Tomorrow's Transactions

Thought leadership from Consult Hyperion

Archives for August 2008

Zoom out

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[Dave Birch] I’m sitting working at home, going through some slides for a conference that I have to have finished shortly, and I’m listening to the radio. An airline called Zoom has gone bankrupt and, once again, the news report points out that people who paid with credit cards will get a refund, people who paid with debit cards and cheques will not. They’ve just interviewed a woman (on BBC radio) who paid UKP1600 (ie, $3,000) for tickets with a debit card and will now not get her money back. I feel sorry for her, obviously, but I just don’t get it: why does anyone ever pay for anything using a debit card? There’s no frequent flyer miles, no cashback (in the U.K.) and no legal protection, yet debit volumes keep on climbing: there were about two billion credit card payments in the U.K. last year but about five billion debit card payments.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Voicing my opinion

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[Dave Birch] As I’ve mentioned a few times on the blog (eg, here), there are many reasons for thinking that voice technology (both authentication and recognition) is particularly important to the world of digital identity. There are two main reasons for my enthusiasm: the first is that my technology roadmap has mobile at the centre and there are obvious synergies between voice technology and mobile phone technology, the second is that voice can deliver a biometric suited to multi-channel, local and remote environments. Therefore I’m very pleased to be speaking at this year’s Voice Biometrics conference in London on 19th and 20th November 2008, explaining how the technology fits into a broader picture of identity management for government and business, so that I can test some of our ideas in this space on other experts in the field.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Currency conversions

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[Dave Birch] There was a fascinating discussion about the use of mobile minutes as currency in Africa during a workshop that I was attending. The case study under discussion was the Democratic Republic of Congo (DRC), a country the size of Western Europe. Some people there are apparently using mobile top-up vouchers instead of bank notes and, according to the experts I was talking to, and the use of top-up vouchers as an alternative currency is actually growing. That is, the general public use mobile top-up vouchers just as they use banknotes here in the U.K. and they are accepted in retail transactions. The general lesson seemed to be that the reasons why airtime replaces central bank currency are varied, but they can be usefully categorised by the function of that central bank money that they are replacing/ In the case of DRC, the mobile phone vouchers are not merely a mechanism of exchange but a store of value because they are denominated in U.S. dollars: Thus Gresham’s Law is once again operating under our noses and people will trade away the local currency in order to obtain mobile vouchers because the mobile vouchers are just as liquid but there value is more stable. In an odd way that would nonetheless be recognisable to economists, the mobile phone operators have become a kind of currency board, except that instead of using gold or actual U.S. dollars as the reserve, they are using airtime. A currency board, as was used in Argentina for a decade (the 1990s), is a way to bring inflation under control and return stability to an economy. Having just read Tim Butcher’s outstanding book Blood River, about his journey down the Congo river, I’d have to say that it’ll take a lot more than airtime vouchers to deliver stability in that environment, by the way.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

More data hilarity

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[Dave Birch] Last week it was PA Consulting who were on the front page for losing masses of personal data, partly because the newspapers love stories about government data getting lost (I’m surprised they’re not bored with it, since it happens absolutely all the time) and partly because PA Consulting are designing Britain’s new ID card. The Home Office said back in March that the first cards will be issued by “day 330 of 2008”, which I think is their way of saying 1st December. SInce that’s only two months away, I’m sure that the first-class design is all squared away and the media are making a mountain out of a molehill over PA Consulting losing a USB memory stick full of data — this has nothing to do with the ID card scheme, as far as I know.

PA Consulting – which on Tuesday told ministers it had misplaced the unencrypted names, dates of birth and expected release dates of the inmates, as well as the addresses of 33,000 prolific criminals – has won £240m of government contracts since 2004, including one as the Home Office’s “development partner” to “work on the design, feasibility testing, business case and procurement elements of the identity cards programme”.

[From Consultants who lost data are working on ID cards – UK Politics, UK – The Independent]

Today, however, PA Consulting have vanished from the papers, having been swept away by the hilarious blunder by one of RBS’ suppliers, who sold a disk drive on eBay without erasing it first.

The computer hard drive was sold for a paltry £35 but the information on it was priceless, as it contained highly sensitive documentation on American Express, NatWest and Royal Bank of Scotland customers.

[From Customers’ bank data sold through eBay | News | TechRadar UK]

Now, while the newspaper anger is, to my mind, slightly misplaced — while RBS losing peoples’ personal details including mother’s maiden name is bad, what’s worse is that you can use personal details including mother’s maiden name to execute transactions because RBS (like many other banks) have no consistent two- or three- factor security across channels, so the paper should be angry at banks for not implementing digital identity rather than losing hard drives — it must at some level lead to even further erosion of trust in banks.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Category error

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[Dave Birch] A common mistake in government-related discussions around identity is completely misunderstand the nature of the problem itself:

people need to prove who they are many times during a day.

[From In Development » Just what is ‘identity’?]

No, they don’t. People need to prove that they are entitled to do something or are allowed to do something several times during a day, which is actually an entirely different issue. Mind you, it’s an often-repeated mistake, even amongst those who should know better but haven’t really thought it through. When he was the Home Office Minister for ID cards, Andy Burnham said that “I take the view that it is part of being a good citizen, proving who you are, day in day out”. How wrong can you be? Other than the current Home Office Minister for ID cards, Meg Hillier, who said that we should see ID cards as “passports in-country”. Or, indeed, the Home Office Minister for ID cards before him, Tony McNulty, who said that

“There are now so many almost daily occasions when we have to stand up and verify our identity.”

[From BBC NEWS | Politics | Labour admits ID card ‘oversell’]

I blame the education system, but blog readers may have some other explanations as to why this same, fundamental, error is propagated by people who ought to have some grasp of the issues.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Why now?

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[Dave Birch] People tend to assume that the way that money works is just the way it is. They see current monetary arrangements as being akin to a law of physics, like the speed of light. But they are not. The way that money works is the culmination of hundreds of years of evolution through a particular set of circumstances that have led us to where we are, which is system of fiat currency. Generally, in times of low inflation people are broadly content to allow the system of fiat currency, as we have in the UK, to function without too much reflection. What this means is that people are content to use currency (in our case, Sterling) that has no real existence: a pound is worth a pound because that’s what the government says and it’s been a long time since you have been able to go down to the Bank of England and hand over your banknote in return for gold (although, as we were discussing, some people think the Gold Standard should come back). But when inflation begins to creep up, people then begin to question whether the fiat currency arrangement is necessarily best. Critics will ask if it makes sense for the issuers of the fiat currency (ie, governments) to be allowed to denominate their own debt because the ability to inflate away that debt reduces their incentive to maintain sound money.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Risk analysis and just rewards

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[Dave Birch] Who has stolen the most money through the fraudulent use of Oyster cards recently? The brainbox super-hackers from the Netherlands who reverse-engineered a smart card chip in order to create cloned Oyster cards that can be used for a day, or Transport for London staff? Well, risk analysis would tell you that it’s odds-on to be the later. And sure enough…

A former Transport for London employee has been banged up for nine months after conning £18,000 out of the Oyster card system.

[From www.thelondondailynews.com]

Her master plan? Liquid nitrogen and micro-lathes? No. She worked in the ticket office and gave her mates cards with two grand pre-loaded! It’s important to do the risk analysis for payments systems properly (ie, systematically) and keep the pathological cases in context. Insiders are always a problem when it comes to designing secure payment schemes, but the need for proper risk analysis is even greater now that there are many different kinds of insider to consider: it’s no longer simply bank employees and retail staff, but telco employees, outsourcer and call centre staff, bureau staff and more.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Golden moments

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[Dave Birch] Now that I’ve taken to riding my new government-subsidised bicycle to work, I’ve got more time to listen to podcasts (through one earphone only, for safety reasons) and I’ve been getting through a fair few recently. One that blog readers might enjoy is the podcast of a presentation by Lawrence White at the Foundation for Economic Education on the Gold Standard, which includes some speculation on how the United States might return to a Gold Standard. This is fascinating stuff for anyone who is genuinely interested in the way that money works, and how information and communication technologies might cause disruptive change in the future. Lawrence is the F. A. Hayek Professor of Economic History at the University of Missouri–St. Louis and an adjunct scholar of the Cato Institute. He is the author of two of my favourite books, Competition and Currency and Free Banking in Britain, which I have open on the desk in front of me as I’m researching the “Scottish experiment” in monetary competition for a paper that I’m writing.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Charlie Edwards, DEMOS

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[Dave Birch] Charlie Edwards is a senior researcher at the London “think tank” DEMOS. He writes, lectures and consults on national security, resilience, defence and intelligence. He works with international institutions, government departments, companies, and NGOs. A regular commentator in the national and international media, in this podcast he discusses the DEMOS essay collection “UK Confidential“, reflecting on issues of privacy and identity in the modern age.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

Elf regulation

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[Dave Birch] If you thin that European regulators are having a hard time trying to sort out SEPA, the Payment Services Directive, KYC, AML and all the rest of it, remember that they do at least have the advantage of trying to control money that sort-of-exists, even if they aren’t able to control it terribly well. Elsewhere, as most economists would predict, I’m sure, other kinds of money that sort-of-exist are beginning to suffer from the exactly the same problems.

Police in China have arrested 2 men for running a World of Warcraft gold farming operation and charged them with “unfair revenue distribution” (presumably a crime against socialism of some kind). The two men ran the operation for 7 months and earned 1.4 Million RMB (just over US$200,000). They had 20 computers and 20 employees and were based in Chengdu’s Shuangliu county.

[From Only in China – Gold Farmers Arrested! Earned over US$200,000 in 7 Months – PlayNoEvil Game Security News & Analysis]

Of course, if your local constabulary don’t respond when you dial 999 to complain that there’s been a jack and your friend’s World of Warcraft Guild has been rolled over for a hundred gold pieces, because they’re busy helping people look for their glasses and so on, you’ll have to look for alternative law-and-order structures. I doubt that the Financial Services Authority (FSA) would be much help either, although it enough players got together they might be able to persuade the government to underwrite the gold pieces and have WoW Gold Institutions regulated under the Payment Services Directive (PSD). There is an alternative, though. As in any other frontier community, a long way from centralised authority, virtual communities can choose to police themselves.

disgruntled Alliance players have come up with a clever, though perhaps somewhat EULA-non-compliant hack to enable community self-help (aka murder) as means of silencing n00b bot gold spammers

[From Terra Nova: The Bot-Slaughtering Totems of Stormwind]

It’s the Wild West. Economics may work differently in wholly virtual environments, but human nature does not.

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These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

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