social anthropologist perspective will help me to explore the key question of whether digital currency will be driven forward by evolution or intelligent design. 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?

(Ozark Series 3, Episode 1. Mom “Mining virtual gold isn’t a real job”. Son “You know that all money is imaginary, right?”)

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. As he put it, “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”. 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 having people instruct speed of light instant payment transfers by typing in account numbers and sort codes).

Things, however, could be 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? That’s precisely what we should be listening to social anthropologists about! 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?

In this case the current sub-optimal situation 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 and  co-ordinated efforts to make ‘sustainable asset classes more investible at lower cost’. 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 a history of sustainable asset classes as a mechanism for deferred payment that in time become a store of value and then a means of exchange. The means of exchange then becomes a currency that denominates other transactions.

If that is a useful model to work with, then what would these assets be? In the article referenced above, Richard Roberts goes on to identify candidate currencies based on “flows”, which is a useful way of thinking. He points to four key flows — you could also think of them as currencies — that he believes will underpin the next economy: money, data, carbon and genes. 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 (in the form of digital assets that can be traded without clearing and settlement) comes into things, by answering some of the questions and solving some of the problems set out by the authors in my EASA session. Not the problem of helping college kids in San Francisco to split a bar tab without talking to each other, the problem of helping everyone (and I mean everyone) to better financial health though better management of assets. One way will be to turn investible assets into money (or, at least, new kinds of assets that function in money-like ways in certain circumstances). 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 your attention span, and money will remain necessary. But it won’t be the same money that we have today. And if you want to see how it might be different, then come and join me tomorrow in listening to some perspectives that go far beyond technology to deliver important ideas about the future of money.

A polymer paradox

The governor of the Reserve Bank of Australia Philip Lowe has more than once referred to the interesting dynamics around cash down under. The paradox is that despite retail points of sale tending toward cashlessness, the demand for banknotes is close to a half century high. More specifically, he has pointed out that “there are 14 $100 notes on issue for every Australian, 30 $50s, and seven $20s. That makes for around $3000 worth of banknotes on issue for every Australian”, before going on to ask where exactly all that cash is, saying that “I, for one, don’t have anywhere near that amount”.

Me neither, although I just checked and I do have A$25 in my travel draw in my study, so perhaps one explanation is that lots of visitors get some Aussie dollars out at the airport and then discover that they never need them because there’s nowhere that you need to use cash and then forget to spend them before they leave. But that can’t account for anything but a tiny fraction of the $75 billion odd in circulation.

We need to look elsewhere for the missing money. In a November 2018 speech in Sydney, Mr. Lowe further referred again to the apparent paradox between the declining use of cash and that rising value of banknotes on issue. This is not a purely Australian phenomenon. We see the same paradox in the UK, because the fact is that in developed markets cash is no longer primarily a means of exchange. Figures from the Bundesbank show that nine out of every ten euro banknotes issued in Germany are never used in payments but hoarded at home and abroad as a store of value. Not “rarely”. Not “infrequently”. Never. The notes are not “in circulation” at all but are stuffed under mattresses.

IMG 2600

The main explanation given by the RBA is that some people choose to hold a share of their wealth in Australian banknotes. In RBA Research Discussion Paper 2018-12 “Where’s the Money‽ An Investigation into the Whereabouts and Uses of Australian Banknotes”, the authors (Richard Finlay, Andrew Staib and Max Wakefield) go in to some detail to determine that of total outstanding banknotes:

  • 15–35 per cent are used to facilitate legitimate
    Transactions (I’d actually be surprised if it was ten per cent by now);
  • roughly half to three-quarters are hoarded as a store of wealth or for other purposes, of which
    • we can allocate 10–20 percentage points to domestic hoarding (this now seems small to me, given the lack of transactional usage and the ban on cash transactions over $10,000);
    • up to 15 percentage points to international hoarding, which includes the A$25 in the draw in my study;
    • 4–8 per cent are used in the shadow economy. Some more recent figures show that up to A$1 billion is held by drug dealers alone at any one time before they convert their earnings to assets);
    • and 5–10 per cent are lost.
These are very broadly similar to the Bank of England’s calculations. In general, it seems that very little cash is used for legitimate transactions and central banks see the biggest use of it as for hoards. Click To Tweet

Personally, I distinguish between hoards and stashes and I have a strong suspicion that cash (in particular those $100 bills that the governor refers to) are a major component of stashes and that the provision of cash therefore provides something of subsidy to the criminal fraternity. But this of course may simply be my suspicious mind. I’m sure most of those $3,000 in banknotes for every Australian are used for entirely legitimate reasons.

Anyway, good news. Some of the missing Australian banknotes have turned up. A Mr. Simon Cross was pulled over in Queensland this week and when the police looked in his car they found $4.35 million in cash ($1.75 million in a suitcase and $2.61 million in a cardboard box). I don’t doubt that there is an entirely innocent explanation for Mr. Cross’ mobile hoard. I expect his preference for cardboard boxes full of cash is wholly reasonable response to the low interest rates currently available on Australian savings accounts.

The First Rule of Hollywood is the First Rule of Cryptocurrency too

You may have heard of Matty Simmons. He was the man behind the movie “Animal House”. That’s interesting enough for one lifetime. But if you are interested in electronic payments, you should read his 1995 book. I have it in front of me as I write. He just died, aged 93. My friend the author, storyteller and all round nice guy Jeffrey Robinson wrote a brilliant piece on Simmons’ role in founding the payment industry, and it was brilliant. He was, as Jeffrey put it, a witness to an event “which changed our world, but never actually happened”.

This event was the legendary New York supper in 1949 in The Major’s Cabin Grill at 33 West 33rd Street, known to everyone in the business as the birth of the Diners’ Club card and therefore the modern payment card industry. The apocryphal version (as told here by Lana Swartz) is that lawyer Frank McNamara forgot his wallet and had to call his wife who drove into the city from Long Island with money for him to pay. Like everyone else, I’d seen this story in many places and had always assumed it to be true. But it turns out that this story was made up by Simmons, who had been hired as the first employee of McNamara’s nascent Diner’s Club! As Simmons later said, he had to “glamorize the creation of the credit card”. In reality, McNamara had had the idea some time before and spent months going around Manhattan with Simmons to try and drum up interest in the idea before eventually persuading  street to take the first payment by general-purpose charge card. 

Think about the problem Simmons was faced with. An entirely new way to pay. The public had never seen a payment card and didn’t know what one was or why they might want one. Matty must have been a PR genius. Look at this fascinating newspaper report from “The Hartford Courant” dated 23rd October 1962. It concerns the world premiere of a movie called “ The Man From The Diners’ Club ”:

The Board of Selectmen unanimously adopted an ordinance Monday night to prohibit the use of money and place the entire town on credit for a day next March 13. Columbia Pictures “The Man From the Diners’ Club” will have its world premier at the Strand Theater here that day. On the day of the premiere, all transactions by local merchants will be by Diners’ Club cards only. The ordinance says it will be “unlawful for any person to pay cash for any article or goods purchased and it shall be unlawful for any merchant to accept cash for any article or goods sold.” Diners’ Club cards will be issued to the entire population of the town for the premiere day with junior cards for children.

What an amazing promotion! A cashless city in the USA half a century back! OK, so it was only for a day, but even so that was pretty cool. The Mayor of Hartford is reported as saying that “I am especially pleased to participate in this progressive experiment in the use of credit which may prove to the business world that the future method of transacting business will be through such a device as a single credit card” (my emphasis). What a forward looking guy!

Anyway, here’s the trailer for the film, which was written by William Blatty (who went on to write “The Exorcist”). The New York Times review said of Kaye that “his acting in it is so disordered, so frantic without being droll, so completely devoid of invention and spontaneity that he did no more than remind us, somewhat sadly, of that other Danny Kaye and what a terrible thing television has done to comedy on the screen”.

This picture of Danny illustrates an amazing item of payment trivia that Lana pointed out to me. Danny is shown clowning around in front of a computer that looks exactly as you would imagine in a film from 1963. But Diners’ Club didn’t have a computer, this was invented for the film. Simmons says that they did not go over to computers until 1968!

I watched the film so you don’t have to.

At several points the characters stop the action in order to explain how a Diners’ Club card works! So someone would say “now I’m going to phone Diners’ Club to check that this card is valid” and someone else would say “Hey the card comes with a booklet showing you all the places you can use it” or an incredulous supporting player would gasp when told that you could use a card to pay for an airline ticket. All a bit ham-fisted, but at least American consumers would come out of the movie understanding what a payment card does.

So where’s Bitoin Matty? Perhaps what the world of cryptocurrency needs is a movie featuring a popular comedian, much loved by the public (excluding me) for his clowning skills, who works for a cryptocurrency exchange and who, via a serious of hilarious incidents, explains what cryptocurrency is and why the general public should use it. Mr. Bean Gets REKT, perhaps, or Mrs. Brown’s HODL Boys. I’ve already thought up a few example incidents for my pitch to an actual film producer…

  • “The hard drive crashes and customers lose all of their bitcoins”

  • “The exchange gets hacked and customers lose all of their bitcoins”

  • “The dog eats the cold wallet and customers lose all of their bitcoins”

  • “The exchange turns out to have been a scam and customers lose all of their bitcoins”

  • “The PC is infected with malware that steals the password and the exchange loses all of their bitcoins”.

  • “The guy running the exchange fakes his own death and customers lose all of their bitcoins”

What do you think? Maybe that last one is little far-fetched, but I think I’m on to a winner. Remember, William Goldman’s first rule of Hollywood is “no-one knows anything” and that’s first rule of cryptocurrency markets as well.

[This is an edited version of an article that first appeared on Forbes, 15th June 2020.]

Scrip and truck

The Consensus Distributed virtual conference had some pretty interesting sessions this year. There was a lot of talk about disruption coming not just to the payments business but to money itself, and this time is wasn’t coming from the Bitcoin maximalists. Some of the fantastical futurists predicting a fundamental shift in the set of international monetary arrangements (eg, me) think that it isn’t simply about new technology enabling decentralised alternatives but about a confluence of economic and political factors that create an environment for new technologies to take root. Things really are about to change.

This may seem a radical prediction, but it really isn’t. People think about money as a law of nature, as a kind of constant, but the way that money works today is not only just one of many ways in which it could work, it’s a relatively recent set of arrangements in the great scheme of things. It wasn’t that long ago that the developed world was on a commodity standard (ie, gold) and there was no national fiat currency. Go back 150 years and America did not have a central bank and a century ago there wasn’t even a circulating medium of exchange.

Wait? No money? Yes. At the height of the
Great Depression, 1932 and 1933, when the interest rate on U.S. Treasury bills was negative, unemployment was 25 percent and bank runs and closings were common. With no money moving around the economy, Americans reverted to barter.

It’s hard to imagine this now, but at that time America literally ran out of money. Because there was no cash — no Federal Reserve notes — available, communities began to print their own money. This was known as “scrip” and it is by no means limited to this single historical case: it’s a common phenomenon. An often-used example (by me, for example, in my book “Identity is the New One“) comes from the more recent Irish bank strikes, when people in Ireland wrote personal cheques to each other and these were then passed on to form a community scrip as a cash substitute in local economies. British Postal Orders circulating on the Indian subcontinent performing a similar function.

The “depression scrip ” issued around America took many forms (there is a vibrant collectors’ market for this: just search on eBay) and was issued by communities, companies and individuals. And it became close to becoming the norm! As Bernard Lietaer points out in this 1990 article, Dean Acheson, then the Assistant Secretary of the Treasury, had been approached by Professor Irving Fisher with the idea of scrip with a high “negative interest” rate (2% per week) and was calculated so that the face value would be amortised over one year, and the currency withdrawn at that point. Acheson decided to have it checked by his economic advisor, Professor Russell Sprague at Harvard. The answer was that it would work, but that it had some implications for decentralised decision making which Acheson should verify in Washington.

(In “Monopoly: The World’s Most Famous Game and How It Got That Way”, author Philip Orbanes mentions in passing that in 1933, Parker Brothers used their printing presses to print scrip that was accepted in their home town of Salem, Mass. Games to the rescue! I wonder if next time the financial system fails, it will be World of Warcraft gold , not Monopoly money, or Monero, or cartons of Marlboro, that fill the breach as the means of exchange to keep the economy going.)

In many parts of America, scrip was already part of the local economy. My good friend Brett King reminded me just the other day that in the Appalachians, “coal scrip” issued by mining companies was common. The companies argued that the remoteness of mining operations made it complex and expensive to provide cash. (In addition, it has to be said, to managing their capital outflows.) Interestingly, while the mining companies themselves would not redeem the scrip for cash it naturally traded for cash at a discount within the nearby communities. Indeed, in 1925 coal company lobbyists managed to get West Virginia to pass a law prohibiting scrip from being transferred to third-parties (this would be much easier to enforce with Bitcoin today)) thus crystallising the companies power over their employees to a form of serfdom.

(There are some lovely pictures of depression era script over the Wall Street Journal.)

This was not an American phenomenon. During the industrial revolution, and driven initially by the lack of money in circulation, a variety of British companies created money to pay their worker. This was known as “truck”, which is why the measures passed by the British Parliament starting in 1831 regarding the money payment of wages were known as the “Truck Acts”. Under these provisions, employers were forced to pay workers in cash, laws that remained in place until 1960 where they were superseded to allow for payments by cheque.

Anyway, back to America in its cash-free depression. While Acheson’s discussions were going on, the “stamp scrip movement” as it became known, had created interest by no less than 450 cities around the United States. For example the City of St. Louis, Missouri, had decided to issue $100,000 worth of stamp money. Similarly, Oregon was planning to launch a $75 million stamp scrip issue. A federal law had been introduced in Congress by Congressman Pettengil, Indiana, to issue $ l billion of stamped currency. Fisher published a little handbook entitled “Stamp Scrip” for practical management of this currency by communities, and described the actual experience of 75 American communities with it.

It looked as if the U.S. might adopt a decentralised money system, but on 4th March 1933 FDR passed legislation to enforce bank holidays, end the convertability of gold and to force the population of to sell their gold to the Federal government. In addition to launching the New Deal, the administration prohibited the issue of “emergency currencies” and the experiment was over. But, I cannot help but wonder, is it over forever? Now that the technologies of blockchains, biometrics and bots mean that absolutely anyone can issue their own money, why not look at community scrip as way to reboot devastated economies?

I am hardly the only person to think this way. In virus-ravaged Italy, the town of Castellino del Biferno in southern Italy’s Molise region has started to issue its own money (the “Ducati”), redeemable in local merchants only, with a 100% reserve in euros. This kind of scrip (strictly speaking, a “currency board” rather than a “currency”) is intended to keep money circulating within the local economy but there’s no reason why an actual local currency might not circulate over a wider area. In the north of Italy, to continue with this particular example, anti-euro Lega nationalists and the alt-Left Five Star Movement were at one time planning to go around the euro and create a rival payment structure based on ‘IOU’ notes (a course of action I may well have helped to stimulate). If the COVID-19 crisis tips us into even more of depression, more regions may well decided to decouple themselves from national and supra-national currencies in order to manage their own monetary policy on the road to recovery.

(It’s surprising, I think, to Europeans to realise just how much passion these events still stir today: there are no end of books, magazines, pamphlets and web sites that still refer to FDR’s actions then as if they were yesterday.)

Send lawyers, guns and Bitcoin passwords

One of the arguments about the transition to a cashless, less-cash or contact-free economy is that such an economy marginalises people who are trapped in the cash economy and is very bad for them. I’m not sure it’s bad for them, though. I don’t want people to be marginalised, of course, but the people who are trapped in the cash economy are the people who end up paying the highest costs. Just to pick one random news story this week (and I could have chosen many), here’s a case from China in which a man who didn’t trust banks buried his life savings underground five years ago. When he dug it up, a quarter of it was beyond repair and he lost 500,000 Yuan.

Of course, there are people who prefer to exist in a cash economy for reasons other than a fundamental lack of trust in the international financial and monetary system. Criminals and corrupt politicians, for example. Cash works rather well for them, but can sometime be quite inconvenient. For remote purchasing, for example. Only yesterday I read about two freelance pharmaceutical intermediaries who were arrested in California after police caught them dumping nearly $1 million in cash which was intended to buy marijuana some distance from their main place of residence.

(If you are wondering why they didn’t just Venmo or Square Cash the money along I-5, remember that the state of California imposes a 15% excise tax on licensed cannabis so the cash-based black market avoids tax. The state estimates the regulated market has captured less than one-third of activity, once again suggesting to me that the primary function of $100 bills is tax evasion.)

“Well, we’ll see how smart you are when the K9 come!” / I got 99 problems but the Bitcoin aint one.

California, incidentally, has a huge $100 bill problem right now. The coronavirus has disrupted supply chains so that drug dealers in the USA cannot use the normal trade-based cross-border money laundering pathways to pesos. Hence, Hugh quantities of dollars are piling up outside the financial system.

(In other news, the Fed reports that as of 8th April there are $1.84 TRILLION of Federal Reserve notes in circulation, around $200 billion more than this time last year.)

Now, I can understand why the disconnected, marginalised poor in remote parts of the world eschew the benefits of electronic payments for the currency of choice for the global criminal on the go, the $100 bill. But in California? Don’t they have Bitcoin there? Given the huge hassle of counting, bagging and transporting the Benjamins, why didn’t these entrepreneurs simply buy a few Bitcoins, drive to the drop zones and press the “send” button when the goods are in from of them. It only takes an hour or so for the half a dozen confirmations that the wholesale distributors would want to see, and then Bob’s your uncle. 

But no, they packed up the greenbacks and set off in their car.

Surely, I have to reflect, if drug dealers won’t use Bitcoin, then who will? There must be many people who don’t want to carry around huge wads of cash for such purchases. Why aren’t they in crypto? What about the millions of people who buy things that they would prefer not to show up on their credit card statements? Remember the newspaper story about noted England rugby player Lawrence Dallaglio’s credit card being used in a brothel in London? A police raid on the establishment uncovered burner phones, diaries, POS terminals, a bag filled with bank cards and receipts (what a well-run organisation!) showing that customers were were paying between £80 and £100 for a gram of coke and… no Bitcoin hard wallets or passwords written on Post-Its.

(If I was off to brothel and wanted to buy some cocaine while I was there, I would certainly be at the very least reticent to use my credit card, even if the establishment was PCI-DSS compliant, which I’m pretty sure a bag full of bank cards in a plastic bag in a toilet is not.)

Anyway, back to the point. How can it be more convenient to cart around great wodges of cash than to zip some magic internet money through the interweb tubes? That’s not to say that Bitcoin is the perfect solution for criminal on the go, though. For example, in a recent Irish case, a drug dealer who wisely decided to invest in cryptocurrency rather than the euro amassed a fortune of €54 million in digital loot. He hid the passwords to the digital wallets holding his ill-gotten gains with his fishing rod. Unfortunately, the fishing rod has “gone missing” so while the Irish Criminal Assets Bureau (CAB) has in theory confiscated the 12 wallets (containing 6,000 bitcoin), in practice they cannot get hold of them.

(On the other hand, thanks to people such as Chainalysis, the Irish police can at least find out who sent money to the wallet and where money from the wallets was sent to, which ought to help them further their investigations.)

The noted software entrepreneur John Macafee said, on a recent episode of the Breaking Banks radio show that I was co-hosting, said something similar. He said that Bitcoin is no good for this sort of thing because it can be traced (he has previously called Bitcoin “ancient technology”) and he advised listeners to use Monero instead saying that it hs 99% of the “dark” market right now and also that he is launching a distributed exchange for Monero in the near future. A recently published Rand Corporation study shows that Bitcoin and Monero dominate the black market with Zcash (the other leading privacy coin) nowhere to be seen. 

(The price of Monero has roughly halved over the last year so I guess that there just aren’t that many criminals out there right now, but who knows. )

I should note, though, that the issue of more private versions of digital currencies is not of exclusive interest to criminals and corrupt politicians. There are many people who are engaged in perfectly legal businesses (eg, selling weed in Colorado, performing adult services in Nevada or trying to buy food in Venezuela) that are still excluded from the global financial system and are therefore driven to look for alternatives.

Venezuela is an interesting example. It used to crop up in talks by Bitcoin fans although restaurants, shops, supermarkets and even the street vendors today accept – and prefer – dollars in cash or by bank transfer. You can pay by Zelle in supermarkets there! A Columbian start up, Valiu, has just launched to provide a USD “stablecoin” for the Venezuelan market so perhaps that might eat into the bank transfer market but I wouldn’t bet on it.

What, no Bitcoin?

What’s the niche for cryptocurrency then? A quick investigation tells me that the market-leading porn site accepts four cryptocurrencies, three of which I’ve never heard of, and not Bitcoin, Monero or Zcash although that may change soon as a number of campaigners have sent letters to Visa, Mastercard, Amex and all demanding that they stop processing payments for porn. Mastercard said that they were investigating claims made the and would “terminate their connection to our network” if illegal activity was confirmed.

If the porn people won’t use Bitcoin, then who will? Maybe taking payment cards away from sites such as PornHub will stimulate evolution in user journey and ease of use for Monero et al and push them into the mainstream at last.

(It won’t, of course. What will actually happen is that the porn and gambling guys will get together and launch an over-18 version of Libra which, as it will be the only way to pay for these services, will soon become the currency of choice for adult services.  You read it here first. Pretty soon, the average person will have a digital wallet full of Facebucks and Buttbucks and precious little else.

Digital gold for a digital world?

I went along to the Centre for the Study of Financial Information (CSFI) lunchtime roundtable on “Gold in the Internet Age” because I am fascinated by the link between gold, money and now (of course) digital money. I take my hat off to Andrew Hilton and his crew because the event was outstanding. The panel of experts was as impressive you would expect from the Institute and the audience were well-informed and just as interesting. The panel comprised Haruko Fukada (who used to the run the World Gold Council, WGC) and Jason Cozens of Glint (an electronic gold scheme), Harry Sanderson from the Financial Times, gold market expert Ross Norman and an Andre Voineau from HanETF who have just launched a gold exchange traded product (ETP) with the Royal Mint.

A44675C2 1874 4F2D 8AEF 030AD1CCD454

This is far from my field of expertise but what I learned, if I interpreted the comments correctly, was that it is low Treasury yields rather than the coronavirus or trade wars with China that are behind the rise in gold prices. The Economist made a similar point earlier in the year, noting that while investors typically rush into gold when geopolitical risk soars, the gold price has been rising for a while, climbing by more than 25% since November 2018. The reason is falling real. If inflation-adjusted interest rates rise, gold’s relative attractiveness falls; when they fall, it rises.

I also found out that central banks are buyers of gold at the moment (so you have to wonder what they know that we don’t!) and also that exchange traded funds (ETFs) have been successful at smoothing price fluctuations in the physical gold delivery market. ETFs in fact currently hold around 3,000 tons of gold, which is approximately one year’s worth of production.

I learned a couple more things that help me to refine my mental position on gold. The first was that the “preppers” (some of whom were at the roundtable, judging by some of the comments) don’t want ETFs, “smart” “contracts” or pieces of paper, they want physical metal and the physical metal only. The second was that while China is a massive importer of gold, potentially looking forward to the time when the US dollar is no longer the world’s reserve currency, the digital Renmibi will not be backed by gold and, as I mentioned in my invited closing comments, there has never been any indication of such from the People’s Bank of China.

Oh and I also learned some interesting things about the gold supply chain. For example I learned that with a gold price of $1640 per ounce, the refiners (the refining market suffers from gross overcapacity) make approximately $0.10 per ounce.

Then on to a couple of businesses working with “digital gold” of one form or another. Jason talked about how Glint is getting along. I remember going to see Jason and Haruko three or four years ago when Glint was just getting off the ground because I was at the time looking at a project (which in the end didn’t go anywhere) to create an Islamic payment product based on gold in the Dubai depository. It wasn’t a new idea then – here’s what I wrote about it in 2007: “Given the desire to transact with the convenience of a card but in a non-interest bearing currency, it would seem to be a straightforward proposition to offer a gold card that is actually denominated in gold.  An Islamic person tenders their chip & PIN gold card in Oxford Street to buy a pair of shoes: to the system it’s just another foreign currency transaction that is translated into grams of gold on the statement”.

Anyway Jason said that Glint is now live in 33 countries, including the USA, and is growing steadily. Essentially, you open a glint account and then you add money to this account which is used to buy actual gold and you have a claim over that gold. The gold backs a payment card so that you can spend your gold with ease. The Glint card is a prepaid MasterCard, issued by Sutton Bank, so that you can spend your gold anywhere that MasterCard is accepted. They are launching their peer-to-peer platform in a few weeks time.

I was reminiscing after the event with a couple of the people there because I remember some of the pioneering work in this space by James Turk of Goldmoney and Douglas Jackson of E-Gold, both of whom I spoke to many years ago about digital gold. Douglas was responsible for one of my all-time favourite quotes from the electronic money world when, a few years ago, I was chatting with him about the trajectory of the gold and he said, in answer to my questions, “it was all going very well, right up until I got indicted by the federal grand jury”. (Here’s a podcast I made with Douglas a few years ago.)

(There are other people who want to turn gold into a currency for idealogical purposes, of course. An example is ISIS, who created a physical gold currency for their new Caliphate. It didn’t really work out that well because all their international trade, including oil, was executed in U.S. dollars. So in spite of the group’s declared war on U.S. hegemony, its economy was actually facilitating U.S. dollar dominance.)

So, what do I think about gold now, after this excellent update?

Gold can serve as a unit of account, means of exchange, store of value and a mechanism for deferred payments. All well and good. However, the digital world is not an electronic version of the analogue world. It is different. It does not have the dynamics of the physical world, and this applies to money just as much as it applies to everything else. This is not a new thought by the way. In fact it was one of the first things that occurred to me when I first began thinking about electronic cash way back in the 1990s. For example, I talk about this unbundling in a paper I wrote called “E-Cash, So What?” that I presented at a Unicom conference “Digital Cash and Micropaymens” in London 1997.

In this paper I noted that money has several different functions in society and gave the standard set of definitions, beginning by noting that as just about every economics book in the world has done, that money has four basic functions:

  • A Unit of Account. The unit of account does not, of course, have to have any physical reality (see, for example, Libra).
  • An Acceptable Medium. Money is useless as a medium of exchange unless it is acceptable to both parties to a transaction.
  • A Store of Value. Unfortunately, inflation can erode the value of stored money no matter what medium is chosen!
  • A Means for Deferred Payment. In order for a society to function, it must support contracts between parties that include provision for future payment.

One of the reasons why I remain slightly sceptical of “digital gold” is that it is the nature of digital to “unbundle” functions of money so that there is no economic niche for the maximum bundle that gold provides any more.


Now, we think of these functions as facets of the same thing (eg, the Pound Sterling) but in the past each of these functions could have been implemented in a different way. In my book “Before Babylon, Beyond Bitcoin” I use the example of the American colonies at the turn of the 18th century. The colonists used sea shells (known as “wampun”) for their medium of exchange, a form of cash borrowed from the Native Americans (who were, in effect, the central bankers of this monetary system, converting the shells into animal pelts which were used to store wealth and for external trade). The unit of account was the English Pound (despite the fact that most of the colonists had never even seen one) and the means for deferred payment was bullion.

A contract, then, might run like this: Person A would contract with Person B to pay “£1 in gold per annum for rent of the field” or whatever. When the rent fell due, it would be commuted to £1 worth of wampun (since no–one actually had any gold or silver, as the English refused to export bullion to the colonies). Accumulated wampun was traded for beaver pelts and these were kept as a store of value.

The economy worked and the “money supply” was based on commodities (the pelts, generally) and stable for many years, until over–harvesting lead to a decline in the beaver population: as pelts became scarce, the “exchange rate” for wampun against pelts rocketed, eventually rendering it a useless medium for exchange.

(The reason why that in the American colonies bullion for coins was scarce because Britain wouldn’t export any, an action that led to one of the great revolutions in money: the issuing of banknotes not as a means of substituting for some otherwise inconvenient means of exchange but as a means of creating money. Starting with the Massachusetts Bay Colony in 1690, banknotes were issued by impoverished authorities to avoid the high costs and uncertainties associated with borrowing and the need to impose taxation.)

Since the time of the American rebellion, the financial system developed in such a way as to do away with wampun and beaver pelts and bullion to the point where the Federal Reserve dollar dollar bills yo are used for everything. But that’s not a law of nature. I came to that understanding from a technical perspective, so didn’t realise that proper economists already knew that technological change would mean that each of these functions of money could be implemented using a different technology, with each function of money implemented using the technology optimal for that purpose. In fact it will be another example of going back to the future, as the functions of money used to be implement quite separately in the past.


Now I discover that proper economists are also interested in the “rebundling” of the functions of money along with other functionality. In their superb National Bureau of Economic Research paper on “The Digitalization of Money” (working paper 26300, September 2019) Markus Brunnermeier, Harold James and Jean-Pierre Landau discuss how innovation unbundles the functions of money and, as they put it, renders the competition between currencies “much fiercer”. Then they go on to discuss the role of platforms (ie, two-sided markets where buyers and sellers exchange multiple products) and explore their interaction with digital currencies.

Their point is that digital currencies associated with platforms (what I called a form of “community currency” in my book) will be far more differentiated than currencies are today because they will differ not only in their monetary functions but also in the functions provided by the associated platforms. As they put it, “a currency’s appeal will likely be governed by other platform features such as information processing algotithms, its data privacy policies and the set of counterparts available on the platform”. This is a really interesting perspective on the dynamics of digital currency and has set me thinking about how both governments and businesses will deal with the digital currencies.

Privacy? Reputation? Relationships? It’s almost as if it’s identity that is new… well, you know.

(After the roundtable, I began to wonder that if ETFs hold approximately one years worth production of gold and have helped to contribute to a functioning market, I wonder if ETF’s holding a years worth of bitcoin production could have a similar impact on the crypto currency market. This led me somewhat and productively have to say to try to work out what a years worth of production of bitcoin’s is before I abandoned the project on the grounds that the answer was irrelevant because bitcoin is a thin and opaque market this and ETF’s would be trivial to manipulate.)

The real “challenger” banking business model is data, not money

I was quoted in The Economist (“Plug and pay”, 21st November 2019) talking about the impending reshaping of the retail financial services sector. Although the quote isn’t quite accurate — I was responding to the statement that a a bank is a balance-sheet, a factory that turns capital into financial products (such as loans and mortgages) and a sales force, I didn’t make the statement — the paraphrase is correct. Those first two activities are heavily regulated, as they should be, which is why Big Tech is uninterested are in them. They are more than happy to have banks, for example, do this boring, expensive and risky work with all of the compliance headaches that come with it. As noted in article, the Apple credit card is actually issued by Goldman Sachs (although it was Apple that caught the flack in the row about gender discrimination around credit limits) and the Amazon cards are issued by Chase, Synchrony and American Express. Similarly, the Google “checking” account (this is the American word for a current account, because they still use cheques, which must be something to do with the Continental Congress or something) is actually provided by Citi.

Open Banking Basic Options Updated Colour Picture

What big tech wants is the distribution side of the business, as shown in this old diagram of mine. They have no legacy infrastructure (eg, branches) so their costs are lower, but to my mind more importantly the provision of financial services will keep customers within their ecosystems. If you use the Google checking account and Google pay then Google will have a very accurate picture of your finances. As the article says “Amazon wants payments in-house so users never leave its app”. Indeed.

The business model here is very clear. What Big Tech wants isn’t your money (the margins on payments are going down) but your data. That’s why when people talk about “challengers” they should really be talking about Microsoft and not Monzo.

This is where there are some pretty serious implications. If Big Tech takes over consumer relationships, banks will end up having to give away margin but, far more seriously, data. Andrei Brasoveanu of Accel, a venture-capital firm, is quoted as saying that they could turn into “utilities, providing low-margin financial plumbing”. Well, that’s the lucky ones. The unlucky ones will be wiped out in a wave of consolidation and closures.

This isn’t a technology prediction, by the way. In Europe at least it is a regulatory prediction. Back in 2016, I wrote about regulators demanding that banks open up their APIs that “if this argument applies to banks, that they are required to open up their APIs because they have a special responsibility to society, then why shouldn’t this principle also apply to Facebook?”. My point was, I thought, rather obvious. If  regulators think that banks hoarding of customers’ data gives them an unfair advantage in the marketplace and undermines competition then why isn’t it true for other organisations in general and the “internet giants” in particular? This same point was just made by Ana Botin, Chairperson of Santander. My good friend Chris Skinner notes her comments to Bloomberg: “I need to know you and that’s based on data. Why should data be regulated in a different way if you’re called a bank and if you’re called something else”.

There are big changes coming, and banks and payment companies in particular are going to need effective strategies to survive. It’s not only a problem for those legacy incumbent dinosaurs that the happening new digital kids like to poke fun at. The fintech “challengers” also have a problem. Just as Big Tech has made ecosystems impervious to competition, so it could cross-subsidise (with data as well as with money) its financial services products to raise such a barrier to competition that no newcomer will be able to spend enough to gain traction.

There are some really big changes coming in retail financial services. And that’s not a prediction, that’s a fact.

Where’s “Sign in with Barclays”?

In my keynote speech at KnowID 2019 in Las Vegas, I said that we needed think about the big picture around digital identity. I said that digital identity should be seen as a fundamental defence in the cyberwar that we are already in and that has no imaginable end. It’s possible that some of the people in the audience felt that I was being hyperbolic and that this piece of conference rhetoric was for entertainment purposes only. In which case I must refer them to the recent comments of General Sir Nick Carter, Britain’s Chief of the Defence Staff, who said that our nation is “at war every day” due to constant cyberattacks. Even more interestingly, he then went on to say in the modern world there is no longer a distinction between war and peace (my emphasis).

This is precisely as the great media theorist Marshall McLuhan predicted. Indeed, I quoted him in my speech. In Culture is our Business, written nearly 50 years ago, he said that “World War III is a guerrilla information war with no division between military and civilian participation”. This is why we need to take digital identity seriously, as strategic infrastructure and as matter of national urgency. It’s not about making it easier for people to log in to The Daily Telegraph or Woking Council, although that should surely be a by-product of a well-designed system, it’s about keeping our people, our institutions and our democracy safe.

(I saw Paul Chichester, the Director of Operations at the UK National Cyber Security Centre, speaking about this at the P20 conference in London. In addition to telling the delegates that “cybercrime paid for that North Korean submarine launch”, he observed that it is the centenary of the Government Communications Headquarters (GCHQ) and that they have special exhibition about this over at the Science Museum. Since I spent formative time in my career working on secure networks for GCHQ, I’m really looking forward taking at look at this when I’m in London next!)

So what should we do?

I don’t think the answer for us it to build a centralised identity service (such as Aadhar in India) or a centralised reputation management system (such as China’s social credit score). I think we need to think about more sophisticated and more flexible federated options. I think we should start building an identity infrastructure for the modern world and that we should probably start with the banks. Citi put out a paper about this last month: it’s called “The Age of Consent” and it discusses the idea of a federated financial sector solution, something along the line of the Scandinavian bank ID services. (I contributed to the paper.)

You can see the author, Tony McLaughlin of Citi, talking about it here on Finextra TV saying that “if we fix digital identity, we fix payments”, and he’s got a point. Banks have an obvious and significant interest in creating the new infrastructure because it’s good for banks. But it’s also good for everyone else, so it’s not only a way for banks to save money, it’s also a way for banks to create new products and services that mean new revenue streams. In fact, it could be that digital identity is not simply an additional revenue stream in the future but that identity is bigger than payments to banks. You can watch Alessandro Baroni, CMO of equensWorldline, saying just this today on another Finextra TV interview.

In the UK, it is time for the regulators to demand action from the banks. When I was last asked to log in to a web site to buy something (last weekend) I was presented with the option to “Log in with Amazon” and “Log in with Facebook” but no option to “Log in with your safe and trusted bank digital identity that is part of a regulatory framework designed to protect you and your personal information and comes with expectations of redress, ombudsman, accountability and, ultimately, a physical presence to resolve issues”. Why not?