Identity, Money And The Future Of Digital Currencies (And Personal IOUs)
The old saying goes that in the digital world if the product is free, the payment is you. Or your information, at least.
The notion that personal data is valuable is becoming more widely understood. “Behavioural biometrics” – the way we interact with our devices – are set to replace passwords in online finance, according to a report in the FinTech Times:
Next year, an additional form of authentication will be required for some transactions when Strong Customer Authentication comes into force. However, the technology, which has been customised in partnership with Visa for the purpose of increased transaction security, could replace passwords and helps to make payments more secure. Strong Customer Authentication is part of the PSD2 regulation and is an extra layer of security designed to prevent payment fraud and check that it is the cardholder making the payment. Behavioural biometrics works by analysing the unique ways a customer interacts with their device when making an online purchase. The technology uses this information to confirm who is making the purchase and does not access or share any private data held on a device.
But identity is more than just authentication, it’s becoming a token of value in itself. Perhaps the most insightful commentator in this section is the excellent Dave Birch. In a book published six years ago – an aeon in digital terms – Birch argues that identity and money are both changing profoundly. See Identity Is The New Money.
Because of technological change the two trends are converging so that all that we need for transacting will be our identities captured in the unique record of our online social contacts. Social networks and mobile phones are the key technologies. They will enable the building of an identity infrastructure that can enhance both privacy and security – there is no trade-off. The long-term consequences of these changes are impossible to predict, partly because how they take shape will depend on how companies take advantage of business opportunities to deliver transaction services. But one prediction made here is that cash will soon be redundant. In its place we will see a proliferation of new digital currencies.
Published three years before the famous Bitcoin high of December 2017, the book correctly predicts the rise of digital currency. But sooner or later, even decentralised currencies may become redundant – if identity becomes the new money, we’ll become walking IOUs. Admittedly, there’ll be some system of tokens exchangeable for goods or services, but the focus on the individual will render the redemption of the IOU – in paper cash, a credit card transfer, digital token as part of a decentralised ledger system – really not very important.
Over the next few years, the writer of this article, our communications director, believes there’ll be another surge in the use and value of digital currencies, despite the best efforts of governments to discourage this development.