If Cash Is King, Then The King Is Dead!


These are the words of Vincent Kiyingi of Pride Microfinance in Uganda.

Vincent is featured in a short movie produced by Ericsson, titled “On The Money”. I have the privilege to be a contributor to the movie too. You can watch it on YouTube.

The movie shows deep disruptions to the real world brought by the parallel, networked digital world. It talks about different ways the technology is changing us – digital money (rather than cash), crowd sourcing as a way of investing (rather than the traditional exchanges), online value and trust and reputation (based on social network connections rather than real world credit ratings).

(the rest of this post can be read on my @gatesfoundation Impatient Optimist blog)

The 2013 Tech 50, “Masters Of A Volatile Universe” – and I’m #33!


This morning came with this amazing news: Institutional Investor, a well known and read American financial magazine, has named me #33 in their 2013 ranking of the top 50 people in financial technology.

The online article is here.

When you look at the quality of the people on the list, and the tagline “Masters Of A Volatile Universe” – what is there to say? I just feel incredibly honored.

Aaron Timms, one of the journalists, wrote the very nice bio, mentioning my teens spent in Burundi. Aaron and I had breakfast a short while ago in New York, and he wanted to know everything (!) about me in order to write this bio. Well done!

Thanks Institutional Investor and senior contributing editor Jeff Kutler!

The Sandbox For Disruption


I was recently in New York for the Innotribe Startup Challenge showcase. It was for some time that I needed to get in touch with TABB Group. We had missed to connect several times in my previous visits to New York, but this time it worked and I met Paul Rowady.

It was truly a meeting of the minds. Paul and I immediately aligned on the key topics of innovation in financial services and more particularly in capital markets. So much so that Paul said “why don’t we put some of this on video?”. I readily agreed and here is the result.

TABBForum video.

It was interesting, stimulating and … fun (make sure you see the last 2 minutes)!

Paul has invited me to speak at the upcoming TABBGroup event on Nov 19th in New York. I’ll be there!

Trust On The Internet – The Solution Is Ahead


There is a need for a user-centric identity, privacy and trust on the internet, to power the digital economy. It’s a major issue, and a solution that relies on crowd-sourcing is being proposed by Respect Network.

Let’s first look at how trust works in the real world “brick & mortar” economy, then understand the issues with trust on the internet, and finally the Respect Network solution.

Trust and the “brick & mortar” economy

How do you ascertain of the identity of somebody? For example, when signing a contract? Or making sure somebody has the legal age to transact?

You will probably rely on some form of government or bank issued credentials – an identity card, a passport, a driver’s licence, a debit card, or something that an institution you trust (the local public library for example) has issued.  And, for sure,  you will attach varying degrees of trust to each of these tokens of identity. A debit card, with its pin, is a good proxy  in many day-to-day financial transactions. A passport is probably the token you will trust most in travel or real estate transactions.

Furthermore, once someone’s identity is clear, how do you establish whether you can trust him to perform the agreed action – such as paying the bill, delivering the goods, etc? In the real world, this is one’s reputation – is she paying regularly her bills? Is the company you’re dealing with healthy and reputable?  There are many possible ways to establish trust, going from personal opinions to rating agencies.

Trust and the open internet

Let’s now look at the online world. One immediate and major difference is that the online world is, by design, global. The person you are dealing with may be in your neighbourhood or may be on the other side of the planet. Establishing the identity, and the associated trust, is made very difficult because there are no central and inter-operable agencies or bodies, as we have in the real world.

A good example of this is the eBay reputation.  As a regular user of eBay, I’m very conscious of my reputation there. On eBay, one’s reputation is gradually built by the people one transacts with. Buyers will hopefully recognise a good seller (goods corresponding to description, fast shipping) or sellers will recognise  a good buyer (fast payment). In my case, the reputation of a seller of something I’m interested in is a key factor on whether I will bid for the item or not.

In other words, the eBay reputation is an asset with a lot of value, even if is not expressed in monetary terms. This is fine if you only deal with eBay. However, looking at this more broadly brings the following issues -

- there is no inter-operability. The eBay reputations is not something that can be easily used on, say, Amazon.com. So, people have to build these relationships all over again in many contexts. It’s the same with Twitter and Google+. When Google+ launched, many people went through the pain of re-building their Twitter relationships on Google+. Many people didn’t bother, as it can be a lot of work and time to do that.

- there is a potential lack of privacy. Indeed your assets end up residing in many places, and the more places, the more risk there is for these assets to be compromised.

- there is a lack of control and there is a missed opportunity. What do the companies that store you assets do with them?  Some of them are actively selling your assets for various commercial purposes, and, as far as I know, you as the owner never see any of that money.

The digital economy and the Respect Network

So, how can we establish trust on the internet? This is where Respect Network comes in.  It is a little bit of a complex construction of organisations and companies. Below is an overview, and why this is interesting for Innotribe and me.

Trust on the internet is the focus of OIX  (Open Identity Exchange),  a non-profit company organization founded by Google, Paypal, AT&T and others. Their business is to establish, standardise and manage “trust frameworks” – legal, business and social rules that enables parties unknown to each other to trust their respective digital identities. The trust frameworks are designed to be public, standardised and inter-operable, so that people and companies can play various roles in the framework and still manage trusted relationships.

Among the three trust frameworks currently available, an intriguing one is the “Respect Trust Framework”. The idea of this framework is to not only establish a digital identity, but also to provide individuals control over ownership and sharing of their data on the internet. The key to the framework is the use of a crowd-sourced, peer-to-peer reputation system. It’s really very simple – people can vouch for you (for example, say “I vouch for John Smith’s innovativeness”), or complain about you (“I complain about John Smith’s stubbornness”). Similarly to eBay’s reputation system, the peer-to-peer reputation system grows over time, and the more vouches and complaints about a particular person, the more precise the information is and therefore the trust level in this person increases or decreases.

Respect Network  is a project run by Respect Network Corporation and which uses OIX’s Respect Trust Framework to implement the first trusted personal data network. Notable partners include Neustar and Swisscom, and Innotribe is involved.

Users of this network own their data (unlike centralised social networks such as Facebook and eBay). Users then establish secure channels between their personal data clouds, under very strong privacy and security rules. All the software and protocols uses are open to encourage inter-operability and to prevent any single company taking control.

Respect Network also establishes a crowd-sourced peer-to-peer reputation system, implemented through a service called Connect.me (Connect.me is in private beta now and will be launched soon. You can request access on theconnect.me website).

The architects of the Respect Network include an impressive number of people, among which Drummond Reed (who is also a co-founder of connect.me), Doc Searls, Craig Burton, Phil Windley who I have all met at Innotribe events and respect enormously.

The peer-to-peer reputation network establishes naturally a chain of trust. The chains begin with a number of known people, called Founding Trust Anchors, who provide credibility. These are people whose identity is publicly verifiable - members of the Internet identity, security, and privacy communities who believe in the power of a peer-to-peer, socially-verified reputation network. Others are early users of the Connect.Me private beta. Others still (you?) will emerge over time.

Peter Vander Auwera of the Inntoribe team and I have been extensively involved over the last couple years with many of the above companies, organisations and people. Peter and I have the honour to have been elected Distinguished Trust Anchors – nominated by other people and trust anchors as individuals that “exemplify the spirit and principles of the Respect Trust Network”.  Proud to be in such company!

Peter’s and my readers will also probably recognise that many of the above concepts and components are part of Innotribe’s Digital Asset Grid project. The information on this project is now in the public domain.

The Startups That Will Change Our Lives


I was asked recently - what technologies are most prone to change the world in the next 3 years?

It’s the type of question where you’d naturally start thinking about artificial intelligence, 3D printing, robotics and other advanced science topics.

But, after giving it some thought,  I think what will impact us most is not new technology, but a very clever use of the technology we already have.

Namely: smartphones and the pervasive permanent connectivity that they bring.

Mark Pesce, a futurist who was with me at an Innotribe event last year , calls it “hyper-connectivity”.  Erik Kruse, networked society evangelist at Ericsson and another Innotriber, calls it “the internet of things”.

Because smartphones make each one of us a geo-located, connected, data beaming and data absorbing walking entity, they enable a complex person to person or person-to-business mesh or grid. This was not possible before, simply because we were not connected in the way we are now.

I’ve been privileged to be on the jury of the Innotribe Startup Challenge and the Accenture Financial Services Innovation Award, and I’ve seen three innovative uses of smartphones by startup companies (or startup units within larger companies) that illustrate what this hyper-connectivity means.

1. The truly remarkable effect of the hyper-connectivity is removing “friction”, to use another of Mark Pesce’s term, in the day-to-day transactions.  Peer-to-peer is replacing hub-and-spoke models for more efficiency, volume and convenience.

Uber is an excellent illustration. It’s an app produced by a start-up company that connects people in need of transportation with participating drivers of luxury vehicles. No intermediary needed. It started in San Francisco streets, and is expanding rapidly in other cities in the US and Europe. You can imagine what Uber does to traditional dispatch (hub and spoke) cab companies. And you can understand why the cab companies are desperately trying to stop Uber.

I’m watching closely Uber in its quest to make friction disappear.

2. Another additional clever use of smartphones is in the person to person (peer to peer or P2P) payment space . There was a lot of talk in the last couple of years about NFC and related technologies to enable P2P payments with a hardware proximity based sensors. But right now NFC proves to be more of a friction than an enabler, as it requires a massive upgrade of all the smartphones to support the technology. A feat that requires Apple and Samsung to agree to roll it out…

A Belgian payments company called Bancontact/MisterCash has not waited and is rolling out a P2P payment solution using a very simple thing – the QR code.

Rather than relying on the hardware, they realised they can solve the problem with onboard technology already available on smartphones:

  • a high definition screen, on the vendor’s smartphone, to display a QR code with all the selling information (amount, nature, location etc)
  • a camera, on the buyer’s smartphone, to scan the QR code from the vendor’s smartphone screen, and initiate the payment using Bancontact’s existing debit card payment scheme

This solution requires both the buyer and the seller to be part of the Bancontact scheme, and to have the Bancontact app installed on the buyer’s and seller’s smartphones.

In Belgium, these are very low, frictionless, requirements and I predict a big success to this scheme.

3. The last illustration of hyper-connectivity is in the couponing space – enabling consumers to manage and benefit the coupons provided by merchants.  When you think of it, coupons are nice – as they give you price reductions and other benefits at your local stores – but they don’t really empower the consumers that we are. We are supposed to collect coupons, store them, understand how and when to use them, understand how they can be combined etc. Rather than a benefit, coupons prove to be a headache in many situations.

Apple has released last year an app called Passbook that allows to store some of these coupons and other items such as boarding passes. But this is only scratching the surface. There are startups out there that use hyper-connectivity to enable much more powerful scenarios. The idea is that your smartphone realises through geo-location that you are approaching a participating merchant and, suggests, in real-time, how to best use the coupons you have on your smartphone. Truaxis, recently acquired by MasterCard, is one such startup. Fidelsys, in Belgium, is another startup providing innovative solutions in this space.

It’s amazing to see how the hyper-connectivity brought by smartphones enables innovation. The smartphones are a platform on which infinite and clever new business models can thrive.

It’s truly the Far West of the internet.

Four Questions (And Answers) About Open Source Software In Finance


The subject of open source software came about in several recent discussions and I thought the key points would be relevant for this blog. Here’s a summary in the form of a Q&A.

1. Open source software has been identified as a tool that can be used for highly commoditised IT tasks, including compliance, measuring performance, etc. Is this generally where financial services organisations use open source or is it transferring into other areas too? 

Open source has been used primarily in IT shops and especially on Unix platforms, where a number of necessary components are by tradition open source (things like file systems or graphical user interfaces).

Over time, cost pressure has led the IT organizations to consider open source for mission critical components such as database management systems (mySQL) or the operating system itself (Linux).

What I’m seeing now is the open source approach being used in the application space, driven by commoditisation and also the search for new profitable business models. Let me point out two interesting examples-

  • OpenGamma is a UK based startup. They were the winner of last year’s Innotribe Startup Challenge regional showcase in Belfast. OpenGamma used the open source approach to provide a risk analytics platform to financial institutions. Quoting  Kirk Wylie, CEO of OpenGamma:
    “The idea of OpenGamma came from a need I noticed while working in the risk and front office technology for financial services firms.
    My job was building generic infrastructures,  but infrastructure for which there wasn’t a viable commercial offering. With financial services firms looking for cost reductions in every part of their operations, it seemed absurd that most of their IT budget was spent on building and maintaining expensive in-house systems that didn’t hold any proprietary value to the company. Trading and risk analytics systems are plumbing; as long as it works you shouldn’t notice it.
    So why should every firm build their own from scratch? Why shouldn’t there be an open source solution out there available to all?
    This thought triggedred an email to the other two co-founders, and the idea for OpenGamma was born”
    See more about OpenGamma here.
  • Allevo is a Romanian based software company. They took a big bold bet, and decided to put their core product – FinTP, a financial transation processing platform – in open source. They want to attract new customers for their platform, and want to transform their business model from software seller to support provider. Quoting Sorin Guiman, the CEO of Allevo: “Why shouldn’t every bank out there, doing the exact same thing in the back-office systems, use the same payment application? Customers don’t care what these systems look like, they care about what customized cool products and services their bank is able to deliver to them and the way these are delivered. We see no dangers for financial institutions to adopt open source software in their back-office systems, but rather an opportunity to become more relevant, in pace with technology”
    See more about Allevo here.

2. Are there any serious security issues in mixing open source and proprietary software? 

I’ll quote Sorin Guiman again: “Security by obscurity is widely denigrated – it does not mean that if one doesn’t have access to the source code, that code cannot be cracked.”

One of the main advantages of open source software is that any security issue is transparently known and can be collectively & rapidly solved by the community developers, making the application at least as secure as the proprietary one. Thus the mix of the two cannot hurt more than mixing any types of software.

3. Is there not an argument that open source security problems are easier to pick up – and solve– than ‘commercial’ software?

Having more eyes to see the code, getting issues solved, patches released and installed is definitely a faster process in open source software. I like to quote Bill Vass , the COO of late Sun Microsystems:

“If the Trojan Horse was made of glass, would the Trojans have rolled it into their city?”

4. How do you see open source take-up developing in 2013? Are there any clear trends that could emerge?

Financial institutions are starting to take open source software more seriously.

Allevo, OpenGamma are examples of firms pioneering the way in 2013 for financial services. I also think this is not only a financial industry trend; governments have started for a few years now to create policies designed specifically to encourage the use & adoption of open source software.

What Does 2013 Hold For Financial Services IT?


Several people asked me recently about how 2013 would look like for IT professionals in the financial industry. Here are my thoughts, inspired by the 2012 Innotribe events and network.

If you’re a CIO/CTO in financial services, you probably have something like the following in your objectives -

  • flat budget
  • long list of regulation related “must do’s”
  • drive innovation to deliver tangible new value to internal and external customers
  • continue delivering operational excellence

In other words, 2013 budgets reflect on one hand a continuing focus on fiscal caution, and on the other hand the necessity to invest for the future.

I’ve gathered from my talks with CIOs in various financial companies – and indeed my own (SWIFT) – the ratio of maintenance vs investment has changed. What used to be a 90/10 budget (90% for maintenance and operations, 10% for new projects) has now shifted towards 80/20 or even 70/30. That means serious money for innovation.

The first area of innovation will be related to regulation. How to cope with the inevitable and increasing requirements, while keeping the budget equation balanced? I think cloud computing will probably emerge as a best adapted tool. Regulation lends itself to be, by nature, a shared effort – everyone must comply to the same rule. Therefore, why implement this over and over in every financial institution – why not use a shared resource? A good example of this is the recently launched Sanctions Screening service from SWIFT (http://www.swift.com/products/sanctions_screening). This service checks payments against public sanctions lists for the banks who subscribe to it. I think there is a major opportunity for more services such as this one, and a large number of potential suppliers out there.

The other areas of innovation will be driven by technology change in mobile computing, social media and “big data” analytics.

Most financial institutions are playing catchup right now with respect to mobile computing – I expect frantic investment in 2013 to go into easy to use, mobile based front end to replace the more traditional web based home banking systems. It’s a “no-brainer”, and this gameplan will essentially be about choosing the right partner (outsourcing or ad-hoc) to deliver – delivering this in-house is seldom an option.

The challenge for 2013 will be about formulating the gameplan for a truly innovative customer experience. This is not only about technology, it is really about a mindset change. Going from “captured consumers” into “empowered consumers”. The clever use of social media and “big data” analytics (analyzing massive amounts of customer related data to gather new insights) will be key in differentiating the offerings and gaining traction with the “digitally native” generation (people under 30 today).  I’ve seen some pioneering examples of this at Fidor bank (www.fidor.de), who rely heavily on social media for new customer acquisition, and Movenbank (www.movenbank.com) who use big data analytics to compute financial health scores.

Finally, it is going to be important in 2013 to map the future. Where does the “empowered consumer” road ultimately lead? One interesting idea I saw in the context of Innotribe is the “Digital Asset Grid” (http://innotribe.com/digital-assets/) – a new internet where consumers own their digital assets (valuable data such as a person’s eBay reputation), and where digital assets can be shared safely and securely. The banks may have a major role to play. It will be important to incubate this – and other – ideas related to the digital banking of the future.

(also posted on ComputerWeekly.com)