Part 1 – Identity Models, Government and Governance Structures

This is a big topic, and I’ll get a few things wrong. My mechanism for correcting my viewpoint is this blog, where this community gives feedback. It’s the reason I write. I won’t get into the tech weeds in this blog series. When there is a need to drill down on a standard or tech, I’ll provide a link to documents providing an overview. The insight I’m attempting to provide surrounds the evolution, economics and value chain implications of various models. 

Why read this? 

Identity is the key shaping force across many domains (including payments) because: 

  1. ID touches “everything”,  
  2. ID is the “primary key”  in trust, risk, contracts and value exchange 
  3. ID is core to a well-functioning government (voting, taxing, regulating, …etc).

This breadth makes it challenging to sift through ID-related announcements and assess the implications. Thus, I’ve created three identity communities for my taxonomy:

  1. Government – Working to define identity as part of Digital Public Infrastructure (DPI). DPI has three legs: identity, payments and data exchange.
  2. Commercial – Platforms, Banks, Healthcare 
  3. Web3/Blockchain/Social – Jack Dorsey is the unofficial spokesperson.

These communities find alignment in technology but are working toward different end goals with significant philosophical differences across communities, particularly regarding the role of government and near-term objectives. These differences surround the definition of trust, authority and governance structure, which is the focus of today’s blog.

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New Blog Series – The Economic Models of Identity (and Trust)

Free Content

Happy New Year. I’m starting a new blog series in 2024 – The Economic Models of Identity. 

Identity is the #1 shaping force in new payment schemes, Web3, blockchain/crypto and more broadly “trust” interactions in government, commercial and social (see Trust Networks). Most investors haven’t spent much time thinking about identity because it was the realm of tech geeks or bundled into the services we use (see Separating Identity and Payments). The reason to pay attention today? Identity is shaping a redesign of the internet’s infrastructure AND governments are defining new LAW on what constitutes a digital identity (ex India’s UIDAI and Europe’s eIDAS/eID).

Let’s unpack the word Idenitity to ensure a consistent taxonomy. While most people relate a drivers license or passport to identity, it is much more than that. Who are you? And who can answer that question? Are you a US citizen? Licensed Driver? Doctor? Skier?  Great credit risk? While your SSN or DL# are legally issued identitiers that only the government can issue and authenticate, you are also biometrically defined and have credentials, behaviors, preferences and other attributes. Identity and the contexts in which it is used are the foundation of trust, contracts and relationships. 

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Adios 3DS “Step up”.. Hello FIDO2

Short Blog

There are significant changes brewing in eCommerce authentication and authorization. Today’s blog is more of a headline summary of key points that I hope to break down over Thanksgiving. 

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DOJ Probe – Network Tokenization – 2023

It’s hard to believe I’ve been writing about payment tokenization for 11 yrs. Tokenization is an overloaded term with multiple definitions. Last week McKinsey wrote a fantastic article on crypto tokenization, this note is about the tokenization of card numbers (PAN to DPAN) performed by network tokenization services like Visa Tokenization Service (VTS) and Mastercard Digital Enablement Service (MDES). 

This week the US DOJ opened a probe into network tokenization services (Bloomberg). The specifics of the probe are not known

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Apple Launches Pay Later

https://www.apple.com/newsroom/2023/03/apple-introduces-apple-pay-later/

Apple Pay Later was announced at Apple’s WWDC on June 6, 2022  (Youtube – ~21:00 in). I covered the details last year in Apple Pay Later – What is it? 

Today it is going live in a limited rollout. Summary points

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Payment Authorization – Under The Hood

Retailers should tread very carefully in direct issuer connections

My focus over the last 18 months has been identity, trust, authorization and assertions. Today I thought we would get under the hood a little on the technology of authorization and the current operational issues with a key network service: 3DS. 

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Tap to Pay – Growing the Network – $700B GDV Opportunity

~$700B GDV opportunity for breakout volume growth as the network could “double” in scale as every cardholder could become a “merchant” in 20-30 min. 

This month was a first! During my 25 yrs in payments, I could accept a card payment (in person) with no additional hardware. Enrolling as a Square merchant took only 30 min and I was then live with Apple Tap and Pay. A fantastic experience! (see Square). This is a tremendous “team effort” by Visa (VAS), Apple (See Mobeewave blog) and Square (as PayFac). 

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FedNow Hurdles and Opportunities

Short Blog – Follow Up to Last Week’s FedNow Update 

I’ve got 4 blogs in queue with Part 5 – Future of Retail Banking coming next week. I’ve been asked to expand beyond my pro-network bent into areas like FedNow, PayPal, Stripe and Asia… etc and I will oblige. For today, drilling down on FedNow’s opportunity and the key barriers for “break out growth” (expanding on the last 2 bullets within 22 Feb FedNow blog).  Feedback appreciated.

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