WEBVTT 1 00:00:00.330 --> 00:00:04.020 Nick Holland: Hello, this is Nick Holland with Information Security Media Group. And it's my 2 00:00:04.020 --> 00:00:08.700 privilege today to speak with Dave Birch. Dave, I think I mean, is this true to say, you've been 3 00:00:08.700 --> 00:00:15.600 sort of an early advocate of identity being at the core of everything. About I mean, I can't remember 4 00:00:15.600 --> 00:00:20.700 and I read it, maybe it came out 2014 you published a book called Identity is the New Money. 5 00:00:22.890 --> 00:00:30.120 I've been doing numerous roundtables over the last few months in a virtual context, obviously. The 6 00:00:30.120 --> 00:00:36.510 mantra there is quite often "identity is the new perimeter." But, you know, think again, your 7 00:00:36.540 --> 00:00:41.430 visionary view of identity is the new money is a very fascinating one. So maybe sort of elaborate 8 00:00:41.430 --> 00:00:45.810 on that a little bit. And I really think I mean, is it now the new money? 9 00:00:48.420 --> 00:00:55.680 David Birch: Well, I think it's the new money in two senses. So in the first sense, the problem 10 00:00:55.680 --> 00:01:00.060 that I was thinking about at the time, which goes back to some of the work where you and I crossed 11 00:01:00.060 --> 00:01:07.290 paths the past, advising the big payment schemes and banks and so on was this issue about what was 12 00:01:07.290 --> 00:01:14.070 actually the source of value. And I started to think, if you take the average person, the 13 00:01:14.070 --> 00:01:19.710 proportion of their wealth, that's in the form of demand deposits is vanishingly small. I can't 14 00:01:19.710 --> 00:01:26.190 remember the exact figures, but 100 years ago, it probably was close to 100%. Fifty years ago, maybe 15 00:01:26.190 --> 00:01:33.600 50%. Twenty years ago, 20%. Now, I don't even know. Almost all of my wealth such as it is, is in 16 00:01:33.600 --> 00:01:39.900 the form of assets of other kinds are very, very small part of it is actually money in the bank. 17 00:01:39.930 --> 00:01:45.450 So, so what is it that the bank is actually storing? What what what is it that's in the bank 18 00:01:45.450 --> 00:01:52.380 vault? That's worth something? And of course, the answer is, you know, trust and reputation and all 19 00:01:52.380 --> 00:01:58.230 these kind of things. The bank doesn't really have very much money for the money I have in the bank. 20 00:01:58.620 --> 00:02:05.790 That's for sure. So I started to think, well, if, if that's true if banks are really places where 21 00:02:05.790 --> 00:02:10.800 people are going to store, for want of a better description, their identities rather than their 22 00:02:10.800 --> 00:02:16.470 money, what does that mean in terms of business? And well it meant a couple of things, it meant, on 23 00:02:16.470 --> 00:02:21.780 the cost side, banks would need to invest in the technologies to cut their costs, you know, because 24 00:02:21.780 --> 00:02:28.650 the costs of identity management were just spiraling out of control the KYC AML, CTF PP, you 25 00:02:28.650 --> 00:02:36.810 know that those numbers are astronomical, so but having spent all that money to essentially acquire 26 00:02:37.140 --> 00:02:42.120 identities, banks weren't doing anything with them. And so I thought, well, obviously this will 27 00:02:42.120 --> 00:02:50.130 be the next thing they move into. Because the, I mean, everybody uses the trivial example of you 28 00:02:50.130 --> 00:02:55.020 know, proving that you're 21 when you go into a bar, you know, why are you showing everybody your 29 00:02:55.020 --> 00:02:58.830 driving license, which is your name and address and all sorts of other personal information? Why 30 00:02:58.830 --> 00:03:04.230 can't they just ping the bank and the bank will tell him "Yes, this person is over 21 or not. So 31 00:03:04.230 --> 00:03:09.690 the idea of banks would take this from being a cost center into being a platform for new AI. You 32 00:03:09.690 --> 00:03:14.670 know, I thought at the time that was obvious and around the corner, and we were working on business 33 00:03:14.670 --> 00:03:19.950 cases at the time for a number of different banks. But for one reason or another, it didn't come 34 00:03:19.950 --> 00:03:26.100 together, I think. I think sometimes, you know, banks don't always sort of, you know, 35 00:03:26.100 --> 00:03:32.910 cooperatively work in their best long-term interest. So, so we're still in a very fragmented 36 00:03:32.910 --> 00:03:38.640 environment there. But of course, now it's become a little more serious. Because I suppose a few 37 00:03:38.640 --> 00:03:43.800 years ago, the argument was, well, we won't bother doing it about identity, because nobody else is. 38 00:03:44.280 --> 00:03:48.300 Like, you know, as long as Citi don't do something about it, I won't bother doing something about it. 39 00:03:49.230 --> 00:03:53.340 But then you saw in places like Canada, the banks begin to get together to form in Canada, it's 40 00:03:53.340 --> 00:03:59.550 verified.me. People started to think well, why? Why isn't there something that's a bit like 41 00:03:59.550 --> 00:04:05.130 Mastercard, but for identity. Certainly Mastercard, think that because they're they're 42 00:04:05.160 --> 00:04:10.260 spending an enormous amount of money on building up their identity capability. So people began to 43 00:04:10.260 --> 00:04:15.990 think, "Well, okay, what sort of structures would work in that space?" In my opinion, there are 44 00:04:15.990 --> 00:04:23.370 really two, two pillars that you build this on, which are interchange and liability. In other 45 00:04:23.370 --> 00:04:29.130 words, what do I get paid for, for the, for the identities that I've established? And what 46 00:04:29.130 --> 00:04:34.080 liabilities do I accept by accepting that payment? And it's not beyond the bounds of human 47 00:04:34.080 --> 00:04:37.920 imagination for the banks to sit down and come up with- In fact, they already did it remember years 48 00:04:37.920 --> 00:04:42.810 ago with IdenTrust? So they already had a model at works. They just sort of didn't take it anywhere. 49 00:04:43.830 --> 00:04:49.410 But what's different? I think the reason it's gone back up the agenda, Nick is because now you've got 50 00:04:49.800 --> 00:04:55.530 Facebook, Google, Apple, Microsoft around the edges, and they're like, they need that problem to 51 00:04:55.530 --> 00:05:01.260 be fixed as well. And if the banks aren't going to fix it, they'll fix it. And if they fix, in this 52 00:05:01.260 --> 00:05:07.890 world of open banking API's, that means that essentially big tech takes over the distribution 53 00:05:07.890 --> 00:05:14.760 side of the business. And some banks will have the scale to survive that transition into being 54 00:05:14.760 --> 00:05:20.790 utility providers of heavily regulated financial services. But I think a lot won't. 55 00:05:22.170 --> 00:05:29.010 Nick Holland: So you brought up the trust word, right. And I see as maybe the fundamental flaw in 56 00:05:29.010 --> 00:05:34.680 some of this is, is who do you trust with your identity? Do you think, I asked this to a security 57 00:05:34.680 --> 00:05:39.210 professional few weeks ago, you know, do you think banks will actually be the custodians of identity? 58 00:05:42.900 --> 00:05:46.950 David Birch: You know, I feel really conflicted about answer that because I think the answer is 59 00:05:46.950 --> 00:05:57.030 yes. But I can't provide a shred of evidence to back that up. Look, I agree trust is complicated. 60 00:05:57.150 --> 00:06:01.950 So when people say they trust or don't, you know, that wraps up a lot of things. When it comes to 61 00:06:01.950 --> 00:06:06.360 banks, basically, people hate them, but they trust them. 62 00:06:06.690 --> 00:06:07.050 Nick Holland: Right. 63 00:06:07.410 --> 00:06:11.760 David Birch: And the reason why I would trust bank with my identity is not because I trust my I mean, 64 00:06:11.760 --> 00:06:16.140 I do trust my bank for a reason. But it's not because I trust my bank, it's because I trust the 65 00:06:16.140 --> 00:06:17.250 banking system. 66 00:06:17.580 --> 00:06:17.970 Nick Holland: Right. 67 00:06:17.969 --> 00:06:22.785 David Birch: You know, if if some social media giant screws up my identity, or it gets taken over 68 00:06:17.990 --> 00:06:18.260 Nick Holland: Yeah. 69 00:06:22.842 --> 00:06:27.887 by somebody else, or it gets undermined in some way, I mean, really, who you gonna call? 70 00:06:24.830 --> 00:07:02.870 David Birch: And, you know, they they blew that, didn't they? Sort of so that's, that's gone then, 71 00:06:27.945 --> 00:06:33.334 Basically, I mean, what, what's. Whereas, you know, if my, if it's the bank that's managing my 72 00:06:33.392 --> 00:06:38.781 identity and something goes wrong, they have a branch I can go to and sort something out. They 73 00:06:38.838 --> 00:06:44.400 have regulations, they have ombudsman, they have oversight, they have responsibility, they have a 74 00:06:44.457 --> 00:06:50.191 call center. You know what I mean? It's like they, I didn't. Look identity's so important. I want my 75 00:06:50.248 --> 00:06:55.867 identity to be held by a regulated institution. And since regulated financial institutions already 76 00:06:55.924 --> 00:07:01.658 have to capture all of the data but just don't get to do anything with it. They're the obvious place 77 00:07:01.715 --> 00:07:07.334 to start. But you know, there were plenty of other possibilities. You know, you and I can remember 78 00:07:06.650 --> 00:07:24.830 you know, you were thinking like brands, maybe big retailers could do it. That's, to my mind, that's 79 00:07:07.391 --> 00:07:12.723 years ago had a had a thought and more than passing thought that actually the telcos might be 80 00:07:12.781 --> 00:07:14.100 able to step into this. 81 00:07:24.830 --> 00:07:29.750 still a possibility. It could be the social media platforms because you know, for good reason, 82 00:07:30.080 --> 00:07:35.510 right? You might imagine they they actually know more about you than other people do. It could be 83 00:07:35.510 --> 00:07:41.060 wholly new as yet non-existent regulated institutions that come into existence. I mean, 84 00:07:41.450 --> 00:07:46.550 there are many possibilities, but I just feel it should be the banks. 85 00:07:47.420 --> 00:07:52.640 Nick Holland: It's something solid about a financial institution as you say, you can go there 86 00:07:52.670 --> 00:07:58.520 right it's you. You're not gonna be stuck in call center hell for like a week, potentially. 87 00:07:58.990 --> 00:08:03.280 David Birch: Well especially because you know, If you look, if you if I lose my credit card, you 88 00:08:03.280 --> 00:08:08.200 know, it's not the end of the world. But the banks have got it sorted I phone up, they'll drop it 89 00:08:08.200 --> 00:08:12.610 straight into my Apple Pay for me, a new card will show up in the post if you you know, my life is 90 00:08:12.610 --> 00:08:19.180 not disrupted by that, okay? But if I lost my identity if I wake up in the morning, and suddenly 91 00:08:19.180 --> 00:08:24.160 I can't log into anything, and some some mastermind hackers in North Korea have suddenly 92 00:08:24.160 --> 00:08:30.280 got hired on my identity. That's a that that is a very different kettle of fish. And I need to be 93 00:08:30.280 --> 00:08:36.880 able to go to a bank branch and get it sorted out immediately. Because it's not the same as losing 94 00:08:36.880 --> 00:08:37.270 money. 95 00:08:37.660 --> 00:08:45.640 Nick Holland: No, very much. So slight pivot, obviously, relevant. But you did a great post the 96 00:08:45.640 --> 00:08:49.750 other day, which I enjoyed, were you're talking about it's digital currency time in the same way 97 00:08:49.750 --> 00:08:55.510 that at one point it was steam engine time. Can you can you just give us a brief overview of that 98 00:08:55.600 --> 00:08:59.740 I thought was a great analogy and also sort of sets the stage for why digital currencies might 99 00:08:59.740 --> 00:09:02.170 actually have a chance right now. 100 00:09:02.960 --> 00:09:06.530 David Birch: Yeah, well, the reason I was using that as an analogy was because it's, uh, you know, 101 00:09:06.560 --> 00:09:12.380 you see, historians and anthropologists talk about this sort of thing. They say, you know, different 102 00:09:12.380 --> 00:09:18.470 people had steam engines and different people had the bits to make steam engines and in different 103 00:09:18.470 --> 00:09:22.910 parts of the world, there was cold and iron and mine, there's all the things that you need. So how 104 00:09:22.910 --> 00:09:29.660 come the first commercial steam engine was for pumping water out of a Cornish mine? And the 105 00:09:29.660 --> 00:09:35.810 answer is, you can't point to any one thing and say it was because of the presence of coal or it's 106 00:09:35.810 --> 00:09:41.240 because of a new technique for forging iron or because, you know, surplus capital had arisen 107 00:09:41.240 --> 00:09:48.560 because of the advent of capitalism. It's kind of all of those things, which is just saying, you've 108 00:09:48.560 --> 00:09:54.350 got steam engines because it was steam engine time, you know. And I think the same is true with 109 00:09:54.350 --> 00:09:59.360 digital currency. We've had the technologies for digital currency for actually quite a long time 110 00:09:59.360 --> 00:10:07.070 now. And some experiments that we, I hope people learn from but perhaps they didn't learn as much 111 00:10:07.070 --> 00:10:13.100 as they could have done from them. We've had digital currency for a long time, the conditions 112 00:10:13.100 --> 00:10:18.830 for delivering digital currency, pervasive communications networks, tamper-resistant 113 00:10:18.830 --> 00:10:26.450 hardware, you know, in the form of mobile phones. So what's different now? Why, why was I suddenly 114 00:10:26.450 --> 00:10:32.480 moved to write a new book about it? Why did it all of a sudden wander into the strategy workshops I 115 00:10:32.480 --> 00:10:37.430 was involved in? It's actually not because of technologists. It's not because of business 116 00:10:37.460 --> 00:10:42.740 people. It's because of central banks. And in particular, it's because, I mean, they'd all been 117 00:10:42.740 --> 00:10:46.520 looking at it for a while, but you know, Mark Carney, who then was the governor of Bank of 118 00:10:46.520 --> 00:10:50.870 England, stood up last year and said, perhaps we should think about what he called a synthetic 119 00:10:50.870 --> 00:10:59.240 hegemonic currency, an SHC, which I I always abbreviated SYHC, because I like to call it a SHC 120 00:10:59.240 --> 00:11:03.950 currency. So Mark Carney said we, you know, we need to look at the idea of a SHC currency. Why? 121 00:11:04.430 --> 00:11:10.100 Because of what he called the destabilizing dominance of the U.S. dollar. The International 122 00:11:10.100 --> 00:11:14.870 Monetary and Financial System was created at the end of the Second World War. It served its purpose 123 00:11:14.870 --> 00:11:21.440 magnificently. But it's it's not a law of nature. And the way things work now is not necessarily the 124 00:11:21.440 --> 00:11:28.700 way they have to work in the future. If we want to achieve some other goals around, you know, 125 00:11:28.700 --> 00:11:36.410 financial inclusion and all those kind of things, we need digital cash. In other words, we need some 126 00:11:36.410 --> 00:11:40.760 form of digital currency, just having electronic money in bank accounts isn't enough. It doesn't 127 00:11:40.760 --> 00:11:46.820 get us there. And, and actually, I can, a very good example, has, of course, come up because of 128 00:11:46.820 --> 00:11:47.600 the pandemic. 129 00:11:47.630 --> 00:11:48.020 Nick Holland: Yeah. 130 00:11:48.330 --> 00:11:54.210 David Birch: You've seen the situation where in the U.S. printing, printing physical checks and 131 00:11:54.210 --> 00:12:00.930 mailing them out to people, many of them still alive, whereas in China they're- They've got 132 00:12:00.930 --> 00:12:07.830 digital currency running in four cities. And the idea that government stimulus would be printed and 133 00:12:07.830 --> 00:12:14.970 posted and whatever in 2020 seems especially like in some emerging markets, the government wanted to 134 00:12:14.970 --> 00:12:19.740 get stimulus payments to people. So it got them to open mobile wallets, and then just got the money 135 00:12:19.740 --> 00:12:26.010 straight into the mobile wallets. So it's no one thing. But because of all of those things, and 136 00:12:26.010 --> 00:12:34.320 certainly because of the stimulus of central banks, and COVID. Yeah, it's digital currency 137 00:12:34.320 --> 00:12:34.740 time. 138 00:12:35.760 --> 00:12:41.340 Nick Holland: Good. Well, always fascinating to talk to you, Dave. Really, again, really enjoyed 139 00:12:41.340 --> 00:12:42.210 the conversation. 140 00:12:42.510 --> 00:12:45.150 David Birch: I'm flattered, Nick, you know it. Thank you very much. 141 00:12:45.480 --> 00:12:52.260 Nick Holland: And I'm so Dave Birch, author and advisor with Consult Hyperion and for Information 142 00:12:52.260 --> 00:12:54.750 Security Media Group, I'm Nick Holland. Thanks very much, Dave.