Birch uses Somalia as an example of a challenging payments corridor. Image: Shutterstock
David Birch is the director of innovation at Consult Hyperion, as well as the author of “Identity is the New Money,” a book on the profound evolution of both identity and currency in modern infrastructure. We sat down to talk with him about the process of making blockchain real.
Ripple Insights: You write about the emerging payment landscape. We agree that the current payment infrastructure, especially cross-border payments, must evolve and modernize – and blockchain has a role in this. What do you think banks’ next move will be?
Because I’m English I can’t help but look at things in historical terms, thinking of value. We have this new set of technologies available, but we’re trying to use it on institutions that are barely post-industrial. What we’re really building are brand-new institutional arrangements. Banks in particular have a long road ahead to adapt and adopt and stay relevant in the face of so fundamental a shift. It really is a new industrial revolution.
Like the mechanization that enabled the last industrial revolution, blockchain is a potential game-changer in finance and beyond. It is being applied to trade finance, inventory and insurance, to name a few. The bigger banks and payments schemes know there are many pieces to the value chain of disbursement, remittance, supply, and all the rest. However, cross-border payments right now are a particularly rusty piece of that chain. A distributed ledger solution is more resilient, more transparent, more flexible than say, a system like SWIFT.
Distributed ledger systems have potentially far-reaching consequences for global settlement solutions and beyond, specifically for cost reasons. For example, in the U.K., one of the main remittance corridors is to Somalia. The corridor is a huge part of Somalia’s GDP. A lot of banks don’t maintain accounts for Somali money services businesses (MSB), because the cost of the transmission outweighs any potential profit. KYC, AML and PFT all continually increase the cost of doing business. DLT could bring the procedural costs down and make low-value payments worthwhile in places like Somalia.
I believe the long-term impact of solutions like Ripple will be felt in much more than processing payments, especially as it relates to how identities are handled. Immutable data stored on shared ledgers could one day govern KYC data, event ticketing, or tracking high-value individually identified goods such as wine, diamonds, or art.
RI: On your blog, you often talk about the role of digital currency. Where do you see that going, as banking infrastructure evolves?
I am a big, big fan of digital currencies. I feel that the future of currency is much more community-minded. We’re not going to end up with one world currency. Currencies will fracture more and more, and become more closely related to the individual communities that they serve. Islamic Dinar might not be the most efficient currency, but it embodies values that they believe in. Imagine money that can’t be spent on alcohol, or money for just London or just for Coca Cola products. It sounds like a hassle, but each of these could be governed by its own smart wallet, as a system of credits. It is plausible that one or more of these will be cryptocurrencies. Currencies won’t be replaced, they’ll just proliferate and emerge for different unique purposes.
Birch moderated a panel at Money 20/20 on One-Click Buying: New W3C Standards for Web Payments with Ripple’s director of business development, Welly Sculley, along with representatives from Shopify and the World Wide Web Consortium (W3C). Their discussion focused on the need for standards and an interoperable network for merchants and consumers across disparate technologies and market.
Key takeaways from the discussion: standards and a cohesive network are crucial. It’s unlikely that a singular network for merchants and end users can succeed, but a way to interoperate all the different networks is what will take the next step in creating the Internet of Value. This challenge of fragmentation in the market is the same challenge across the board. Merchants experience fragmentation as frustration: they want to be able to accept all possible methods of payments. That’s wallets, apps, currencies, everything. It’s analogous to the problems that we hear from banks regularly. A single technical interface that can grant reach without the complexity of added connections is really the solution that people are looking for, at every level of the stack.
David Birch is the Director of Innovation at Consult Hyperion. This interview is part of our series on leaders in our industry. For more like this, please subscribe to Ripple Insights.