Identity is the New Money

Thoughts on Identity is the New Money, by David Birch. 126 p. London Publishing Partnership, May 2014.

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Despite its provocative title, I didn’t finish this book with a precise understanding of how money will be replaced by identity; but along the way there were several interesting points regarding the advancement of mobile technology as a payment mechanism, and the implications for digital identity and privacy. The brief case studies indicate international efforts to make digital identities are further along than the USA’s, but no one is making great strides in adoption just yet.

I was left with questions about the book’s central idea, which is not a necessarily a bad thing when reacting to this kind of abstract premise. Was he saying I’ll be able to buy goods and services based on how many facebook friends I have? That the social graph alone will prove my ‘credit-worthiness’ and earn me whatever I need that I would otherwise have to pay for with dollars? How does being a part of the social graph actually increase, or enable wealth, from a technological perspective?

I think the book would have benefited from a different title, like ‘mobile phones are the new money.’ To me, the mobile examples were the most interesting futurist perspective offered, and the ones that made the most sense. Instead of cash, mobile phones should communicate without exchanging a great deal of identity information, only that I am Person A who has X number of dollars, and I would like to exchange them for a thing or service. No cash needs to change hands, or even exist, I suppose.

One of the most compelling ideas was that the economy can now support ‘infinite currencies.’ With physical money, we are limited by what we can carry – only one type. But with digital, it can be an infinite number, assuming an infrastructure is there to support it – not unlike the dozens of credit cards some people carry. So I could issue ‘Brian Dollars’ and you could carry them with your regular dollars, and when your phone initiated a transaction with me, I would tell it to use Brian Dollars only and it would comply.

The practical examples for this ability aren’t completely clear, but it seems like a logical idea. Maybe I will only give Brian Dollars to people who are nice, and you can exchange them for a cup of coffee. Or maybe my Apartment Manager will give me ‘apartment dollars’ when I pay my rent early, and I can exchange them for a ceiling fan. This kind of personalized exchange wouldn’t work with standard currency, since standard currency could be exchanged for anything – but with personalized currencies, the scope of transacting is easier to control.

The book’s historical references to ‘giant stones’ and ‘tax collecting sticks’ of centuries old illustrated that payment technology isn’t static. People haven’t been using credit cards or checks forever. Ancient systems were in place before what we have today, and therefore, what we have today will someday also be ancient and replaced by new things. A good way to get people on board with adopting new things is to point out what the old things were, and how much room there is for improvement.

Without a finance background, there were macro concepts behind the cash replacement idea that I didn’t really understand. My interpretation of the argument was that cash is expensive to produce and manage, and permissive of anonymous and potentially illicit transactions, therefore the financial system could be reformed and benefit from operating without cash. I agree with anonymity being undesirable, but I don’t think creating and managing a cashless technology infrastructure will be any simpler than maintaining a cash-based one, nor immune to hacks and corruption.

The most important argument I gathered from the book was that privacy is increased when digital identity is leveraged to facilitate physical, in-person payments (or ‘mundane payments’, as the author calls them.) Through cryptographic wizardry, my phone can prove that it is me, Brian, who is using it, and anyone who wants to interact with it can be sure they are interacting with me – and I can control what ‘parts’ of me, or which ‘identity’ they interact with and get access to. If I only want them to know I have 20 Jumbo Dollars, that’s all they get to know, but if they also need to know I live on Sesame Street, or that I am not a convict, they may ask for access to that information also, and it can be proven authoritatively via private key infrastructure, mobile phones, and identity management applications.

So, in short – this was a complicated but interesting take on the changing landscape of identity credentials, payments, and mobile technology. Maybe not all that fascinating or useful to people who work outside of the ‘Finance Tech’ industry, but perhaps these ideas will become more prevalent and widely understood over the next several decades as mass adoption grows.

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