A library of snippets
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This is not just a poor-world problem. Britain was recently rocked by the “Windrush” debacle, in which dozens of citizens were wrongly deported. But it is a particularly acute problem in sub-Saharan Africa, where one in two people cannot prove his or her identity. It is not for want of effort. Every country in the region has either established or plans to create a universal identity programme.
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“The number of card payments in the euro area have more than doubled in a decade as consumers increasingly dispense with the hassle of carrying notes and coins, according to the latest statistics from the European Central Bank.
In 2018, card payments accounted for almost half of the total number of non-cash payments across the single-currency area.
Credit transfers and direct debits were the second and third most common non-cash payment methods, accounting for approximately 23% each, while e-money and cheques together made up around seven percent.
However, the relative popularity of each type of payment service still varies widely across euro area countries. In 2018 card payments accounted for just over 70% of all non‑cash payments in Portugal, compared with around 23% in Germany.
The stats show that the number of card payments made by consumers and businesses has more than doubled in the last decade, with an average of 121 card payments per capita in 2018, compared with 56 in 2008. However, the average value of each card payment has declined steadily, falling from €54 in 2008 to €44 in 2018.
Again, big differences appear between member states, with the Finns, for example, using their cards five times more often than people living in Germany and six times more often than people in Italy.
Curiously, the average value of annual cash withdrawals in the euro area also rose, from €1,925 to €2,082 per card between 2008 and 2018.”
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I tend to agree with people who see privacy as a function of control over personal information. Not a thing, more like a trade off. It’s a big problem though that the trade-offs in any particular situation are multi-dimensional and nothing like as explicit as they should be. And what if you have no possibility of control? The always interesting Wendy Grossman made me think about this in her recent net.wars column about her neighbour’s doorbell camera.
As Wendy puts it “we have yet to develop social norms around these choices”. Indeed.
Whether it is neighbours putting up doorbell cameras or municipalities installing camera for our comfort and safety, the infrastructure of cameras (much more cost effective and useful than the one imagined by George Orwell) and pervasive always-on networks is going to created a decentralised surveillance environment that is going to throw up no end of interesting ethical and privacy issues.
Here’s an example. What happens if you set up a camera trap to photograph badgers but accidentally capture a picture of someone doing something they shouldn’t be doing? This is called “human bycatch” apparently. According to a 2018 University of Cambridge study, a survey of 235 scientists across 65 countries found that 90% of them had human bycatch. I remember thinking about this a while back when I came across a story about some Austrian wildlife photographers who had set up cameras in a forest in order to capture exotic forest creatures going about their business, but instead caught an Austrian politician “enjoying an explicit sexual encounter” (as Spiegel Online put it).
This was big news although (as one comment I saw had it) “if it had been with his wife it would have been even bigger news”. Amusing, indeed. But the story does raise some interesting points about mundane privacy in a camera-infested world. I don’t know whether, in a world of smartphones and social media, one might have a reasonable expectation of privacy when having sex out in the woods somewhere. I would have thought not, but I am not a lawyer (or a wildlife photographer). It’s getting really hard to think about privacy and what we want from it and cases like this one remind us that privacy is not a static thing. It is not an inherent property of any particular information or setting. It might even be described as a process by which people seek to have control over a social situation by information and context.
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Do you think it is inevitable that the U.S. Treasury will make the leap to the digital coin of the dollar?
‘Currently, Congress is set up in a way that matches the economy of 200 years ago.’ I think we are going to be in trouble if we don’t. The one good thing about the Libra proposal is that it [brought attention to] China, which has been working at some level for several years on central bank digital currencies.
Why Libra Worries This Physicist-Turned-Congressman — The Information:
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The European Central Bank has welcomed an initiative by some of Europe’s top banks to explore the development of a rival payment system to challenge the dominance of Visa and Mastercard and the threat from Chinese and US Big Tech firms
Backed by twenty French and German banks, the The Pan European Payment System Initiative (Pepsi) would seeks handle all forms of cashless transactions.
ECB offers support to bank-backed alternative to Visa and Mastercar…:
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In a speech, Banque de France first deputy governor Denis Beau says that his organisation is “quite open for experiments” with the ECB on a wholesale CBDC.
Why
Speaking about the inefficiencies that still bedevil cross-border payments, Beau says: “The tokenisation of financial assets combined with the recourse to blockchain-based solutions and more broadly distributed ledger technologies to store and transfer those assets could help answering market’s demands.”
The tokenisation of financial assets is, of course, a much broader topic than CBDC and (as I have said for some time) and inevitable trend. In my mental model of the world, I look from that perspective. So we use the cryptocurrency platform to trade tokens, and one form of these tokens (homomorphic to, but necessarily built from, ERC-720) is digital currency and one option for implementing digital currency is CBDC.
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“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”
From “Ana Botin of Santander on FinTech and Blockchain – Chris Skinner’s blog”.
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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 it — 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.
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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 account and Google pay then Google will have a very accurate picture of your finance. As the article says “Amazon wants payments in-house so users never leave its app”. Indeed. What Big Tech wants isn’t your money (the margins on payments are going down) but your data.
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.
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The dollar’s falling share of reserves represents an “official sector vote against US ‘exceptionalism’”, said Mr Ruskin. In his view, the data should give pause to US policymakers contemplating laws to tax foreign purchases of US assets, further sanctions based on the international use of the dollar and plans to restrict access to US capital markets. All are actions that could weaken the dollar’s influence.
Why central banks are edging away from the dollar | Financial Times:
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ITU Workshop on Standardizing Digital Fiat Currency (DFC) and its Applications
New York City, USA, 18-19 July 2018
Case: The State of DFC Implementation in China People’s Bank of China (PBOC) has been a leader in thinking strategically about DFC deployments at a large scale with a mixture of heavy cash use and robust and growing use of mobile payments. This will highlight PBOC’s efforts in meting these challenges. Yao Qian,Vice Director-General of Technology Department, People’s Bank of China [ Presentation ]
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