Going Cashless

For some twenty plus years I can remember hearing people speak of the dream of an economy without coin and paper money. A dream, driven by the desire to promote the use of electronic payments.

Over the last months, a number of articles focus on promoting the idea of a cashless society.  They all speak to the advantages and attempt to promote the concept, arguing we can:

  • Eliminate the concern of thugs insisting at gunpoint for the cash
  • Reduce the risk of employee theft
  • Stop paying people to count all those dirty coins
  • Remove the need for an expensive safes
  • Stop paying to have a specialist truck take the money to the bank
  • Eliminate the grey market

The business case for a merchant to eliminate cash seems to be beneficial.   Many have tried and succeeded to no longer accept cash.

At the same time articles report on the new regulations; various cities and states are implementing and considering, intent on outlawing merchants from going cashless.  The argument often focuses on how eliminating cash disadvantage the underbanked.

Then there is reality! As a consumer, I recently have been surprised at the need to carry cash and the unsettling pleasure of finding that I still had  cash in my leather wallet.

The first wake up to this reality took place while driving from St Simons, GA to the Orlando International Airport. In the trusting hands of Google Maps, I traveled down I-95, across I-4 and was directed to the FL-417. Suddenly a road sign informed me that I was on one of the various Florida toll roads.  above my head was a road sign indicating which lane to move into, based on my preferred method of payment. Driving a car that was not mine and knowing it did not possess a PeachPass, my only option was cash. Fortunately, I had cash and was able to continue my journey.

The following Friday my father and I went to The Lodge to play Sniff, a dominoes game. The game was competitive and cash was the only method to settle. With a bit of cash in my pocket, I was able to pay the few dollars I lost.

One Saturday a street vendor in front of the local Harris Teeter was selling spare ribs. When I went to pay they informed me, they only accepted cash. Once again I was Fortunate, I had enough cash and was able to buy those delicious ribs for dinner.

On various Sunday’s, when the collection plate came around, I’ve had a check or a bit of cash and was able to leave my tithing.

On a number of occasions, the valet deserved a tip and I’ve had a few dollars in my wallet.

Two more events brought the reality of how society does not want cash to disappear. one morning, I wanted to enjoy a pastry. Not having $2.75 to pay for the Danish, Sweet Mama’s, a local baker, charged me $0.50, an eighteen percent surcharge, simply to use a credit card

Finally, yesterday as a guest for lunch at the local Rotary Club, I was confronted with a series of cash only events. This time I did not have any cash and was not in a position to contribute to various worthy causes.

We dream of a cashless society. Yet churches, valets, toll booths, street vendors and the Rotary all continue to desire or require cash. Some are not even willing to accept anything but cash.

Looking at our society from two different ends, we must accept the continuing need for cash.  Be it the underbanked, unable to acquire a credit or debit card or those who carry many credit cards; both need to use cash simply to eat or enjoy life.

Later today I will have to visit the ATM and make sure I have a bit of cash in my wallet.

 

https://www.paymentssource.com/news/target-outages-show-the-failings-of-cash-as-backup

Cash is King especially when the battery dies or the power goes off

Digital payments are growing, but consumers aren’t ready to abandon real money

Cash is king let us never forget it. Cash has always been the primary form of payment.  It was until very recently accepted everywhere.  Most likely will once again be accepted everywhere especially given the need to make sure we do not disenfranchise the unbanked and underbanked will remain the default form of payment

This said, what always amazes me is how so many authors forget Apple Pay, Google Pay and the other NFC based mobile phone based payment solutions are simply another device capable of carrying your debit and / or credit card credentials.

What many of these authors are starting to  remember is how much it costs a merchant to accept these alternate forms of payment.  I wonder when they will also begin to appreciate how many if not all of these alternate forms of payment only work when the power is on.  Our always on society assumes power never goes off.  We dream of everything in our mobile phone and forget when we last could not use our phone because the battery was empty.  Or the store clerk who could read your card because the power went down.

This is one of the redemining facts about cash.  Cash exists without power and can be used whenever.

Are we in Need of Faster Payments – a question of speed and instant gratification

When I started to read this article, https://www.pymnts.com/news/b2b-payments/2019/wespay-corporate-faster-payment-adoption/ , my first thought, why would anyone in accounts payable want to pay a bill sooner than it is due.  Clearly someone in accounts receivable, the CFO and the treasurer, is in need of a strong cash position.  Therefore  therefore, wants to bring cash in as fast as possible.  This classic struggle between the buyer (accounts receivable) and the seller (accounts payable) begs the question – Who gains from faster payments and who loses?

Clearly the financial institutions are stuck in the middle.

    • On one side their clients want moneys to flow into their accounts, oh so fast.
    • While on the other hand those same companies would prefer moneys moved out of their accounts at a snail’s pace.

If the competition offers the service, then, the financial institution simply must decide if faster Payments creates a competitive disadvantage.
The question is not if – it is when.

Do we the consumer care?  Today we have credit and debit cards which allow us to pace the movement of money.  In the case of debit – today.  In the case of Credit – some number of days after we get the bill.  We can set up autopay facilities for those every month payments.  We can schedule money transfers to occur on the day we desire.

From a business and technical perspective the movement of funds immediately upon instruction, makes good sense.  We the receiver are assured those funds are good funds.  We the sender know the moneys have been sent and received.  Therefore, whatever subsequent result can be expected, now!

365/7/24 seems to be what instant gratification is all about.  We want everything now and have lost the excitement of expectation.

All this said, there are risks we must consider when deciding to employ faster payments.  There is no recourse.  Once the moneys have been authorized the moneys are in the hands of the party you transferred them to.  Only if they so desire, will you be able to recover from a mistake.

Worse still, if someone is able to assume your identity then an even greater risk exists.  The funds are gone. The party receiving them will have no interest in addressing your lose.

Therefore Strong Authentication is the essential requirement.

 

Smart Cards with Fingerprint Scanners

Over the last couple of years the reality of fingerprint cards is a hot topic in conversation, white papers and press articles.  It led me to think about the challenges and opportunities associated with this intriguing convergence of technologies.

My purpose is not to determine which solution is best or which companies are developing and selling them.  My goal is simply to explore.

The first consideration begins when the card is constructed.  Here we must ask the mechanical question relative to how the electronics are integrated into the strata of an ID-1 card.  This then begs the question of making sure this new card conforms to the specifications dictated by Payment, Networks, Governments or other bodies who define the use of these branded cards.  If we continue to think about the card manufacturing process we need to think about electronics and the use of heat in the typical lamination process or the inclusion of metallic materials used to create a particular look.  One needs to think about the method of connecting the various internal components to the other electronic elements  as the fingerprint scanner, antenna(s)m LEDs, batteries, the EMV chip or contact plate on the face of the card.

The second set of concerns must be related to the personalization of the card.  First question is where will it be personalized? in a branch or within a bureau?  How will it be personalized? With a thermal printer, laser engraver or embossing machine?  Will any of the  personalization processes adversely affect the electronic?. Similarly it will be appropriate to confirm whether any of the various card transport mechanisms will disrupt or damage the sensor and related electronics.

At some point in the processes the consumer must register their fingerprint and the resulting template must be instantiated into the card.  How will this be done?  Some speak of an in branch process.  Others talk about some type of first time cardholder activation process performed when they receive the card in the mail.

Clearly there are a lot more questions the issuer, card manufacturer and personalization provider need to address.  Let alone the method of making sure the cardholder knows how to use the card at the point of sale or ATM

The key question is the cost of the card, is it worth it?

Where are we going

Each morning I read trade articles on Blockchain, Faster Payments, Mobile Wallets, Authentication, Identity and other alerts & subjects of interest. Each day the writers leave me thinking about the future of society, howbwe will address cyber security, what we can do to funally eliminate fraud and which solutions will help us to mitigate risk. These then drives concern about where we will end up, as we drive to define effective means of identity and authentication, capable of supporting the individual desire for convenience and gratification.

Facial recognition deployed to speed up entry and exit to and from countries and through airports are here. The surveillance state is emerging at alarming speed. These same cabilities could potentially deliver a safer environment. Which will it be?

Physical and behavioral biometrics many feel should become the primary means of authentication. Yet, false acceptance and more importantly false rejection will result in inconvenience some expect the consumer to tolerate while other remember friction typically ends up with the consumer abandoning the journey.

The cost of payments, the escalating concern of the retail sector, remund us thatnpayments are sourcesnof revenue for some and friction for others.

Identity theft and the ability to create synthetic identifies are the fears of many. Consumers whose identity is stolen struggle to regain their standing.

In the end all we seek is:

  • Pay for something
  • Identify ourselves
  • Protect our hard earned money
  • Live a safe and productive life
  • Be assured you are you and not someone else

A world between yeaterday and tomorrow

The week of March 25, 2019 I had the opportunity to visit with a room full of community banks with assets in the 100 million to billion range. Organization with 25 to maybe 300 staff.

The presentations taught me more about the difference between what large International Organizations worry about and what these small community banks need to learn. Faster Payments, Zelle, same day ACH all new services these organizations must integrate into their organization, both technically and procedurally.

Things I have been exposed to are new challenges for these small town banks.

Words like liquidity risk clearly top of mind. Yet, as we move from over night settlement to real time settlement.

Phone fraud, risk mitigation all greater challenges not necessarily appreciated yet alone understood.

In the end what is clear these community banks exist because of the small towns they understand and work within. Do those of us exposed to a larger world understand what drives these communities banks, at least not I.

Account TakeOver should be the Bankers concern

FASTER PAYMENTS, FASTER FRAUDSTERS

Another article published by PYMNTS.COM causes me to reflect on a discussion I had last we at the Payment Summit organized by the Secure Technology Alliance.  When the US Faster Payments work groups where stood up on e of the working groups focuses on security, yet no particular drive exists to protect the consumer of the corporate treasure from their account being hacked into by some phishing, vishing or other criminal act.  Account takeover will become a much more interesting attack vector.  Moneys will irrevocably flow out of the hacked account and to whatever account the criminal so directs them.

Key word real time gross settlement and faster payments depend on the irrefutability of the funds.  once executed they instantaneously transfer to the receiving party.  What is required is a concerted effort to implement strong multi-factor authentication, at least at the time the transaction is authorized by the sending party.  Some will say the risk is no greater than what exists today when a consumer or treasurer executes a Wire Transfer or any form of transfer between two financial institutions.  This maybe true.  the availability and assumed convenience will as the article described lead to heightened risk.

As I have written in other blogs we need to embrace strong Multi-Factor Authentication.  The standards exist, the security of the device in many case is present.  Relaying parties need to decide security is worth the investment.  They need to recognize the value of  satisfying the consumers’ need to have access to their funds properly protected.

Multi-Factor Authentication – Faster Payments and the Immutability of a Transaction

Distributed Ledger and Things

As I sat to write, I was drawn to the Wikipedia’ Bitcoin article. As I read the story of how it all happened memories and concerns once again flowed through the neurons of my mind. Silk Road and their involvement and the evolution of the value of a Bitcoin, struck me as a magical mystery tour through a world of mathematicians, anarchists, profiteers and speculators.

I then remember reading

an element of a report from the Bank of International Settlement on crypto currency. The picture above is intriguing for those of us who appreciate the complexity of payments. The article gets ever so intriguing when one continues to read and finds this interesting illustration of

the difference between what we all are familiar with and what those who understand DLT and Bitcoin appreciate. The central focus of this new technology is to address one and only one concern. Trust in the intermediary.

I must admit this particular article is not the one I originally intended to speak to. I do though recommend reading it.

The article I had intended to reflect on is Central Bank Cryptocurrencies. In this document they speak to the possibility of the banks issuing a stablecoin. The recent announcement of JPMorgan Chase is one example of such.

This then causes me to reflect on the various use cases and conversations with people about the potential of DLT. I wonder why, at least here in the USA with our judicial and regulatory framework and the rule of law; we would seek to replace the existing intermediaries with a permissionless distributed ledger and the associated consensus mechanisms of a public ledger. There is enormous and growing cost in consensus built on “Proof of Work” and massive duplication of the ledger or as most call it the chain. Be it the electrical cost, the cost of a data center or the specialized computers necessary. The people and companies, the nodes and miners, will expect a reward for their effort.

Which is cheaper, if a reasonable level of trust exists?

Where are we going from here

This is the question. There are those that believe Block-chain and all of the other distributed ledger technologies are the answer to everything. I would suggest one much consider:

    • The level of trust the various parties have in each other.
    • The cost of multiple copies of the distributed ledger.
    • The cost of the consensus mechanism versus a trusted intermediary.
    • The governance required to maintain security, software and specifications.
    • The value and ethical issues of anonymity.

This then begs the question of a permissioned or a permissionless ledger. Which then begs the question of governance and who is responsible to establish the rules.

It is clear there is value in the idea of a distributed ledger. I would suggest caution in deciding if it makes sense for your use case.

      • What are the goals and objectives of the solution?
      • What are the economics of the various approaches?
      • Who are the stakeholders?
      • Who determines the rules and manages change?
      • Can the participants trust an intermediary?
      • Does everyone fear what another could do?

Helping you to understand the answers to these questions is what we do.

Multi-Factor Authentication – Faster Payments and the Immutability of a Transaction

Karen Webster
CEO, Market Platform Dynamics
President, PYMNTS.com

Karen,

Last week in your publication I read the article Deep Dive: Security In The Time Of Faster Payments and I had to offer the following thoughts:

The concept of Multi-Factor Authentication is based on the idea of layering multiple authentication techniques on top of each other.

We typically speak of three factors “What You Have”, “What You Know” and “What You Are”.

When we think of “What You Have” we think of a “Thing”.  An object that cannot be replicated or cannot be counterfeited.

An object “a secure computer” that can be upgraded and made more secure as threats like Quantum emerge.
A unique object with a False Reject Rate FRR and a False Accept Rate FAR approaching zero.

In the physical world “the thing” is a card or passport.  You will remember our first discussion, we came to agree the “secure computer” embedded inside provides a future proof mechanism.  In the digital world, we depend on Cryptography.  This Thing, inside our computers, mobile phones and other technologies; many refer to as a ROE “Restricted Operating Environment”.  Technology people may call it a Secure Element, a SIM, an eSIM, a TPM, a TEE, an eUICC or even Security in Chip.  Companies like ARM specialize in creating the design of these things and silicon manufacturers embrace and license their designs.

Today these connected devices (be they: personal computers, identity & payment cards, FOBs, mobiles phones, bracelets, watches and hopefully every IoT device) need to be secured.  This array of cheap ~$1 security circuitry provides a place to create and/or store private keys & secrets keys, perform cryptographic functions and assure the integrity of the BIOS and software being loaded or currently running in these computers.

Think Bitcoin for a second.  The key to its architecture is the Private Key associated with your store of coins.  Lose it and they are lost.  Many people store these in hardware, based on the use of a ROE.

The second factor is all about proving that you are present.  Behavior, location, PIN, fingerprint or passwords are second or even third factors, be they something you know or something you are.

This is what FIDO and what WebAuthN is all about.  Especially since they introducing the security certification regime. This is what the Apple Secure Enclave is and Samsung and others embed into their devices.  This is what we put into payment cards, government identity cards and the Yubico keys we see various enterprises embracing.  This is what Bill Gates started talking about in 2002.  BILL GATES: TRUSTWORTHY COMPUTING

As we move to Faster Payments we must move to Secure payments.  Immutability and irrefutably become key requirements.  To achieve this goal I suggest we need to understand one fundamental security principle.

The First Factor
is Something(s) You Have
My Thing(s)

The Second and Third factors
Prove You Are Present

Storing Biometrics in the Cloud
Creates a Honey Pot
And, begs questions of Privacy

Let me identify myself to My Thing.

Then let My Thing
Authentication my presence to
The Relying Party (Bank or Credit Union)

Disruption or the Reality of Legacy

Often times people speak of disruption as this traumatic thing being imposed upon them, their industry or society. Yet, if we look under the covers disruption more than likely is all about a competitor, not locked into a legacy approach, approaching the market with different tools.

The world of payments, as so many others, have implemented technology then gone on to enhance or update multiple times. Each time, someone or some group of people, had to adapt therefore invest to keep up. More often than not, a community would decide to hold on to what they built, sometime ago, hoping no one tried to disrupt the status quo.

With payment the need to embrace more effective approaches parallels the robustness and frequency of transactions. It also parallels the desire of sellers to do business with anonymous buyers. A lack of trust and a need to reduce the amount of cash we carry drove, markets to promissory notes. These promissory notes further evolved, as trusted intermediaries entered the market and created more efficient methods of providing that guarantee of payment.

Not wanting to duplicate what is already written about the history of money and payments we can jump forward through the paper phase to where we are in North America: Cash, cards, some checks and electronic debits & credits.

If we look inside the evolution of legacy.  We find what we have, is a stumbling block, holding innovation back.  We need to decide to adapt what exists or remove and replace.

Dual Interface Construction

When we think about the migration to contactless or Dual Interface cards it is important to have a general understanding of what goes into creating the card and the constraints one has to think about, as they work with their marketing teams to design these cards.

The design of a payment card involves assembling multiple of PVC into a sandwich that will be bonded and then punched out to form the card body.

  • On the face of the card: a clear laminate to protect the surface
  • On the back a clear laminate with the magnetic stripe affixed to it

In the middle two printed sheets

  • The front
  • The back

In the middle of the card body, your manufacturer will need to insert an antenna.   The antenna is typically provided to the card manufacturer as an inlay, as seen on the left.  The inlay is a sheet of plastic with the copper antenna, sometimes aluminum embedded within.  The card manufacture will add this inlay into the middle of sandwich.

On the right is an example of a six layer card construction including one element as an example, a metal foil.  This has been included given it has an impact on the effectiveness of the radio signal.  More about this a little later.  Using pressure and heat, the layers of the sandwich are bonded together in a process called lamination.  The bonded sandwich is then run through a series of additional processes designed to create an ID-1 card as specified in the ISO 7810 specifications supplemented by the additional payment network requires, such as the signature panel and the hologram.

After quality inspection the next step is to mill and embedded chip into the card body and simultaneously assure a connection between the contacts on the back of the chip and the antenna.  There are various means of connecting the chip to the antenna.  These different methodologies for connecting the chip to the antenna is a specific skill and is the responsibility of your card manufacturer.  Look to your manufacturers to propose, construct and certify your card to your requirements and employing their unique processes, techniques and technologies.

One thing you will need to be aware of is how the use of the antenna affects the certification process.  It is important to understand that the combination of ink, materials and methods of construct means; each construction will need to go through a unique certification.  This need for certification is a result of the use of radio frequency to communicate between the card and the terminal.  Think of your cell phone when your inside a big building or within an elevator and how the conversation maybe disrupted.  It is this possibility of the radio signal to be disruption based on the materials employed and the method of construction.

When metal elements like metallic foils and layers are used in card construction, the challenge increases.  Eddy currents are emitted by the metal and will interfere with the level of power and quality of communications emanated by the antenna and radio in the POS  received by the antenna and the computer in the card.

So far we have spoken only of the hardware.  The chip in the card is a computer and needs an operating environment, application and data in-order to function.  The introduction of the contactless interface alters the operating environment, the payment applications and the data which is loaded into the card.  All of this impacts the card manufacturing and card personalization process.

 

Will the US truly embrace dual interface cards or is our phone the future

When the US decided to migrate to EMV, it took the safe course

When it was time to migrate to EMV here in the USA, both issuers and acquirers focused on addressing the market and the required technology, one step at a time.  They recognized the confusion created by the Durbin Amendment, the reality of the competitive US debit market, the complexity of the merchant environment and the legacy infrastructure underneath the American card payment system.  Unfortunately unlike in other parts of the world the American merchants tended to migration to  EMV in the following order credit & debit, Common AID, contactless (MSD mode), Mobile Pays and finally contactless (EMV mode).  This journey is still a long way from complete with less than 25% of the terminal base contactless enabled, let alone in EMV contactless mode.

The larger and most invested merchants also worried about the impact of sharing data with the likes of Amazon, Google and Apple.  The “honor all card” rule is also the “honor all wallet” requirement.  Wal-Mart, Target and Home Depot were clear, they did not intend to expose the NFC antenna to the various NFC Mobile Wallets.  Instead they are implementing solutions, post MCX, based on their mobile apps using QR codes and often times enabled to support frictionless payment.

We are now looking at the second wave of card issuance and Issuers are wondering what merchants will finally do about enabling contactless.    As the Issuers prepare to issue their cardholders with their second EMV enabled card they must also think about the future of the card in the context of the future of mobile payments.

Are the payment credentials carried in the mobile wallet the companion of the card
o
r
Is the card the companion (fallback) for the payment credential carried in mobile wallet / device

Or
Are we on a journey to a new paradigm

Where facial recognition, loyalty, geolocation
Enabled by the always connected devices

We surround ourselves with
Help merchants to focus on
the shopping experience

And
Turn the Payment into

A frictionless “thank you”

 

What Happens When the Lights Go Out

Since 1984, when I was told I needed to carry this mobile phone with me, there has been that nagging issue of needing to make sure it had enough life to get me to the next charge point.  My first phone was luck if it could last a half a day so they gave me two, one was always being charged while the other hung on my shoulder.  In 1993 while working on the development of the EMV Specifications we focused on the ability to authorize a transaction when the Point of Sale POS device was unwilling or unable to reach the issuer.  In 2013 I listened to Visa representatives explain how 100% of all payment transactions could be executed online.  Then I ponder getting a Tesla Model 3 and learn it is only capable of traveling a maximum of 310 miles, it make me wonder; how do I finish the last 19 miles to my fathers home.

Today, I was reading an article emanating from the Money 2020 event when IDEMIA spoke of the idea of the mobile drivers license and that nagging feeling emerged.  What happens when the power goes off after the hurricane hit and someone asks me for my drivers license.  Its locked securely inside my dead mobile phone.  I then saw that their competitor Gemalto and even NIST are working on this concept of the mDL.

We live in a world where electricity is becoming as essential as water and food.  Yet, we hear of power outages that last weeks and even months.

It is like with Mobile Payments, if the phone is dead and in order to pay it must, then what?  The card remains the essential element of a successful payment transaction.

I dream of the day when I can merge my leather wallet and my mobile device into one.  Yet, I appreciate there are technical challenges like the need for electricity.  Until we lead with these technical challenges and not simply the dream.  Exciting concepts and ideas will go where so many have gone before.

A Letter to Karen Webster of PYMNTS.COM

Karen, you come to mind off and on, especially when I’m try to keep up with what is happening in the wild world of payments, block chain, cryptocurrency, identity, authentication, trust, identification and who knows what else.

One thing is clear.  Lot’s of companies are investing significant sums of money in these various “opportunities”.  Yet are we, as a society, on the right path?

We could look to Washington DC, and the other capitals around the world, and this same question would apply.  But, not to get distracted.

Let’s start with identity and authentication in the digital space

As you may remember, EMV was something I got deeply involved with, both here in the USA and back when we originally conceived of the specification.  We the three founding payment associations had one goal – solve for counterfeit.  And, when the issuer or country so desired address lost and stolen fraud.  Focused on the physical world of commerce, the Point of Sale.  Our original goal was simple.  Assure global interoperability by defining a global migration path away from the magnetic stripe.  We mutually agreed we had to select a technology capable of protecting the physical token, the card, well into the 21st century.

Simultaneously, as was so beautifully captured by the Pete Steiner’s famous 1993 New Yorker cartoon, we knew there would be an issue in the digital space, that thing we then call the World Wide Web.  MasterCard and Visa set out to define the Secure Electronic Transactions SET, then Visa patented a concept called 3D Secure and more recently  worked together with the other owners of EMVCo to create EMV 3D Secure.  Each of these, attempts to find a meaningful way of  authenticating the cardholder when they paid with a credit or debit card.

Today billions of identities have been compromised.  The techniques used during an enrollment process online, to verify who you, are no longer viable.  Identifiers like our social security number and Person Account Number (PAN), unfortunately, became authenticators, a role they were never designed to support.  As EMV was deployed criminal shifted their focus to the Internet and PCI had to be introduced to address the challenges of criminals acquiring payment card and PII data.

As the World Wide Web morphed and grew in value and importance, the potential of monetizing the vast amount of data companies where collected began to scare people;  as this recently found comic so aptly demonstrates.  People, governments and corporations started to struggle with their desire for privacy offset against the value of data corporations are collecting.

Way back then, an opportunity to address the issue was offered by Bill Gates.  As is always the case, Microsoft the then technical giant  wanted something to support what society would ultimately need.  The idea of the social good was lost to the value of corporate profit and control.

As the Internet grew to become this marketplace, library, museum, cinema, place to play and place to meet and connect; we imposed well understood enterprise security techniques (username and password) to the consumer space.  The password thus became our challenge.  How do we convince customers (let alone employees) of the importance of complex, hard to remember passwords – unique to every security conscious relationship we establish on the World Wide Web.

Are biometrics the answer, has the FIDO Alliance and W3C created a set of authentication standards we can all embrace?  Hopefully.  Unfortunately, most opportunists are seeking to monetize their often proprietary solution, creating what they think is a best of breed consumer experience.

My fear, we are moving from the familiar experience of typing our user name and password; to multiple unique experiences at the front door of each and every web site we seek to log-in to. 

As an example my Samsung Android phone has a fingerprint sensor and is FIDO certified.  There is a Samsung Pass Authenticator, Microsoft Authenticator, Google Authenticator and several demo versions of various other authenticators.  I also receive SMS messages with one time tokens I am asked to enter onto the screen.  My PC it also is enabled with a FIDO U2F set of dongles.

Unfortunately my tablet has none of these and assumes I will simply remember, thank you Norton Identity Safe, my various passwords.  What a mess we are created all with monetization and the desire to offer a unique consumer experience as the justification.

With all those already installed, I await the introduction of WebAuthN, within the various browsers installed in my PC, tablet and phone. 

Moving to Block Chain and Cryptocurrencies

The wild west.  The makings of a speculators dream.  The realm of the incomprehensible, built on complex mathematical concepts and the desire to remove the man in the middle and replace them with the miners and nodes distributed around the center.  Or, is the idea of the distributed ledger the solution to the challenges of trust in an every expanding universe of connected people and things.  One can only wonder?

People speak of removing central governments.  Yet, they remind us that there is a governing body, book of rules and set of code that is designed to assure immutability.  If I understand their, logic we should not trust Governments instead we  trust these new open societies and digital enterprises?  they speak of removing intermediaries and replace them with nodes and miners.  New players responsible for creating and signing the new blocks and distributing it all those who maintain a current copy of the chain.

Is there potential, Absolutely.  The challenge is to understand why one would wish to move data from a trusted central repository to a distributed trustless environment.  Cost and latency should be part of the discussion and most importantly the level of trust the parties have with each other, identified intermediaries and governing bodies involved in the ecosystem.

Finally Payments

Barter, gold sovereign, IOU, government or bank back notes and coins, checks, cards, account based solutions, digital coins and what next.  Payments have been this ever evolving space.  Some seek to monetize the methods businesses, consumers and governments use to pay for the good and services they seek to acquirer, use or explore.  Others argue that the cost of payment should not be a source of profit.  The interesting twist here is more about the stage an economy is at in their migration from one from of payment to another.  Questions of legacy and history limit a markets ability to embrace the new and retire the old.

We could shift the conversation and focus on the store of funds: be it the safe in the wall, the checking or savings account at an institutions or digital coins stored in digital memory.  We could talk about the entities that focus on the experience and employ the already existing mechanisms.  We could think about block chain, crypto currency, identity and authentication.

Does the consumer care? or would we be pleased to simply hear the merchant say thank you for your payment.   The frictionless experience of get out of an Uber car or when we click the buy button on Amazon we know the payment will be made and that we will see a receipt in our email.  Remove the friction and make sure that only what I owe is paid, that is the experience we seek.  We the consumer are not interested in the detail.  We just want to know we successfully paid, using the source of funds we set up as our default.

In Conclusion

Yesterday, with this blog incomplete, I listened to  The Economist article titled Rousseau, Marx and Nietzsche – The prophets of illiberal progress – Terrible things have been done in their name.  What grabbed my attention is that it spoke to the depth of my wider concerns.  The article concludes with the following:

The path from illiberal progress to terror is easy to plot. Debate about how to improve the world loses its purpose—because of Marx’s certitude about progress, Rousseau’s pessimism or Nietzsche’s subjectivity. Power accretes—explicitly to economic classes in the thought of Marx and the übermenschen in Nietzsche, and through the subversive manipulation of the general will in Rousseau. And accreted power tramples over the dignity of the individual—because that is what power does.

As I think of our capitalist environment, I am concerned and wonder if the publication of the Economist article is  timed to educate and alarm.  The reality is we are experiencing a concentration of power leading to an increase in the distance between those in the upper 1% and those we call the middle class.  Therefore, there is a need to about what is good for the whole, yes a tiny bit of socialism, to restore balance to make sure the wealth and benefits accrue to all and not just the few.

As identification, authentication and payment systems, discussed above, evolves we need to think about the structure of how these solutions will be offered to the market.  Are we seeking to address a social issue like crime or terrorism? Are we seeking to improve confidence?  Are we attempting to focus on the consumer, citizen and employee needs?  Or, is it all about shareholder value and the search for profit?

Like in the article discusses, my fear is Profit will create confusion and complexity.  Not more convenient and frictionless experiences.

NYTimes: Transaction Costs and Tethers: Why I’m a Crypto Skeptic

Transaction Costs and Tethers: Why I’m a Crypto Skeptic https://nyti.ms/2NYYSdw

As a technologist with an understanding of cryptography and very aware that in order to remain secure and tamper proof we increasingly increase the complexity of the work to assure the integrity of what we are using cryptography to protect. I wonder why so many people got so excited about Bit coin and Blockchain. As I have written before the cost to assure the integrity of the ledgar. Be it the original work to calculate the nonce or the subsequent work to confirm that the nonce the miner calculated was the right one, there is a need to spend money buying work specific computers, renting or building a facility to houses these work units and the power to cool and run these computers.

Mr. Krugman properly outlines the challenges. He effectively focuses on two issues. The cost and the idea of tethering.

It is this need to identify the value of the coin. Governments help to stabilize their defined currency. The intrinsic value or use of Gold, establishes its value.

Understanding and being able to clearly articulate how cryptocurrencies are valued and how then can achieve the stability necessary to support commerce is essential. This is what tethering is about. How do we establish and more importantly share the nature of the valuation.

Could a US Cryptocurrency Prevent Systemic Harm to the Underbanked and Underserved?

I recently absorbed the following article  and offer the following reflections.

Frankly, it disturbed my social consciousness.

There are an estimated how many million smartphones in the hands of US consumers?

An article answering the question can now be found at this link.
http://paymentsjournal.com/could-a-us-cryptocurrency-prevent-systemic-harm-to-the-underbanked-and-underserved/

After reading the article, I thought about this graph derived from the US Census.  What income level equates to that of the un-banked?  I think of my expenses and about the expenses most people are dealing with.  Health issuance for two people in Georgia is $1,100 a month.  That’s a lot of people struggling to make sure they at least have health insurance!  If $53,700 is the median income and $13 thousand is spent on health Insurance, and then we consider all the other daily expenses we need to live: food, medicine, co-pay, gas, utilities …

Then I remember an economics report which claimed that the hourly wage required to afford a place to live in the least expensive part of the US was something just over $15/hour.  All of this causes me to ask the question – At what income do people find it of value to have a banking relationship, e.g. a card?

Those who argue that we should migrate from Cash to Card should remember the primary motivation for credit cards is directly related to the profits and revenue the banks, processors and other players who touch the flow of money earn from processing the payment transaction, and the revenues earned by lending money (i.e., a credit card) or by holding your money (a debit card).

Sure, we could propose giving the poor pre-paid cards, as some of the Government’s entitlement programs already do.  But then who will be responsible for the fees to manage the program and who will earn the interchange from each transaction?

The service fees, OK, maybe we the taxpayer will cover, given the perceived social value of supporting the poor.  On the other hand, entitlement is perceived by many to be a scheme to support the lazy, therefore many would say that the fees are part of what the entitlement should cover.

Let’s get back to the real subject at hand:  What is the most economic form of payment and are crypto-currencies the future?

In the world of cards, interchange is a cost to the merchant and revenue to the Banks.  Therefore, since merchants end up loading their processing costs into their price, the consumer pays.  Those who advocate migration away from cash recognize and argue cash has costs, for intance:

  • Cost of Employee pilferage
  • Cost to store and carry to the bank
  • Cost to handle and count

Many would agree that a card is cheaper.  Others would argue they are not.  This becomes a question of faith in your employees, the cost of a safe and a visit to the bank and the fun of sitting up at night counting your earnings.

Are crypto-currencies an answer?  At whose cost?  The nodes or miners who maintain the Blockchain need to be paid to ensure the immutability and consensus inherent in the Bitcoin model.  Someone must pay.

This begs the question: Which is more expensive to society?

  • Cards
  • Crypto-currencies
  • Checks
  • Cash
  • Coins
  • Certificates – in other words, tokens

 

 

Could a US Cryptocurrency Prevent Systemic Harm to the Underbanked and Underserved?

cryptocurrencies

A toll on the Massachusetts turnpike is $4.00, unless you can’t afford an EZPass then it will cost you $7.35*.  This article published in Convenience, the web site of National Association of Convenience Stores (NACS), points out that restaurants are also increasingly eliminating cash and that the impact this has on the poor has finally started to create some pushback in D.C.:

“As more restaurants go cashless, a backlash is building, especially in the nation’s capital, where an increasing number of fast-casual eateries are only accepting credit or debit cards and mobile payments, the Washington Post reports. Sweetgreen, a national chain, doesn’t accept cash at most locations, including its Washington, D.C., unit, while Menchie’s, Barcelona Wine Bar, The Bruery, Jetties and Surfside in the District also refuse cash payments.

‘By denying the ability to use cash as a payment, businesses are effectively telling lower income and younger patrons that they are not welcome,’ said D.C. Council member David Grosso, who has introduced a bill that would require retailers to let customers pay in cash. Chicago didn’t pass a similar bill last year, and Massachusetts has a 1978 law on the books that’s for cash payments but it hasn’t been enforced regularly, according to the state retailers association.” (Emphasis by Payments Journal)

I was unaware of the 1978 Massachusetts law described here, but clearly MassDOT and the Massachusetts legislature are more interested in how it will spend the money saved and the new revenue generated than it is in old laws. The fact that the policy to go all electronic will also increase late payment fines from the poor, perhaps even putting some in jail for non-payment, is just icing on the cake.

In our rush to save money we have ignored the systemic biases this action creates against the poor (if you doubt this statement reread the Justice Department’s report on Ferguson Missouri and how the town’s cost cutting measures created that very same bias). My dollar bill states that “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE” and yet nobody is considering how this is becoming less true every day and the impact that reality will have and it isn’t just the poor.

It is ludicrous to think that paper currency can survive even as everything around us shifts to electronic bits that are controlled by software. But we mustn’t ignore the ramifications of this shift. Consider what the future would be like if all payments are electronic utilizing our existing payments infrastructure. It is likely the cost burden would move from the Federal government (that prints money) to all the entities that need to send or accept money (because they pay the network and processing fees). In this scenario a) the government will see significant savings, b) the entities making a payment will see increased costs, and c) payment networks will receive increased revenue and profits.

If we would prefer to keep the status quo then the Federal government should support an electronic form of tender, establishing a cryptocurrency that replaces paper but is also recognized as “LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE”.

If not done relatively soon, say in the next 5-8 years, then every state and private payment network will be so entrenched that it would likely prove too difficult and costly to switch.

* The difference described above is for anyone driving 113 miles between Natick and West Stockbridge according to MassDOT’s toll calculator

The case for Identification and Authentication

As we continue to explore the case for Identification and Authentication I share the below article.

What is becoming clear is standards are being embraced.

In the Payment space

Will it be W3C WebAuthN, 3DC and Webpayments or EMVCo SRC & Tokenization?

My guess depends on if standards bodies can play well together.  EMV (contact or contactless) will remain the many stay for physical world commerce, until the App takes over the Omni Channel shopping experience.  then the merchant will properly authenticate their loyal customer and use card on file scenarios for payments.  The question of interchange rates for CNP will see a new rate for “Cardholder Present&Authenticated/ Card Not Present.”.  In time when a reader is present I can see an out of band “tap to pay” scenario emerging using WebPayments and WebAuthN.

In the identity space

I contend the government and enterprise market will go for a pure identification solution with the biometric matched, in the cloud, in a large central database.  Does it include a what you know username, email address or phone number; maybe!  If it is simply the captured image or behavior, then it is a 1 to many match.  If it is with an identifier, it is classic authentication with a one to one match.

In the pure authentication space where the relying party simply want to know it is the person they registered.  Then, the classic FIDO solutions work perfectly and will be embedded into most of our devices.  Or, as we’ve seen with some enterprises, the relying party will embrace U2F with be a FIDO Key, like what Yubico and Google recommend.

The classic process needs to be thought about in respect to what can be monetized.

  • Enrollment = I would like to become a client or member
  • Proofing = Ok you are who and what you claim, we have checked with many to confirm your Identity – This is where federation comes in.
  • Registration – Verification = Ok, now we confirm it is you registering your device(s)
  • Authorization & Authentication = Transaction with multiple FIDO enabled relying parties using your duly registered authentication.

How Microsoft 365 Security integrates with the broader security ecosystem—part 1

by toddvanderark on July 17, 2018

Today’s post was coauthored by Debraj Ghosh, Senior Product Marketing Manager, and Diana Kelley, Cybersecurity Field CTO.

This week is the annual Microsoft Inspire conference, where Microsoft directly engages with industry partners. Last year at Inspire, we announced Microsoft 365, providing a solution that enables our partners to help customers drive digital transformation. One of the most important capabilities of Microsoft 365 is securing the modern workplace from the constantly evolving cyberthreat landscape. Microsoft 365 includes information protectionthreat protectionidentity and access management, and security managementproviding in-depth and holistic security.

Across our Azure, Office 365, and Windows platforms, Microsoft offers a rich set of security tools for the modern workplace. However, the growth and diversity of technological platforms means customers will leverage solutions extending beyond the Microsoft ecosystem of services. While Microsoft 365 Security offers complete coverage for all Microsoft solutions, our customers have asked:

  1. What is Microsofts strategy for integrating into the broader security community?
  2. What services does Microsoft offer to help protect assets extending beyond the Microsoft ecosystem?
  3. Are there real-world examples of Microsoft providing enterprise security for workloads outside of the Microsoft ecosystem and is the integration seamless?

In this series of blogs, well address these topics, beginning with Microsofts strategy for integrating into the broader security ecosystem. Our integration strategy begins with partnerships spanning globally with industry peers, industry alliances, law enforcement, and governments.

Industry peers

Cyberattacks on businesses and governments continue to escalate and our customers must respond more quickly and aggressively to help ensure safety of their data. For many organizations, this means deploying multiple security solutions, which are more effective through seamless information sharing and working jointly as a cohesive solution. To this end, we established the Microsoft Intelligent Security Association. Members of the association work with Microsoft to help ensure solutions have access to more security signals from more sourcesand enhanced from shared threat intelligencehelping customers detect and respond to threats faster.

Figure 1 shows current members of the Microsoft Intelligent Security Association whose solutions complement Microsoft 365 Securitystrengthening the services offered to customers:

Figure 1. Microsoft Intelligent Security Association member organizations.

Industry alliances

Industry alliances are critical for developing guidelines, best practices, and creating a standardization of security requirements. For example, the Fast Identity Online (FIDO) Alliance, helps ensure organizations can provide protection on-premises and in web properties for secure authentication and mobile user credentials. Microsoft is a FIDO board member. Securing identities is a critical part of todays security. FIDO intends to help ensure all who use day-to-day web or on-premises services are provided a standard and exceptional experience for securing their identity.

Microsoft exemplifies a great sign-in experience with Windows Hello, leveraging facial recognition, PIN codes, and fingerprint technologies to power secure authentication for every service and application. FIDO believes the experience is more important than the technology, and Windows Hello is a great experience for everyone as it maintains a secure user sign-in. FIDO is just one example of how Microsoft is taking a leadership position in the security community.

Figure 2 shows FIDOs board member organizations:

Figure 2. FIDO Alliance Board member organizations.

Law enforcement and governments

To help support law enforcement and governments, Microsoft has developed the Digital Crimes Unit (DCU), focused on:

  • Tech support fraud
  • Online Chile exploitation
  • Cloud crime and malware
  • Global strategic enforcement
  • Nation-state actors

The DCU is an international team of attorneys, investigators, data scientists, engineers, analysts, and business professionals working together to transform the fight against cybercrime. Part of the DCU is the Cyber Defense Operations Center, where Microsoft monitors the global threat landscape, staying vigilant to the latest threats.

Figure 3 shows the DCU operations Center:

Figure 3. Microsoft Cyber Defense Operations Center.

Digging deeper

In part 2 of our series, well showcase Microsoft services that enable customers to protect assets and workloads extending beyond the Microsoft ecosystem. Meanwhile, learn more about the depth and breadth of Microsoft 365 Security and start trials of our advanced solutions, which include:

 

Something to wonder about

What You Have

The Two Sided Market

When we think of investing in various macro business needs e.g. revenue. We see that establishing relationships with customers to stimulate sales is why we create the goods and services, hopefully, others want.

If the buyer has something the seller wants, in exchange for the good or service they desire, then a transaction occurs. The challenge is simple, each party defines the value of what they are providing or exchanging and presto the trade occurs.

When society grows and the complexity of what each of us produces and when our needs are not aligned to this process called barter, a means of monetization is established. Society creates a trusted form of exchange – pebbles, coins, money, a promissory note or now even cyptocurrencies.

In other words, society creates an answer to enable the exchange of goods and services between parties who do not have goods and services the other party seeks in exchange.

With cash, coins or other trangible representations of value, commerce is easy. When we complicate things and worry about carrying cash and seek to buy things with debt. A need for a Network emerges.

These payment networks, by necessity, add complexity. They create the need to establish two sides to the market, one focused on the relationship with the buyer and the other with the seller.

Issuance and Acceptance. Two words to descibe the two sides of a network. It’s only when the two sides of the market have sufficient participants. Only at the tipping point, enough critical mass exists, to create a self sustaining network. This is the network. At this moment the network blossoms. If either side of the market does not achieve critical mass, the network collapses.

Any two entities familiar and trusting in the Brand, or each other, can easily establish a temporary relationship. Adding anonymity to the requirements, increases the leave of trust and recognition the Brand must establish.

In a digital environment we have to define mechanisms to share and establish trust across trillions of electrons. The two sides will not pursue understanding of nor focus on security. Until the risk exceeds a threshold unique to each party on either side of the market.

To often in the past, the idea of the individuality of the individual or the need to design security in from the beginning. Has left us with a legacy of system all needing design of custom approaches to how to integrate security with requisites necessary to capture, calculate and manage risk.

The Artifact of Trust

When a mutually trusted set of parties gives the citizen, consumer, employee or courtier a card, a device or an object and provides every acceptor with a reader capable of recognizing the trusted thing; then the two parties are in a position to establish “trust”. The consumer has a thing which is recognized and trusted by the acceptor. This is often referred to as “What You Have”.

Once the thing is recognized by the acceptor, then, the process of identification and authorizations (the transaction) can take place. The object – the artifact – carries an identifier. It possesses characteristics that establish its unique character. The object also posesses a means of assuring the acceptor the presentation of that identifier repreents a unique entity.

The simplest artifact of establishing “trust” is a hand held thing, be it a key, fob, card, watch, pendant, phone, ear piece. It does not matter what it is, all that counts is that the merchant recognizes it and that the consumer is willing to carry and present it.

Trust, for the merchant, means they can, according to the rules, recognize and authenticate the thing. They are then in a possition to pursue a temporary and trusted relationship. What can be achieved during the time the relationship of trusted is bounded, is the constrained by an additional layer. In this layer the consumer, the acceptor and any third parties address which the rights and privileges are to be granted or pursued. This is when the exchange, sale, conversation, tranaction, event or access is granted.

Two sides meet several common mediums of exchange are available.

[contact-form][contact-field label=”Name” type=”name” required=”true” /][contact-field label=”Email” type=”email” required=”true” /][contact-field label=”Website” type=”url” /][contact-field label=”Message” type=”textarea” /][/contact-form]

Digital Identity



Question for all those who advocate migration from card to electronic

We all are aware and many of us dream of a time when all of our physical identity artifacts are digital. We dream of consolidating these credential in our electronic wallet, otherwise known as our mobile phone.

Today while visiting an outpatient imaging center, I was asked for my drivers license. She would only accept the physical document, I offered to send an image by email. Her goal to scan my identity document into the electronic patient file she was creating. The idea of an image of the drivers license in an email, well.

Sure the system could easily be changed to record digital credentials delivered by NFC or BLE. The first question given the expensive medical system we have here in America; at whose cost?

Time could not be argued as a savings, she would only have a saved a second or three of time to pass the card back to me.

People discuss contactless cards and contrast them to the convenience of a Mobile Wallet. What we often forget is reality. As long as we need to carry other physical identity artifacts, the convergence of our leather wallet into our electronic device is not happening.

In my humble opinion it is an all or nothing situation. Yes I will add digital credentials into the mobile wallet. But, unfortunately, the leather wallet is still part of my attire.

Better still it does not need to be recharged. My leather wallet still works after the phone’s battery has died.