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As of today Seqr customers in the UK are now able to quickly and simply link their bank account to the Seqr app and make payments directly from their bank account.

From Seqr launches contactless payments service in the UK

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Speaking of the direction where the disruption will come from, Yermack sees three potential players. These include challengers (complete outsiders looking for disruption); collaborators (like Overstock and R3); and regulators (countries like the UK, Australia, and Canada).

He was optimistic that regulators might be the most active agents of change, even going so far as to mandate changes that enable the technology to be used more broadly.

[From

| Could Bitcoin Be the Future of Blockchain Post Trade?

]

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Identity and money

 

Mark King

 

I think I might touch on this in my keynote talk on Digital Identity at FinTechStage in Cannes on November 30th.

As I always tell everyone, the fastest way to learn is by arguing with smart people. So I particularly enjoyed arguing with old chum Ian Grigg about the relationship between cash use and tax evasion. I decided to take the time to go and research some up-to-date figures.

The average bank spends £40m a year on KYC Compliance, according to a recent Thomson Reuters Survey, which also revealed that some banks spend up to £300M annually on KYC (Know Your Customer) Compliance and Customer Due Diligence (CDD).

[From The spiralling costs of KYC for banks and how FinTech can help | ITProPortal]

So let’s say a £1 billion for the big four and another £1 billion for the rest. So £2 billion in KYC. And that doesn’t include (obviously) the £5 billion that the UK Treasury estimates that UK banks spend on “financial crime compliance” (which I assume means AML, CTF and PEP). So… that’s something like £7 billion on compliance and presumably tax evasion is one of the main crimes that it is supposed to be tackling.

How does that compliance spend compare with the tax gap? The what? Well, the difference between what Her Majesties Revenue and Customs (HMRC) thinks it’s owed in theory and what it actually collects is called the ‘tax gap’. The tax gap is currently estimated to be £34 billion in the UK. 

It includes a number of things as well as evasion and avoidance. HMRC estimates that in 2013/14, differences in legal interpretation cost it £4.9 billion; unregistered paid work cost it £6.2 billion; organised criminal attacks cost it £5.1 billion; non-payment cost it £4.1 billion; the failure of people to take reasonable care with their tax returns cost it £3.9 billion; and honest errors cost it £2.6 billion.

[From Tax: evasion and avoidance in the UK – Full Fact]

By far the single biggest contribution to the tax gap is the underreporting of income by SMEs, especially those who take payments in cash. Everyone from your builder to your taxi driver contributes to this, which is why the scale of the evasion is so vast. Here are the HMRC figures broken down by source rather than type.

• SMEs £16.5 billion.

• Large businesses £9.5 billion.

• Criminals £5.1 billion.

• Individuals £3 billion.

That’s a lot of schools and hospitals. Everyone goes on about big companies like Apple and Facebook engaging in perfectly legal tax avoidance (blame the government not Google) but that’s not the biggest chunk of cash missing from the books. Now, no-one would be so dumb as to imagine that reducing cash would eradicate the tax gap. But it would raise the costs of tax evasion as well as the risks and therefore, I would think, at least reduce it. And given the dominance of SME cash under-reporting (it’s half of the tax gap) that would seem to be low hanging fruit, as they say. Maybe instead of spending all of this money on compliance, we should spend it on migrating away from cash?

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Big questions remain for all these guys about security. How much of the data used for verification will be kept? How will the data be protected? To what standard?

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net.wars

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Some people really can seen into the future. 50 years ago this was already clear

In 1968, Paul Armer of the RAND Corporation testified in front of a U.S. Senate subcommittee about his concerns for privacy in the future.

[From

The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

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The first is that computer technology is introducing order-of-magnitude reductions in the cost of collecting, transmitting, and processing information.

[From 

The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

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Second, centralization of data is usually a concomitant of computer use. The payoff to successful snooping is much greater when all the facts are stored in one place. Though most of the data to complete a dossier on every citizen already exists in the hands of the government today, it is normally so dispersed that the cost of collecting it and assembling it would be very high.

[From 

The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

]

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The third factor is that computer systems with remote terminals can permit, unless proper safeguards are provided, remote browsing through the data with a great deal of anonymity.

[From 

The Privacy Dangers of a Cashless Society Were Clear Over 40 Years Ago

]

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The technology that repelled the hackers was a style of software programming known as formal verification.

From Computer Scientists Close In On Perfect, Hack-Proof Code | Huffington Post

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American money is private. Sweden has embraced cashlessness more readily in part because it finds the value of currency in the transfer and velocity, the social path it follows, the bonds it traces. It’s social: a network conception of wealth.

From Imagining a Cashless World – The New Yorker

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Last summer brought Sweden’s first Swish mugging, when two thugs beat up a man and forced him to Swish them. The criminals were rapidly identified by their account.

From Imagining a Cashless World – The New Yorker

This has to be a candidate for the most stupid crime of the year. I realise it is up against some pretty stiff competition – I absolutely love Drew Curtis’ Fark and some of the crimes curated there are jaw-dropping but, I mean… come on.

 

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The commission is on its third day of vetting traffic police officers in Mombasa where most have been found with huge M-Pesa transactions.

From Police officer on Sh45,000 salary moves Sh100m via Mpesa – Politics and policy

Who knew a life in public service could be so rewarding? 

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In other cases, rogue officers open mobile money outlets where an alleged offender is given the agent’s number and told to withdraw bribe money from their accounts — instead of sending. One does not need to be anywhere near the agent’s physical location.

At the end of the day, the rogue officers reconcile their dirty proceeds by making entries in the catalogue, including filling fictitious personal details of those who “withdrew” cash. 

From M-Pesa the bribe, and other tricks traffic police use – Daily Nation

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Junior officers in the police force were being used by senior police officers to get bribes from the public and send the money through specific M-Pesa accounts. It emerged during the vetting process that the senior officers had set a target for their juniors which they were supposed to meet daily.

From M-Pesa Transactions Led To The Sacking of The 63 Police Officers ▷ Tuko.co.ke

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Credit and debit cards and e-money make up only 17 percent of the Japan’s retail consumption, versus 85 percent in Korea, 56 percent in Singapore and 35 percent in India, according to a 2015 report by the credit association. Usage in the U.S., which includes data only for credit and debit cards, exceeds 40 percent.

From Music Fans Start to Rock Japan’s Cash-Loving Economy – Bloomberg

I thought about a couple of things on reading this. First, it’s interesting how Japan (like Germany) is very cash dependent. The second is that the US doesn’t have e-money.