3 March 2021

On The Money: The future of digital finance

Described by The Telegraph as “one of the world’s leading experts on digital money”, David Birch is a Forbes contributor, a columnist for Financial World, and one of the top 100 global fintech influencers for 2021. This conversation with Dave invites us to really consider the future of money, with AI and bots assembling financial transactions instead of people and a refreshing take on the digital forms of currency. Join us as we take a deep dive into all things digital finance.
David Birch, Digital Identity Expert, on The Future of Money

Let’s start with an introduction to you and your experience. What do you do and, perhaps most importantly, why do you do it?

I spend probably half of my time writing, which I love. I write for some magazines and online publications, as well as some analysis and reports for clients. I also write books, I'm actually halfway through writing a couple more books. 

I used to spend a lot of time traveling and speaking, which I really enjoyed, but obviously that's on the back burner at the moment. And then I have a portfolio of roles. I'm on some boards and advisory boards, and I'm still part-time with the consulting – it’s quite a nice mix really. And why do I do it other than for money? Broadly speaking, I quite like it really. 

You've been described by The Telegraph as one of the world's leading experts on digital money. For you, what is the most fun part of your job writing about money, consulting on money?

It kind of oscillates. The whole reason I got interested in the bigger picture stuff was because it's coming through the payment system side of things. That led me to getting involved with digital money in the very early days of it.

As soon as you spend any time in that space, you begin to realise you actually don't really understand money. In fact, most people don't. Then you want to find out more about it, and then you begin to think about the impacts of new technologies and it sort of spirals out of control.

One of the things that led me to, of course, was when you really start getting involved in solving practical problems in that space, you discover a lot of the practical problems are really to do with identity and not really do with money. It’s to do with identification, authentication or authorisation, and that took me into the digital identity space where I had one or two ideas that have turned out to be prescient in that space as well.

Digital money is where I spend most of my time. At this instant, because of what's going on in the world of digital currency, which has gone up the agenda in lots of different ways, not just with the central banks, but with companies that are looking to add this to their strategies, I’m actually spending 90% of my intellectual effort on the digital currency stuff.

In 2014, you wrote your book ‘Identity is the New Money’. Do you believe it's feasible in the future for businesses to have a digital identity that can be passported to multiple organisations and countries? How would that work in your view?

I don't only think it's feasible, I think it's highly desirable. I mean, I don't like the idea that you have an identity, that sort of a Big Brother-type thing, that you have to present everywhere you go so everybody knows who you are and what you're doing. That doesn't seem quite right to me. Presenting my passport at the pub has a couple of problems with it. It’s none of the pub’s business who I am or whether I’m British or not, they’re only interested in my age. Practically-speaking, it’s not ideal to take a passport to the pub that can get lost and increase identity fraud. We’re looking at this in the wrong way.  

What we actually want, I think, is a more sort of credentials-based approach where you have a digital wallet that has different kinds of credentials in it that come from different places and are then presented in the right situation. This takes us into the world of selective disclosure and partial disclosure and I do think that's the way forward. 

In terms of that existing in a business context, how do you see that affecting the movement of money, for example?

If you look at a lot of the problems that we're trying to face in the payments business in particular. What are the problems that we're dealing with? It’s identity, theft, fraud, synthetic identities, this kind of stuff. These are all really identity problems. If we attack those problems and deal with them, then the cost of payments falls significantly since most of the cost is to do with identity, not to do with actually running the payments rails.

To take a very simple example, I've been with Barclays for absolute years. It would be cryptographically trivial for Barclays to create some form of a token or, I don't want to say card because that's the wrong metaphor, but Barclays could drop something into my phone which says, yes, we know who this person is, he’s with Barclays, he’s been with us for yonks, he’s got an overdraft but he pays it back.

Now, if you're trying to work out whether to give me some credit in a store or whatever, that's all you need. You don't need more than that. It's not like I can get up to no good with that, because if I do something bad or misbehave online, the police will go to Barclays and say, well, who is this token 123456? Barclays will say it's Dave Birch and, by the way, we know where he is because our app is on his phone. 

This idea that you have to say who you are, your name and address, and everything about you to get every stupid little thing done anywhere you go is wrong. There are certain kinds of businesses, and banks are one of them, who actually have all this data already and are trusted as sources of that data. 

When you look at the discussions going on at the moment about open banking and the potential premium API is in the open banking world, stuff to do with reputation credentials and figures is pretty in the forefront of that kind of discussion. I think we're heading in the right direction there.

On a more personal note, what's the best piece of money advice you've ever been given?

First of all, nobody should take money advice from me. I'm absolutely terrible with money and always have been. There's a blank spot in my brain about dealing with this. This is why I want a superintelligent AI to take this stuff over at the earliest opportunity. I really shouldn't be allowed anywhere near bank accounts and credit cards, it’s just not my thing. 

When I was considerably younger and actually had some money in the bank, my bank manager in those days used to actually give you financial advice. I remember him telling me that even though I had no interest in buying a house as I was living abroad at the time, he told me I should buy a flat to get started. The only reason I can afford to feed myself now is because I bought that flat all those years ago. 

I'm not sure that's good advice for people now, by the way. It was certainly very helpful for me.

It's really interesting you mentioned that because I do experience personally a generational divide between even myself and my parents when it comes to money advice. It’s all ‘get on the property ladder’. 

I think you’re right to point out that generational divide. We haven’t yet seen the strategic impact of the demographic shifts that are around us. The products that my kids get from the bank, debit cards and even a mortgage are exactly the same as I had and even my parents had. That doesn’t seem quite right given that we now live in a different kind of economy. When you factor in the demographic shifts from a number of different generations, we don’t quite have the products and services we need for the new economy. 

I’m optimistic that because of the use of data and possibilities in open banking, we should be building financial health rather than individual financial services. 

On the point of financial health and literacy, what's the worst money advice you've ever personally been given?

At a very early stage in my career, I was working for a company that was floating and employees were offered some shares. I grew up on a council estate in Swindon so I didn’t know anything about shares. I decided to buy some government bonds instead because I looked for the least risky option.

Of course, all of my friends ended up buying Ferraris, while I was eking out a meager existence on my 3½ % or whatever it was. I'd probably tell people a bit earlier in their career than I did to start getting involved in and getting a stake in businesses rather than just working for them. 

What does your wallet look like? How many cards do you carry with you?

Actually, I don't tend to carry cards at the moment. I mean, I have my phone with me a lot of the time and I have a ring that has an EMV contactless card inside it. I happen to be the chairman of a company that's in the wearable space, so I quite like having rings or key rings or stuff like that to pay for things and my phone takes care of the rest of it. Not only do I not carry cash, I don't carry cards either.

I watched your TEDx talk on the future of money back in 2014. In your opinion, what is the future of money to you now? Where is it all heading?

I think that talk actually stands up pretty well. If you looked at the sort of technology and the trends and some of the bigger picture stuff, I couldn't see that we were going to end up with a global galactic currency or all using the dollar or something. It seemed to me that we were inventing lots of different kinds of money that would get used in different ways, and I think the sort of decentralising nature of technological evolution has shown that to be the case. 

If you look at what's going on at the moment with these incredibly complex markets in decentralised finance and all different kinds of tokens or different kinds of digital currency, some which do smart contracts, some which do privacy and all sorts of things. I tend to think we're looking at a world where there are lots more kinds of money and lots more different kinds of money. Financial transactions will be assembled not by us, but by AI and bots. 

In the Bank of England, I've been talking to a couple of people about retail digital currency and wholesale digital currency. The German Banking Committee is also talking about having an industry digital currency which is just for bots, just for IoT and machines to send money to each other. If people as conservative as that are thinking we don't have enough kinds of money now, then I think my predictions are going to turn out to be pretty accurate.

How do you see the movement of money across borders changing over the next 5 to 10 years? Will crypto replace money for international money transfers?

Well, there's crypto and crypto, so if you mean the underlying cryptocurrencies, I'm a little bit skeptical. If I'm a factory in China and I'm producing fertiliser or something that's going to go to a farm in Africa –  nobody wants to gamble on whether Bitcoin is going to go up and down in three months. They're just not going to want to be paid in those kinds of volatile cryptocurrencies.

But the more sophisticated financial instruments that will sit on top of those currencies, the different kinds of tokens, you could imagine these different kinds of instruments that involve complex derivatives and hedges and bets – that to me seems kind of more plausible. What's actually going cross-border is much more complex and much more sophisticated than simple money transfers, because supply chains aren't just about the payment, are they? They're about trust, the future, stability and all sorts of other things.

And if you look at the cost, I mean we touched on this earlier on, most of the cost of cross-border payments is the identity stuff. Even if you're doing it using cryptocurrency, it's still going to cost me a fortune to check your passport, know your customers' customers, fill out suspicious transaction reports, do the politically exposed persons check, and everything else. 

Of all financial innovation, what are you most curious about in terms of the future of money? If you had to pick one thing that you're excited to see, what would it be? 

The thing that obsesses me at the moment actually is the issue of privacy and anonymity and how to get the right balance. None of us feel comfortable with money that's going to spy on us everywhere it goes. We don't want government money that reports back that I've been to Greggs once too often. 

On the other hand, anonymous money is disastrous for society because it means that the rich, powerful and criminals will be completely free to do whatever they want, and that doesn't seem quite right either. The issue is about where exactly we're going to set that dial and what technologies we use. 

We have quite a wide toolkit of cryptographic technologies available to us now. People talk about cryptographic blinding, and zero-knowledge proofs, or homomorphic encryption, and that sort of thing. Quite where it should all come together, I’m not completely sure. 

I’m always fascinated to learn more in that space, so if I had to pick out one thing it’d be privacy.


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