SIFđź’šS – Green Fintech Events – Dates for your Diary

28 June 2017 – SIFđź’šS at Money20/20 & Copenhagen Fintech Week, Copenhagen Fintech Lab, Copenhagen, Denmark saw our first event that attracted an audience of engaged experts and learners

“Thanks for an inspiring session”

“Thanks Sofie et all – for a great and relevant discussion. This should (and will) be on the top agenda in the #fintech space”

6 October 2017 – SIFđź’šS at Copenhagen Fintech Innovation Week, Dansk Industri/Industriens Hus , Copenhagen, Denmark  

“we expect around 350 participants (c-level and decision makers in Digital/IT, Innovation, Strategy within the financial industry)”

16-18 October 2017 – SIFđź’šS at SIBOS – MaRS, Toronto, Canada

“SIBOS is about saving the banks.  We think we should be talking about how fintech can save the planet too.”

14-16 November 2017 SIFđź’šS at Singapore Fintech Fest and Hackacelerator in partnership with UNEP – Singapore

SIFđź’šS – Sustainability Innovation in Financial Services – is a series of events designed to highlight and inspire discussion about fintech solutions for green, inclusion and sustainability initiatives, in support of the UN Sustainable Development Goals.   We are working in partnership with Stockholm Green Digital Finance, the Green Digital Finance Alliance and the United Nations Environment Programme Inquiry into the Design of a Sustainable Financial System.  For further details and speaking opportunities please contact

GreenInvest G20 Meeting and Green Digital Finance

Continuing our supporting partnership with UNEP and the Green Digital Finance Alliance, the Stockholm Green Digital Finance centre and hiveonline were invited to Berlin to advise the G20 policymakers and representatives of the V20 countries – 46 countries made particularly vulnerable by climate change – on how fintech could help them. The 30-31 May G20 meeting’s focus was on how fintech can support developing economies, and the emerging green fintech scene was also represented alongside policymakers from representative countries.

Given the audience, this was an interesting challenge. Recent experience from the G7 meeting in Venice showed us that policymakers are largely unaware of the potential benefits offered by Fintech, seeing it as something of a technology trend but not relevant to them. We were invited to participate in Venice following some visionary research done by the Inquiry into Sustainable Finance, where Simon Zadek and others have identified many potential applications for fintech in achieving the 2030 Sustainable Development Goals, but communicating the opportunities and bringing them to life is challenging for an audience absorbed in long-running debates.

Fintech – why’s it relevant to the green agenda?

Simon and his team had planned for this and arranged an agenda designed to both challenge perceptions and include policymakers in active participation in solution making. After a warm welcome from the German Federal Ministry for Economic Cooperation and Development, we heard from a number of speakers giving a broad outline of the challenge we face, and painting a compelling picture of the scale and urgency of the problem. Discussions included the challenge of investment in green programmes, the challenge of defining what is green and the role of the G20 in managing through a period of financial transformation.

Solutions for a greener future

hiveonline was then invited to present alongside Ant Financial, SolarCoin, Mobisol and UN Women. Ant Financial are running a fascinating green behaviour rewards scheme, using gamification to encourage consumers, with an impressive 200m+ subscribers. This was a great segue into discussing the broader applications of reputation systems like hiveonline in empowering communities towards sustainability, by reducing investment barriers, credit barriers, community barriers and inclusion barriers. Nick Gogerty of Solarcoin built on this to talk about alternative financial instruments and tokenisation, the opportunity presented by encapsulated marketplace services (“small is the new big”) and how blockchain technologies can support marketplaces and trade, reducing emissions through carbon trading and tokenisation of renewable energy.

This panel led to a lively discussion and we were able to further elucidate some points, including that the scale and volatility issues associated with Bitcoin only apply to certain types of digital currency, whereas others are underpinned by assets, fiat currency or global indexes, while also highlighting the potential benefits for global capital markets, of transparency, reduced manual intervention, reduced transaction costs and opportunities for removing currency volatility through the use of tokenised assets. Some other key misconceptions about the need for internet connectivity to run fintech, the need for supporting banks and the reliance on a grid were also put to rest!

We heard the importance of fintech and inclusion for women, who are significantly over-represented in the 2 billion unbanked and 1.5 billion lacking formal identity, and how with alternative reputation systems and behavioural credit scoring, women can not only become key participants in the economy but also drive sustainable and community focused behaviours in their countries.

Managing adoption barriers in different economic cultures

A workshop to explore potential applications of fintech to real world challenges was a really useful way of helping participants understand the opportunities of fintech, while helping us fintech people understand the problems we’re trying to solve. I was on a team with participants from Argentina, where 30% inflation presents a challenge, Mongolia, which has very low technology penetration, as well as India, China and Egypt, where digital finance behaviour has already evolved rapidly, and we explored the opportunities offered by a digital currency / digital wallet system for countries with economic challenges and barriers to adoption. We’ll pick up on the outputs of this workshop in a future update, as there were many potential solutions identified.

Launching Stockholm Green Digital Finance

The next panel, on international cooperation and overcoming barriers, discussed how micro-equity and SME exchanges can broaden the investor base for SMEs and Cecilia Repinski, newly appointed Director of the Stockholm Green Digital Finance Centre, after formally launching the Centre and our partnership with UNEP and the Green Digital Finance Alliance, was able to put straight some misconceptions about “fintech for fintech’s sake” while explaining the ambitious programme for Sweden in both education about opportunities for fintech use and execution of pilot projects, supported by hiveonline’s technology.

Green Foreign Direct Investments

We were privileged to be joined by many key figures from the V20 – the group of countries made particularly vulnerable by climate change, and on the second day we focused on the challenge of green Foreign Direct Investment (FDI)s, and heard fascinating and compelling evidence from countries facing different challenges – Thailand, where zoning has been tried but faces challenges, Mongolia, where a large part of the economy is inherently Brown because of their reliance on mining, and efforts are being made to offset with sustainable community projects, Egypt and Ecuador, where attracting any investment in initiatives is a challenge, resulting in a massive shortfall across the board.

Challenges identified were different from country to country – FDIs are overwhelmingly skewed towards Asia, so Latin American and African countries are missing out, while corruption, bureaucracy and political favouritism were common themes. Countries are at different levels of development, with different industries and different investment challenges, but across all representatives there were positive examples of governments actively driving policies to improve things. The hard questions remained, of how to identify and measure green initiatives, and whether to insist on global standards.

Externalities and internalities

The 17 Strategic Development Goals identified after Paris 2015 are a good starting point for any measurement system, and are commonly used today, but imposing a single set of benchmarks across all countries and industries would be setting the bar too high for some, and too low for others. Some commonalities remain – Pindar Wong, of VeriFi, pointed out that externalities – the outputs of polluting activities – are borderless and equally destructive wherever they come from. However, there may be an opportunity to configure benchmarking of internalities within individual countries, industries and even regions/municipalities, to support a tailored set of goals which can be tracked and measured for the investments they cover. These could be matched with the goals typical to large investors, to ensure a strong flow of capital towards these projects.

A measurement system for green investment?

Although the NGO and government community has been struggling with how to define green investment for over two decades, one of the key conclusions of the meeting was that we may now be in a position to exploit financial technology to support a more complex, but more transparent evaluation and measurement system, suitable to a wide range of countries with differing needs and priorities. Although the ultimate goal must be to accelerate all countries towards a common approach to sustainability, such a measurement system could support attracting investment towards that state, especially in countries where investment is currently hard to attract, without compromising their green agendas.

Obviously a measurement system won’t solve all the investment problems, but we hope that by adding transparency and fairness to the way that foreign investments are managed, we can give greater confidence to investors that their green goals are being achieved, while reducing administration and waste in the management of funds at country level.

Looking forward

In summing up the meeting, Mark Halle of UNEP reiterated the scale of the challenge we still face, but highlighted the positive aspect that the inclusion of fintech solutions have brought to the debate. He directed the countries to actively include fintech solutions, including reputation systems, alternative financing instruments, and traceability solutions, into policy, to address some of the challenges faced by today’s green investment ecosystem.
We saw, over the course of the two days, a movement from problems to solutions, along with a shift from fintech being irrelevant, to being central to finding solutions for sustainable financial development and green investment. We look forward to working with UNEP, the Green Digital Finance Alliance and the G20 / V20 groups in building a sustainable finance system for the future.

hiveonline at the G7 in Venice

Sofie Blakstad at the G7 Venice

hiveonline is proud to have been asked to support the UN Environment Programme Inquiry into Design of a Sustainable Financial System, recently accompanying them to the G7 Green Finance for SME policy making meeting in Venice. Six of the G7 governments (all except USA) were represented, with a combination of Environment and Financial departments sending delegates.

Following an opening speech by the State Secretary for the Ministry of the Environment, Ms Barbara Degani, Advantage Financial presented their views on the future, with Fintech and future finance driving the agenda but also highlighted the shortage of equity capital available for research and investment. UNEP Inquiry paper co-author Nick Robins presented a summary of the findings, followed by analytical observations by PwC, which centred on the gap between the report’s ambitions and the backing of banks and nations to mobilise practical steps.

Continue reading “hiveonline at the G7 in Venice”

March Newsletter

Building Bridges

Following the Nordic tradition, the Bee has two homes and we attended the launch of the Stockholm Fintech Hub, hosted by KPMG, where the room was packed to capacity and 180 people had to be turned away!  The hub itself, based at the No. 18 shared working space in Stockholm’s Central Station, opened  its doors in March and a number of fintechs have already moved in. With 141 funded FinTechs in Stockholm alone, this facility is much needed.

stockholm fintech launch.jpg

We’re proud that the Stockholm Hub has asked Sofie to sit on its advisory committee, and represented it at February’s OsloFin Tech Fest in a lively discussion about collaboration across the Nordic Fintech Hubs.

Continue reading “March Newsletter”

Building Capabilities

If you’ve been following our series, you’ll know that we believe that whether you’re restructuring an existing business or building a new one, the base unit of building a service aligned business is a capability.  We’ve explored elsewhere the different types of capabilities (Case Managed and Core Standardised), how to structure services and the practicalities of building services.  This article is concerned with the practicalities of building a capability.

As a reminder, a capability is the base unit of the purpose of an organisation, something the organisation does to fulfil its customer proposition.  There are levels of capability, from top level capabilities such as “payments” or “customer relationship management”, to much more granular capabilities like “instant payments”, “customer onboarding” and beyond.

Continue reading “Building Capabilities”

Microfinance, fractional ownership and crowdfunding

We’ve described service alignment, ecosystems and how these impact trust in previous articles.  In this article we explore the impact of technology on community financing, and in particular how technology can support disintermediation of financial services and serve to empower communities in taking back control of their financial arrangements.  This is an opportunity for developing economies, where many people are poorly served by the financial system and exploited as a result, but also in developed economies where there’s a real opportunity to rebalance the power of individuals and small businesses.

We believe an effect of this empowerment will be to encourage communities to make more sustainable choices about how their environments are managed; community ownership will allow longer-term and more community focused decisions to be made, while practical applications of fractional ownership and cryptocurrency rewards for sustainable energy production will reduce need for fossil fuels and costs. Continue reading “Microfinance, fractional ownership and crowdfunding”

Career as microservices – reputation based skills validation

In other articles we’ve covered reputation systems, truth, identity and authentication, and how hiveonline’s truth-based contextualised reputation system will address this.  We’ve also observed a number of applications of similar approaches in fields as diverse as medicine, trade finance and community agriculture in developing economies.

We’re confident these reputation systems will become commonplace, and then standard, because they make sense.  They’re based on facts and give trust consumers, for the first time, the ability to apply the filter of their needs to understanding a counterparty’s reliability within the context of what they want from that counterparty, without the skew of opinion-based bias.  We believe this will have a profound impact on how organisations operate and interact, and that it will be one of the keys to the ecosystem economy developing successfully.

This is exciting and a bit scary for organisations, but what does it mean for individuals?  In this article, we examine current trends in reputation based recruitment, implications for employment and career paths, and where we believe this will take us in the future.

Emerging labour models and associated challenges

While paid contractors have been around for a while, we’ve recently seen the emergence of micro-contract based services (the “gig” economy), powered by platforms such as Uber, Airbnb, TaskRabbit or Etsy, which provide a marketplace for interactions between individual providers and their customers for short-term, one-shot exchanges of service and value.  This has revolutionised access to services and customers, although as we’ve seen the platforms, with business models unimagined by the authors of employment legislation, are subject to controversy and many workers are being paid poorly, are unprotected and lack clarity on their legal status as a result.

The pay problem arises from two sources: firstly, the desire of the platforms to build scale, which is critical for platform survival, by undercutting traditional businesses in the sector.  As we’ve seen with Uber, current low prices are subsidised by the platform’s investment capital, apparently with the aim of putting competitors out of business, following which presumably fares will rise.  Secondly, market economics will have an impact and the availability of workers in lower-cost countries forces down prices for similar workers in higher-cost countries.  The first problem applies more to localised services, and the second more to virtualised services, but both can impact both localised and virtualised services.

The lack of clarity on legal status and lack of protection is more to do with the disparity between employment legislation and emerging service models, although there has always been a disparity between people on permanent employment contracts and those employed through a third party.  In most developed economies, a large number of people have provided services as third-party contractors long-term to organisations, in some cases emulating or replacing permanent employees, but governed by different rules regarding employment protection, tax, holiday and sick pay.  In some cases these workers are able to demand higher pay to compensate for their lack of status, and typically professionals such as IT contractors, accountants and engineers are able to command favourable rates because of their skills and a shortage in the marketplace.

However for less skilled workers, or for those where supply outstrips demand, working in contract conditions has and does depress rates, negatively impacting all but a few – freelance designers, actors and translators have always been relatively low-paid for skilled workers, while the growing numbers of those on “zero hours” contracts are generally unskilled and enjoying few benefits associated with permanent employees, with pay hovering around the minimum wage.

Meanwhile, there’s a growing number of people voluntarily delivering value for no financial reward at all – open source software, Wikipedia, YouTube guides, Medium articles – the list is growing.  Most contributors (but not all) derive income elsewhere, and in some cases there’s an indirect benefit to them, but for the majority there’s no direct exchange of value that could be measured in tangible terms.  This, again, risks forcing down the value of professional services, and journalists, in particular, have been hard hit by the proliferation of people providing free content.

We’re also now conditioned to expect content, particularly creative content, to be delivered to us for nothing – news, opeds, youtube videos, Wikipedia have all got us used to the idea that content is free.  Of course, we “pay” via other means on most platforms – advertising being the obvious one, but also by providing data to organisations who can learn about our needs and target us with paid-for content.

But all of this has overturned our perception of, and in some cases the reality of, the traditional association between work and money, or labour and value – the Labour theory of value states that the value of labour is directly associated with demand and availability, which holds water to an extent with the depressing effect on unit value where labour is in high supply but lower demand.  However, when quality content such as Wikipedia or the BBC news is available for nothing, this association is overturned not just for those sources, but also for other, less widely distributed sources, with consumers expecting to be given content for free.

Reputation as the new currency?

Before exploring what can be done with employment conditions to fix the problem for individuals, let’s consider what’s behind this disruptive behaviour.  Why do all these people do stuff for nothing, deliberately disrupting the association of value and labour and potentially undermining their own value in the workplace?  Why does a software developer willingly spend his weekend developing open source software or a plumber spend time demonstrating how to fix pipes on YouTube?  Why do people write articles on Medium or release free songs, all of which have taken effort and time?

Part of the explanation can be found in Dan Pink’s influential RSA Animate short on Drive – if you haven’t seen it yet, it is ten minutes well invested.  He demonstrates that for work requiring cognitive activity, once the need for money is “off the table”, i.e. we have enough to live on, we’re less motivated by financial rewards than by our need for autonomy, our sense of purpose and thirst for mastery.  Incidentally, that video was made around 2010, before it became apparent that the traditional organisation was evolving into ecosystems, but many of Pink’s examples are actually of ecosystem economy behaviours.  Somewhere in that combination of mastery and sense of purpose sits another motivator we’ve talked about a lot, and that is reputation.

Reputation is, in several respects, the transactable element of sense of purpose and mastery.  Through demonstrating both, you demonstrate value, and reputation is your reward.  Your reputation is strongly associated with the quality and volume of work that you produce, much as in the traditional theory of labour and value, money was.  And in traditional career paths, reputation is an important element when seeking career advancement, either by promotion or recruitment by another organisation.

That’s not to say that money is completely unimportant to professionals – we see a strong linkage between rewards and status, particularly in hierarchical organisations – and while it’s important to distinguish status from performance, status is also likely to enhance reputation, so there’s an indirect linkage there too.  But, importantly, that assumes that more money equates to excellence, which as we’ve seen, is starting to be eroded by the proliferation of alternative working models.

Conversely, an area where the research presented by Pink shows a strong link between rewards and performance is straightforward, non-creative work.  Obviously many of today’s jobs fall into this category, and a lot of these fall into our “gig” economy and zero-hours contract sectors.  While you’re likely to be motivated by recognition to excel at something that produces results that can be evaluated against complex criteria, the base unit of recognition for these jobs may be as low as “done” or “not done” (although in nearly every role, in real life some element of skill or mastery is involved).  We may be programming next generation software and laying down tracks for the greater good and our enhanced image, but it seems unlikely that anyone will voluntarily drive a cab, process invoices, build a wall, pick strawberries or empty bins for the sake of peer recognition.

However, reputation is also important in these roles – maybe not our reputation for excellence, but certainly for reliability, consistency of delivery and, in many cases, customer experience.  Reputation systems such as Uber’s and Airbnb’s ratings are designed to fulfil exactly this purpose, with quality criteria applied to counterparties on both sides of the interaction.  These gig economy reputation scores become the value criteria by which future customers and suppliers can evaluate their appetite for future transactions with those individuals.

The challenge with these platform reputation systems, as we’ve explored elsewhere, is that they may not be accurate.  With platforms like hiveonline and other fact-based reputation systems addressing this, we are addressing this accuracy challenge.  Is there, then, an opportunity to extend formalising fact-based reputation systems to other types of workers?

We think that there could be; using evidence of work done gives current and future employers an unbiased view of employees’ effectiveness, whether they’re one-off “gig” workers or long-term employees under formal contract.  The advantages of this, over traditional evaluation procedures, would be significant for any groups currently impacted by glass ceilings and “mini-me” recruitment mentality.  But that doesn’t address the employment conditions problem.

Square peg, round hole

It’s impossible to obtain accurate statistics about “gig” and zero-hours vs traditional employment because the means of measuring the two aren’t the same – consider, for example, a full-time employee who also rents out a room via Airbnb, or drives for Uber on Saturdays – it’s estimated that the non-standard sector now represents about a third of the workforce in the U.S.  When one of every three jobs falls outside the “standard”, you’re not talking about exceptions to the rule, and governments everywhere are recognising the need to regularise conditions for people working in these conditions.  But they’re struggling, because, like the traditional measurements, trying to apply the same employment conditions as a permanent employee doesn’t work.

Alternatively, given the disproportionate rise of non-standard employment, is it time to reconsider how we view employment across the board?  Is there an opportunity to combine elements of traditional and non-traditional working arrangements to address the imbalance of rights and income?  The reason that the rules are different for contract vs permanent employees is that contract employment is supposed to be short-term and temporary; that’s why there are rules about how long you can hire a contractor for before you have to start treating them like a permanent employee. The problem is, that just doesn’t work when a third of the workforce are in this “bucket”.

Let’s think about the assumptions underpinning permanent employment.

  • The first assumption is that you work for one organisation exclusively, and that organisation is both responsible for paying you and for paying social fund to the state on your behalf; they’re also responsible for funding your days off (sick or vacation) and they have some rights to claim small amounts back from the state on your behalf.  All of that works fine when there’s a one to one you/employer relationship.
  • The second assumption is that you don’t move jobs frequently, or at all, which means that the benefits your employer accrues on your behalf, whether that’s paid leave, pension or redundancy, can be stored and used at some indefinite point in the future when you need them.
  • This is linked to the third assumption, which is that your organisation doesn’t really change much over time, so there’s little or no need to build alternative or new skills in employees.
  • The fourth assumption is that the employee works onsite, in an environment controlled by the employing organisation

As more organisations move into ecosystem supply chains and partnerships, however, all of these assumptions are challenged. Modern organisations need to adapt frequently to survive, which means changing business models, changing roles and changing legal structures.  People change roles and organisations more frequently than ever, and this trend is growing in parallel with the rise of the gig economy.

Conversely, a contractor is assumed to be someone who effectively works for a company owned by themselves and is expected to treat themselves like a permanent employee of that micro-business.  That creates a huge burden of administration and responsibility on individuals working in the gig economy, as well as massively increasing administration for tax authorities and governments.

Will there come a time when the permanent employment contract is dead?  Possibly not, but we think it’s already time to regard the micro-job as a normal, standard model in how people are employed today.  As things stand, governments are trying to apply old-world rules to new-world employment models, and it’s not working.  Gig economy workers have limited access to things that permanent employees take for granted – holidays, sick pay, mortgages and training, to name a few, because these things have been designed around the permanent employee model.

Accepting the gig economy as a valid employment model is the first step towards ensuring that workers have rights; trying to lever permanent employment rules on top of it hasn’t worked, so it’s time to look at it from a different angle.  Characteristics of the gig economy are:

  • Income will vary over time and is based on results, rather than hours worked
  • People work for multiple employers, possibly in different roles and almost certainly for many different customers / stakeholders
  • Hours are not regular and may be greater or less than standard employment in any given week/month/year
  • Places of employment vary and are likely to include more home working than standard employment

With these standards accepted, it’s clear that the traditional view of employment contracts between individuals and employers being closely tied to benefits passed on to employees on behalf of the state, is broken.  States will need to start directly allocating benefits as detached from employment status, if they are to stop penalising people who don’t have a single, regular employment contract with a single employer.

Losing the close coupling between holistic responsibility and employers, would also enable governments to rebalance the inequality between companies paying social fund for “proper” employees and the current lack of social fund for “gig” employees.  A blanket social fund associated with work paid for at the point where it delivers benefit would also simplify the arrangements for firms providing subcontracted services.  By extension, this also implies that firms should be responsible for employee health and safety while onsite at  company premises, regardless of their employment status, rather than the current rules which force employers to take responsibility for safety standards in sites such as employees’ home offices, which are both unpopular with employees and virtually impossible to impose.

Universal benefits – universal income?

Linking benefits to earnings, as they are in current employment contracts, becomes meaningless and unworkable where people are earning variable amounts of money from week to week and across different employers.  This is the main challenge presented when trying to shoehorn gig economy workers into permanent employment style arrangements with employers.  The logical answer if you’re separating benefits from jobs, is to apply a universal benefit across populations, rather than trying to differentiate them based on income.  Not only would this significantly reduce administration costs and complexity, but it would go a long way towards equalising social perception of employees in different types of employment, and improve work/life balance significantly for contract workers.  An obvious outcome of removing the link between benefits and employment status, is that everyone, regardless of whether they’re employed or not, could be eligible for the benefits.

Similarly, it makes sense to consider whether this could be a precursor to Universal Basic Income becoming a reality.  We’ve seen a number of experiments with varying degrees of success being piloted in various countries, in both developed and developing economies. While the unit economics look more achievable in some countries than others, there is a clear opportunity to offset administration and social security costs against a simpler UBI, and the social benefits in reducing stigma and opening up alternative employment scenarios have been documented.  As more positions, in particularly lower-skilled roles, become cheaper to automate and the predicted impact on employment rates across populations starts to bite, the unit economics and social benefits start to make more sense.

However, although this is an interesting and likely eventual income, we think the first step is to focus on benefits associated today with permanent employment; making these universal would be significantly less costly than UBI, partly because in most developed economies, there’s an element of state control or direct funding from the state already bundled in the benefits concerned.

Career paths or career portfolios?

One of the challenges to gig economy workers is that career structures are no longer fixed and linear for them, as they have been traditionally for permanent employees.  We’ve also noted, however, that reputation is more and more important in determining career progression, with what you’ve done becoming more important than tenure, as careers even amongst permanent employees become more diversified.

We’ve proposed a potential mechanism for accurately documenting reputation using fact-based reputation systems, and these could be applied to portfolio careers across multiple employers or within a single employer, equally.  Fact-based reputation systems don’t differentiate between the two, meaning that gig economy and contract workers wouldn’t be penalised for working for multiple employers.  Fact-based reputation systems also level the playing field for employees working fewer hours, or in more junior positions, which in traditional employment structures may be overlooked in comparison to more senior, more visible positions, leading to an uneven distribution of attention as well as financial rewards.

Meanwhile, we’ve seen a trend in recruitment where networks such as LinkedIn have enabled employers to extend the traditional “word of mouth” reputation based recruitment across industries and continents; more frequently, employees are being found and finding roles through recommendations and reputation, as much as through more traditional CV-based matching.  Isn’t it also time to formalise this into fact-based reputation systems, levelling the playing field for less visible workers?

At hiveonline we’ll be enabling this for workers within certain sectors, as we build our reputation system not just for builders, restaurants and farmers, but also for the people who work for them.  These fact-based reputation profiles will help employers to understand who’s a good fit, as well as their reliability.  While there’s a clear gap in the market here – there’s no LinkedIn for builders – isn’t it also time to consider applying similar approaches to support the emerging reputation-based career portfolios we see emerging today?


The emergence of the gig economy has accelerated existing trends towards portfolio careers, highlighting the need for the way people are rewarded to catch up.  Trying to shoehorn portfolio careers into traditional employment structures doesn’t work, and unfairly penalises the growing population of workers in non-standard employment situations.  It’s reaching a tipping point where we can no longer treat these employment conditions as aberrational, and there’s an opportunity to change the relationship between states, employers and employees to recognise new normals in employment.

Benefits, rewards and reputation can all be managed at a portfolio level, and with emerging fact-based reputation systems we have the opportunity to reduce the unfair penalisation of lower-paid workers with multiple employers, levelling the playing field and improving both working conditions and social acceptance of these now-standard employment models.

Plebocracy bias

Post-truth. Information bubbles. Echo chamber. Confirmation bias. We’ve all heard a lot about these phenomena recently, but they’re not new. Opinion, regardless on whether it’s founded on fact, has always influenced apparently impartial decision makers, often unfairly disadvantaging individuals and organisations. In New definitions of identity and authentication for trust-based ecosystems, we explored some of the challenges presented by traditional reputation systems and how we can apply emerging technology to addressing the issues.

Reputation systems largely fall into two areas: traditional, fact-based systems such as credit checks or histories held with federal authorities, which give limited, but hard to falsify information about an individual, and increasingly, social reputation systems, which are based on opinion. Historically, social reputation has usually been built on some flavour of fact, however there have always been individuals able to manipulate opinion and change received facts. While in the past this was limited to smaller groups, the rise of broad communications and media proliferation has opened up the scope of this influence, leading to larger groups, from states to nations, adopting beliefs. Meanwhile, the public’s relationship with the truth is becoming confused by the proliferation of opinion and obfuscated by learning algorithms.

This influence on public perception is causing shifts in opinion which impact not only individuals and businesses that may be subject to reputational damage, but how political policy and consequently economies progress, with serious implications for trade and for banks. In this article we look more broadly at the psychological background for confirmation bias, the reason it’s impacting more than just those who are already bought in, how this affects global reputation systems, and what we can do about it.

Why is critical thinking so hard?

We’ll start with some basics. We all know that your truth isn’t our truth, and yet we all know that our own truth is right. We don’t notice ourselves not questioning information because it comes from trusted sources, even if experience has told us that those sources sometimes get it wrong. We are so confident in our sources and our opinions that we readily back up our opinions by quoting those sources as authoritative. We know that our information is based on sound research, facts and statistics, even if we haven’t seen that research. You know that your information is based on hard evidence and direct experience, even if it’s not your experience. And yet our views are completely different; we can’t all be right.

People aren’t designed to know what’s happening on the other side of the world. They’re not designed to live in hundred-million person societies and work as a nation; rather, they’re wired to bypass rationale when they’re told something by someone they trust, based on the assumption that the someone has earned that trust. That’s part of the problem.

Man is a pack animal. We’re psychologically programmed to work in small units characterised by the hunter-gatherer unit of 5 to 50 people, which we’ve existed in for most of our biological history. This unit doesn’t preclude learning, but it relies heavily on received wisdom, where the older, more experienced animal passes on learning to the young. People are programmed to believe what their authority figures tell them, because it makes sound sense for survival. Don’t eat that red thing. If you see that big brown thing, run. Don’t walk on that. We’re designed to understand, remember and believe these instructions without context and without explanation, because questioning leads to low survival rates. It makes sense both from a survival perspective and from an efficiency perspective; if we debated absolutely everything we’d never get through all the information about the world that’s out there.

Pack animals live in a world where there’s scarce food and competition with other packs for the same resources. Our norms, passed down to us by our tribal elders, also help us to identify who’s “in” and who’s “out” of the pack. Keeping our pack cohesive also means enforcing the norms we learn; another pack may look and smell like us, but we can tell they’re foreign and therefore the enemy, because they hold different beliefs or speak differently from us. Questioning the origins of these norms and beliefs would be counterproductive, because it may leave us more open to accepting the other tribe’s world view, which is expensive from an evolutionary perspective. Keeping the pack together guarantees its survival.

So rather than learning to build our own mental view of the world, which would be cumbersome and senselessly resource intensive, we learn to identify who to trust, and take instructions from them. But society has developed, grown and morphed beyond recognition, so your authority figures aren’t your tribal leader and Shaman any more; they’re people who you have been told are, or who you identify as, authority figures, many of whom don’t know who you are and whom you will never meet. This is highly unusual in human evolutionary history.

How do we identify authority figures?

Our early authority figures are both traditional from an evolutionary perspective and relatively safe: your parents have your best interests at heart and will usually give you positive guidance, which may be full of mystery but of course you trust them completely. Other authority figures in early years are the adults around you and older siblings; again, usually responsible people who have your best interests at heart, sharing values and guidance in much the same way that human tribes have since their early evolution. But as society has developed, things have become more complicated.

The first characteristics of early society formation, regardless of geographical origin, are the maturing of codified faith and of government. These are both human constructs which emerge on the one hand to explain the world and define behavioural norms, and on the other to organise it and define social norms. Government leads to administration, which leads in turn to education, while faith leads to organised religion and facilitated rituals, which requires faith leaders. So, with origins in tribal wise women and Shamans, teachers and faith leaders emerge as society became more organised, and these are the second tier of authority figures most people encounter face to face. Officially appointed teachers and faith leaders are usually doing things in your best interest, although with an unpublished agenda controlled by their organisation.  As a pack animal seeking instructions for good behaviour, man is ideally programmed to subscribe to both so this works pretty well, with societal norms being more or less consistently communicated.

We learn from our parents, teachers and faith leaders what is acceptable and “normal”, based on the rules that they are given by our societal constructs. These norms become hard-coded as we develop and are some of the hardest beliefs for us to change, because of the early and repeated exposure we have to them. It’s always been important to social animals to conform to the behaviours of their tribe and as an intensely social animal, people do this extremely well. And on the whole, that’s ok, although it does lead to societies with widely differing world outlooks emerging, whether from village to village or now, from country to country.

As societies scale, they become more complex and governments and faiths evolve, forming sub-tribes with alternate views even within societies, of what the “correct” form is, which again leads to divisions. Because these are based on pretty hard-coded beliefs which form part of our world views, we defend them strongly as part of how we define the world and, by extension, ourselves. Our tribal instinct kicks in when we meet people with opposing views, reverting to our primal “kill or be killed” instincts where anyone who isn’t part of our tribe is, by definition, a threat to be eliminated.

Complex societies with government, of course, then build two other subsets designed to control behaviour which are not so positive: military and communications media. Typically, early versions of both are directly controlled by central government (or in some cases by organised religion) although as society matures, communications media usually devolves quickly to civil control, following a short struggle by central authorities to retain control. Armies tend to be more closely controlled by central authorities, largely because of the threat they pose to the central authorities when not closely controlled. However of these two groups, it’s easy to see that in democratic societies, communications media has more direct impact on people by impacting their belief systems through building versions of the truth which are approved by central authorities, so even where communications media is not owned or directly controlled by central authorities, they usually impose standards on communications agencies to ensure the output is controlled in some way.

This control is generally viewed as a negative thing both by the communications agencies and populations, who rightly believe that a tightly controlled media will filter information that they otherwise want to see. So control of communications agencies tends to be more relaxed in countries that value democracy and participate in free elections, which recently started to include the majority of countries in the world by a narrow margin. Even in democracies, however, politicians have always been aware of, and frightened by, the power of communications media. They represent key authority figures to anyone with access to media sources – perhaps that’s why the BBC is known popularly as “Auntie” and are usually introduced well before exposure to other authority figures, so have a disproportionately high level of influence on how we think.

This then also explains how we self-select our authority figures from media and politics – largely passed down to us well before we have the opportunity to apply personal judgement to our choices. Consequently, we generally choose not just the politics and religion, but the news sources used by our parents, which in turn were passed on from their parents. Bubble, anyone? We may select to review some other sources as we age, but are most likely to remain loyal to the newspaper (or, nowadays, news channel) we saw across the kitchen table at breakfast, and to choose other sources that reinforce or to some extent echo the agenda it laid out.

What does this mean for our modern reputation systems?

The proliferation of information disseminated by news sources causes some challenges to our 50-person society brains:


As we said above, people aren’t designed to know what’s going on in the next village, let alone the other side of the world: it’s a question of context. We all view events that are happening globally through a filter of our own experience, our own values, and our own beliefs about what should be normal. When we see information about events that are happening elsewhere we have a choice to empathise/relate by mentally putting ourselves in that situation, or to regard the activity as “other” – belonging to a different tribe with different values. In many ways, the more we see about other societies, the less likely we are to relate or empathise, in stark contrast to how our ancestors would experience other cultures, which would be either by visiting different places, where a more full experience is more likely to result in some empathy, or by meeting individuals from other places on “home turf”, where they’re again humanised.

We’re more likely to see people as “of” rather than “other” if we can see something in them that we already have – the obvious ones being if they look like us or speak the same language. But even if we have this connection and empathy, we’re likely to misjudge by plastering our own world view on top of other cultures. This can result in some really odd things happening; firstly, a very skewed view of what happens in other cultures, because we only see reports of unusual events (that’s the very nature of news) and that is our only experience of those cultures. Second, forming ill-informed and often culturally inappropriate assumptions about other cultures, as we apply our own values. Thirdly, we dehumanise people in cultures where we can’t or don’t want to understand the context, which by extrapolation we sometimes start to apply to other cultures which would otherwise be closer to us, and lastly we apply the same emotional responses to things that are real and things that are made up – we don’t just mean “fake news”; we can also have very real responses to situations and societies that exist only in a film or a book. Consider the response when “War of the Worlds” was first broadcast.

In summary, not only does global media reach cause us to dehumanise other people, we can actually develop more empathy for fictional characters than for real people and lose our ability to distinguish fact from fiction.


Since we’re now bombarded with information from many more sources than we’re designed to experience (i.e. our immediate tribe members and environment). We are all every day receiving so many conflicting messages and influences that we can’t actually process it. As is often quoted, an average person in the 17th century would have access to as much information in their lifetime as is contained in a day’s edition of the New York Times. We simply can’t process that much information effectively, which leads to us taking even more shortcuts than we are programmed to take. This means we find it harder and harder to apply any kind of critical thinking to information that’s reaching us; bear in mind that we’re hardwired to believe what authority figures tell us, without asking questions. So any authority figure (press in this case) is likely to be believed without question – as long as it’s one of your selected authority figures, obviously!

Hidden agenda

While you may choose media for a number of reasons, and usually select ones which agree with elements of your world view, the media (fictional or factual) may be driven by a set of values aiming to find additional buy-in among populations for a number of reasons – and they’re not going to tell you what those reasons are. The more remote the source of information, the less likely you are to understand the underlying cultural values or to recognise the agenda driving the content. News sources don’t declare their methods and generally assume a local audience with certain cultural values, and they’re under pressure to keep wordcount down so usually give a very stripped-down message with no available background. So you may find yourself consuming content that’s completely divorced from its context which again, makes it harder to separate truth from fiction.

That was disturbing when new sources were all push – being controlled by boards and investors with a particular agenda, as they overwhelmingly are. However with the rise of the internet and in particular social media, we’ve seen further rapid evolution of how opinions are formed, consumed and internalised by people.

The rise of plebocratic reputation systems

Now the proliferation of global media sources has exploded, and opinion formers are as likely to be individuals as news and media outlets. Microcommunities of opinion formers can give rise to global beliefs with no particular evidence or rationale, other than some citations supporting their assertions which may be completely false – “fake news”. This gives us a whole new dimension to dissemination and filtering of information, with impacts unique to the connected information age:

Popular conspiracy theories, rumours and falsehoods

While there have always been conspiracy theories, these have in the past been relatively isolated to particular special interest communities or political/religious groups; only since the arrival of the information revolution have we seen a new phenomenon, where information with no valid source or attribution is shared so much that it gains traction and validation, often being picked up as valid by genuine news agencies.

Why is this? Surely news agencies should be able to root out fake news? The information age presents two challenges to this: one is, that the news gains validation by the critical mass of (often quite sane, intelligent people) crediting it, . The other problem is that it’s subject to the same attention-span problem we described above, and with news agencies under increased pressure to reduce staffing and increase output, corners are cut; a story which appears to have backing from respectable sources and which confirms the news organisation’s values can appear to be genuine, is reported by the genuine news agency and then of course, gains even more credibility because of this.

Non-news becoming news

Just as we empathise more with fictional characters than real people in terrible situations outside of our experience, people have always responded more to human interest stories where they can directly relate. The corollary of this is the phenomenon we’ve seen of “vloggers” attracting huge audiences just because of their ordinariness. See also, cat videos, motivational memes, out-of-context quotes from dead actors, etc etc. Your newsfeeds and, as above, your news outlets, are now flooded with non-news which also has an impact on your values and sympathies, and creates new authority figures for you who, unlike a news outlet, are creating content primarily because they’re bored, vain or in it for the money, with no regulation or need to tell the truth.

Spread of fundamentalism and other cranky belief systems

OK, give anywhere the right conditions and a committed enough religious goofball, and they’ll develop a cult. But for those cults to become truly widespread takes the internet and a whole load of people who can’t apply critical judgement to what they read, or more accurately, don’t want to. Fundamentalist Christian America and ISIS are both examples of extremist communities that have been able to spread and consolidate influence thanks to firstly, communication between like-minded communities and secondly, the ability to recruit undecided or just bored/uncritical individuals using the same methods used to spread conspiracy theories.

Misquoting, misappropriation and misinterpretation

With information cut to short soundbites and the massive volume of information available, traditional editorial standards have eroded in mainstream press and never arisen at all in popular internet celebrities, who feel free to quote sources at random, use any random picture that looks as though it backs up their point, and misquote/misinterpret quotes they’re publishing. Twitter has dragged us to new lows and rapid-fire behaviour, such as that illustrated by Sean Spicer retweeting a satirical tweet about himself with approval, opens up opportunities for ridicule.


Exposure to the internet now means exposure to everyone’s opinion, and recent studies have shown those people aren’t actually sad loners living in their parents’ basements, but really ordinary people who feel free to share their less pleasant opinions online. Many of these opinions are divisive, tribal and instinctual, driven by disappointment, hate or depression, often combined with alcohol.

Once written, they’re visible for everyone to see, and draw in even balanced people to argue, push back and create partisan divisions, reinforcing further the beliefs of the trolls. We’ve seen an explosion of this as America, starkly divided along (mostly) political lines, screams at each other over the internet every time Trump does something, but it’s been around for a while. The obvious negative impact of this is a lot of upset people, but it also leads to reinforcement of the barriers between camps, and growth of the links between like-minded people, trolls or otherwise.

Removal of filters and barriers

There’s traditionally been a curtain between public figures and the rest of the world. Their opinions, speeches and lives are only visible as dictated by themselves, their publicity machine and their speechwriters. Obviously there have been paparazzi for some time now, and this has also exploded, but what we hadn’t had before Twitter, was their unfiltered voices. Of course, many still use third parties to curate their accounts, but we can now get direct insights from sources as diverse as Stephen Fry, Stephen Hawking, Oprah Winfrey, Ellen Degeneres and, oh yeah, Donald Trump. Of course you can see this as a good thing or a bad thing, but it changes the relationship between authority figures and populations into appearing to be much more direct and intimate, and potentially having greater influence as a result.

All of this leads to significant confusion between what’s real, what’s validated and what’s fake. If trusted news sources are picking up fake news and reporting it as true, even a few glitches will undermine people’s trust in their sources and lead them further towards sources that reinforce their own confirmation bias. News sources of all flavours are now saturated with advertising that leads to click-bait of all types, so you can find yourself led from a well researched, validated source to fake news in a couple of clicks; advertising algorithms track your choice and present you with more of the same. Hence the creation of bubbles.

Plebocracy bias

Worse, though, is the impact we see on political, and then media rhetoric, caused by these bubbles. While it doesn’t uniquely apply to politics, politicians in elected democracies are in a fundamentally unstable position; they can’t get anything done unless people vote for them. So they tend to prioritise getting votes over other qualities such as honesty or doing things they believe in, and it’s hard to see how they could behave otherwise. Getting votes means supporting policies which people will vote for, which may mean supporting policies they may not personally believe in, for the sake of votes. While this seems dishonest, it’s easy to justify in that a politician can’t do anything good at all if they don’t get elected. But we won’t go down that route. Of course, in some cases, hopefully many, politicians’ beliefs match their policies, but it’s not necessary or universal. You can apply a similar narrative to popular media figures, who also rely on ratings for their continued career success.

Now look at this through the lens of popular culture. If politicians or pundits believe they’ll be supported for policies and views which are getting a loud airing on social media, as their researchers tell them they will, that means that all of the bias we’ve just described is directly influencing policy formation. As we’ve seen, social media is used both to source and to influence opinion by political parties and news outlets. We’ve seen some dramatic reversals of policy in politicians, media sources and political parties, partly fuelled by politicians influencing media and social media to grow support, but also by fringe or semi-fringe elements tapping into the zeitgeist and getting enormous support because they understand how to tap into people’s tribal instincts and fear of outsiders. It’s happening all over the world, with outcomes of recent elections in both the UK and US reflecting social media sentiment more closely than predictions based on traditional research.

So if politicians change their policies and newspapers change their politics, what does that mean for the rest of us? Clearly, it means the rules will change – at the moment towards protectionism and anti-globalisation, with as yet unknown consequences for banks and the economy as a whole. De-regulation under Trump could be a very good thing for the banks, at least in the short term, but not such a great thing for consumers, while what’s going to happen after Brexit is anyone’s guess. Uncertainty, as we know, is bad for the economy (although good for the price of gold, or is that bitcoin these days?). However the effect on people’s beliefs and values is even more profound.

People are remarkably adaptable; that’s one of their key success factors. We all share a weird combination of optimism bias (the belief that things will go right, despite all evidence to the contrary), paranoia (the belief that everyone else has a hidden agenda to undermine us, however uninteresting we are) and confirmation bias, which allows us to change our beliefs given the right circumstances. It means that, just like politicians, we’re all prepared to overturn our beliefs if there’s enough pressure to do so. Not evidence – in most cases, a well-reasoned argument is no match for strongly held belief – but, as we see authority figures starting to use different rhetoric, however much we may disagree with it, a primal instinct tells us to believe. What starts as a nagging doubt (paranoia) in our dearly held belief, can grow to acceptance of an alternate viewpoint as valid (optimism bias), and eventually, to our sharing that viewpoint (confirmation bias). As we said at the top, argument doesn’t change people’s views, but authority figures can, usually slowly but surely. The other thing that changes people’s views is personal experience, and with social media it’s becoming easier to conflate someone else’s personal experience, whether told through Twitter or viral memes, with our own, thanks to the same inbuilt survival instincts.

To an extent, this is how societal beliefs and norms have always evolved; free thinkers disagree with received wisdom, some people get angry about it, more people start to notice and then the politicians and media sit up and do something. This is normal and usually benefits society, although feelings, egos and occasionally people get hurt on the way; but what’s different is that nowadays, those free thinkers aren’t necessarily tackling real social ills. Thinking about historical populist reversals of policy, for everything from slavery to disenfranchisement to civil rights, opposition movements had access to and reasonably clear understanding of, the facts of what they were trying to overturn. Laws were explained, often by written media such as pamphlets or newspapers, or by people who had a good understanding of them, to other influencers.

What’s different now, is that it’s so hard to separate fact from assertion, that many people are wilfully allowing themselves to be led into false correlations. The bewilderment in Sweden over Donald Trump’s extraordinary statement about immigrant trouble in Sweden is a great example – Sweden has lots of immigrants, and reported rapes have increased at the same time. That makes it easy to draw the entirely wrong conclusion. In this case, the reporting of rapes has increased because the Swedish tightened up their definition of rape (which now includes what some, including Donald Trump, may describe as “grabbing”) and therefore more are reported. In fact, statistics show that immigrants tend to commit fewer crimes, so crime statistics are more likely to decrease with higher immigration. Of course, that wasn’t reported on Fox News, leading to Trump’s erroneous belief. Which is now firmly shared by a huge number of his supporters, in the teeth of any evidence to the contrary beyond a deliberately misleading media report.

And that is leading to people voting against their own best interests, because they’re voting for something which they are told is in their interests, but will ultimately undermine their own position – such as rural Republicans opposing the ACA because it’s “Socialist”, without considering that the change will impact them directly, or UK pensioners living in Spain voting for Brexit. In most cases the rhetoric is about “taking back control” from some group that’s perceived as a threat (that’s the paranoia hard at work) as a lazy, but effective alternative for facts. The facts, of course, are that we’re not going to get back control; we never were in control and whoever we vote for, that’s not going to change. But it makes a good soundbite.

So what can we do about it?

The solution is both personal and systemic. Personal change may seem hopeless in the onslaught of mass information and apparently endless confusion, but it should be possible for every one of us who is a leader (which is nearly all of us in one capacity or another) to role model behaviours where we question our own long-held beliefs, and to demonstrate that this is a strength. We’re always coming across things we long believed to be true, and then found out weren’t – small things like why you shouldn’t put cooked food on the compost heap or whether glass is a liquid (ok, not so small if you’re a physicist but relatively unimportant to a Fintech CEO). It’s important to be able to apply the same process of critical thinking to the big things too; see new evidence, don’t dismiss it out of hand because it doesn’t fit your beliefs, evaluate it and, if appropriate, adopt your belief system. But the critical thing here is to evaluate it rationally and scientifically, weighing available evidence, rather than just taking an authority figure’s word for it.

In addition, we need to put ourselves in check when we find ourselves telling stories to back up our gut feelings. People are very, very good at this and clever people are even better; that’s why it can be really dangerous to believe someone just because they’re clever, and why it’s really important to question yourself more if you are! Daniel Kahneman in his seminal book Thinking, Fast and Slow describes the mechanisms behind this, but to summarise, your gut feel about something, which is strongly influenced by your belief systems, tells your brain what to think, and your brain then goes and cherry-picks information to support the position you’ve chosen to hold. This is confirmation bias in action. Questioning your stories, as well as your beliefs, is a key element of critical thinking.

On a systemic level, as we’ve said elsewhere, we now have the opportunity to implement reputation systems that are agnostic of opinion and solely based on facts. Technology is available to implement contextualised trust systems for organisations, individuals, governments, you name it. Blockchain and machine learning give us a powerful opportunity to build a future where we can trust reputation systems; that doesn’t invalidate opinion systems, but let’s learn to separate true reputation from opinion; keep your opinions and beliefs to support your identity, but when it comes to evaluating an argument, have access to a source where you know you can find the truth.

Through the role modelling of critical thinking and making it easy to distinguish reputation systems based on fact rather than opinion, we can start to turn the tide away from this apparently inevitable rush towards plebocracy and the serious consequences it could have for our economy, our environment and our society.


We’re pack animals struggling to make sense of the society we created, with a combination of unprecedented access to information and primal mechanisms for analysing it. Although tools are available to filter and interpret information, we’re hard-wired to believe things, for very sound evolutionary reasons, that may not be founded on fact. The rise of modern platform reputation systems, largely unregulated and with limited curation, has allowed belief systems based on limited or misleading information to take root across the globe.

Addressing this isn’t straightforward – it will need both personal commitment and provision of reputation systems based on fact. At hiveonline  Sofie is leading the charge to address the latter; it will take all of us to address the first. That’s a personal choice, and may be one people choose not to take, but we hope this article has helped raise a few questions.

Building bridges not walls: the Nordic Fintech Hubs

I was excited to represent the Stockholm Fintech Hub at the panel discussion on Nordic Fintech Hub co-operation at this week’s Oslo Fintech Fest.  As a recent entrant on the Nordic Fintech scene and a relatively recent immigrant to the Nordics, I’ve been privileged to witness both the common and unique strengths of the Nordic countries that makes the Fintech scene here so vibrant and promising.

I moved to the Nordics just over two years ago to work for Nordea and at the time was given the choice of Stockholm, Copenhagen or Helsinki to make my home, as my job was based in all those countries.  Consequently, like many of the Fintechs we’ll be attracting to the region, my choice of country was based on factors other than the professional draw of a particular skillset or national reputation for excellence; instead I chose the country where it was easier to cycle and swim outdoors, entirely personal reasons.  The tax advantages offered locally were a strong secondary reason, although the language was (and still is) a challenge that could have represented a drawback, although I rather naively assumed I’d pick it up, as I have been able to with other languages.

In my work for Nordea I was able to observe commonalities and differences between the Nordic people and cultures, forming opinions that were largely in line with the popular stereotypes but also observing that, like many close neighbours, the countries have more in common than differences.  The most striking difference to someone coming from London as I do, is that people identify first, as their nationality, but secondly, despite a healthy rivalry between the countries, as Nordic.  This is something I don’t observe so much in other close regions or even countries – people in the UK tend to identify as “English” or “Scottish” or even, as I do, as a “Londoner” but rarely as “British” or “European”.  Go to Spain, France, or Italy and the same applies; in Switzerland you identify as your Canton and then as Swiss, but that’s it.

Common Strengths

So I think the Nordics are unique in this respect, at least in this part of the world and in my direct experience, which gives them an automatic strength in solidarity.  Other factors struck me; the trust that people hold so dear, which is both a huge strength and sometimes a barrier to change, the common acceptance of intellectualism as a positive quality and the near absence of cash being three very obvious ones. And when I was researching to build hiveonline, I discovered statistics that backed up these observations with some strong rationales:

  • The Nordics are four of the top five least corrupt countries in the world.  This partly explains the trust, and is a huge strength.  It also means that people are more likely to trust governments and authority figures than in other countries, which means that Fintechs working with governments and regulators will have a smoother path than in some other countries where authorities are less trusted.
  • These are the most digitised and connected countries in the world; we’re rightly proud of our infrastructure, which is more advanced than nearly everywhere else, although we should also be wary of complacence as other countries start to catch up.
  • The populations of the countries are some of the most educated, thanks to historical free education and this has led both to greater respect for intellectual endeavour than any other country I’ve lived in, and pride in national cultural and intellectual achievements.  That’s an important draw for scientific refugees from plebocratic societies where we have to apologise for being interested in science!
  • They’re also some of the most equal on the planet, both in balance of the sexes and income equality between rich and poor, although as with everywhere, there’s still some way to go.  But this has led to acceptance of differences and many fewer barriers than I’ve experienced in Switzerland, France, the US and even the UK.
  • Everyone has an online National Identity, which as a market both makes being an online financial service easier and means people are comfortable logging in with certain credentials to everything they use.
  • And of course, these are the countries with some of the highest use of cashless transactions in the world, which is also a Fintech’s perfect test ground.  This has also led to a wide use of e-money and of course, central bank consideration of sovereign digital currency, which will become a key benefit to many Fintechs in the future, including hiveonline, as our digital platforms are ready-made to support sovereign digital currencies.

All of these shared characteristics make these countries an ideal place for Fintechs to set up.

Challenges Fintech Hubs are addressing

Of course there are also challenges, which the Hubs can work individually and collectively to overcome

  • Conservative government and regulation perceived as remote and difficult to access; however once accessed, governments are really keen to work with technology companies and to encourage growth.  The regulations are challenging and more complex than in other countries, and again I am confident that the Hubs can help both to support regulators in adapting and to support Fintechs in navigating the systems.  With collaboration across the countries, I also think there’s an opportunity for the Hubs to play a key role in normalising regulations across national boundaries, which will become a key enabler for Fintechs to become established locally and to grow internationally.
  • Traditional and very risk averse banks, which were largely protected from the worst effects of the global downturn because of this risk averse approach.  The downside of this is that, unlike all the other global banks I’ve worked in over the last 20 years, they have never been through the crisis that forced them to re-evaluate their operating models, and consequently are much less adapted for change than some less healthy global counterparts.  This puts the banks at risk of not being able to evolve and adapt; again I think the Fintech Hubs can play a major role in supporting banks to form collaborative relationships with Fintechs and move into the ecosystem.
  • Small scale, risk averse investors – like the banks, investors in this region are wary of taking risks, which is likely to strangle some of the more interesting emerging Fintechs, with the downside that they move to other regions such as Singapore, where investment in early stage businesses is much healthier.  The Hubs can bring their experience of coordinating investors and educating firms on both sides of the Fintech/investor divide, as I’ve witnessed at first hand since setting up hiveonline.
  • A lack of specialist financial and Fintech education – this is being actively addressed by the Hubs I’ve been working with, and while a lack of Fintech education is a problem locally, it’s also a problem globally and I think we have a great opportunity to become one of the leading regions in this space.
  • Immigration and setup challenges: while it was relatively easy for me, as an EU citizen, to move to Denmark, the combination of complex and unique local rules for everything from mortgages to taxation, with a “you just have to know” attitude, make these difficult countries to move into and start a business in; Hubs providing both legal and tax advice will smooth the rails for both local and international firms setting up here.

And of course, apart from addressing these regional challenges, the key benefit of Fintech Hubs the world over is providing community; local communities where people like me can meet, learn from, support and bounce ideas off other Fintech companies and broader, regional and global communities where we can access and share knowledge and experience.  Each of these countries has emerging strengths and while we shouldn’t let that limit the range of specialisms in any given Hub, we should also be able to celebrate and share the growth of mini-industries where they arise, such as the blockchain concentration in Copenhagen.

New opportunities for the Nordics

Advertising our strengths will help us to attract talent and new businesses to our Hubs.  I read this week that the British Fintech industry is deeply concerned by Brexit because 30% of its Fintech CXOs are non-British!  That’s not just a third of UK Fintech firms, but a critical mass of key people within a significant minority or possibly majority of UK Fintech firms, who may be looking for another home very soon.  While Berlin and other places are heavily promoting themselves as the natural destination, the Nordics should be the natural next step for these firms.

Let’s also not forget that, like me, they may look to the Nordics for our Fintech strengths but they’re also people, so we should also be celebrating the things that brought me here:

  • Open society
  • Great food
  • Equality
  • Beautiful, clean cities
  • Easy to get around
  • Fabulous design
  • The water and the sky

Let’s work together to make the Nordics the Fintech Capitals of the World!

Sofie Blakstad is CEO and Founder of hiveonline, resident in both the Stockholm and Copenhagen Fintech Lab and Advisor to the Stockholm Fintech Hub

New definitions of identity and authentication for trust-based ecosystems

This article is part of our randomised, post-structural Let’s Build a Bank series of articles. In this article, we explore concepts of customer authentication and identity, arguing that in the ecosystem economy we need to take a fresh look at what we mean by a customer, break the traditional human-based paradigm and start adopting more community-based trust systems for validation and authentication.

Background to customer authentication and authorisation

Customer authentication is central to the trust that banks and other service providers maintain on your behalf. They need to know that you are who you say you are for their security, but primarily for yours. Authentication is your guarantee the bank or service isn’t going to give away your money, your data or your stuff, without your permission. Authentication processes check your credentials to ensure you’re the person who is authorised to access the service in question.

Regulators also require banks and other institutions not only to know who their customers are, but to ensure they’re the right sort of people, to be authorised to use appropriate services. KYC (know your customer) for banks includes credit checks for the bank’s security, and also nationality checks for individuals, background checks for officers of companies and so on, to ensure that the people they’re dealing with aren’t involved in fraud, terrorism or other criminal activities.

Who you are, where you come from and where you live will also affect not just authorisation levels but also how the bank treats you for some jurisdictions – for example, U.S. persons (which is a broad definition covering a lot of different scenarios) are subject to U.S. taxes regardless of where money is earned, and banks everywhere are obliged to withhold certain types of money, such as tax on interest on accounts, for these persons. Some people will also be subject to authorisation restrictions when registered as officers in a business, such as politically important people, who may put the bank at greater risk of exposure to scandal if there’s a fraud.

Typically, you will be subject to authorisation and authentication at two distinct points: one, where your relationship with the service provider is initiated, to validate that you’re a fit person to have that relationship and who you say you are, and two, when you transact with that service provider, to validate that you’re who you say you are. There may also be further checks as the status of your relationship or something about you changes – for example, you may have opened an account a long time ago, but subsequently moved to a country with different tax laws, or become an officer in a business, a politician, etc, which you may not have been when you opened your account in the first place.

As an individual, you have a one to one relationship with your bank, your telco, or your department store and these organisations see you as an individual human; today, each holds a copy of your personal data and uses this to determine your authorisation levels and to authenticate you. If you have a joint account, one of you will be the primary signatory, again as an individual human and both of you will be subject to validation based on who you are as people. Even if you have a business account or operate on behalf of your organisation, your bank will still authenticate you as an individual, while nearly all authentication systems today are based on validating that the individual accessing the service is definitely who they say they are.

This makes good sense: you can’t duplicate, distribute or corrupt the base unit of humanity, the individual person. It does cause some problems, of course, associated with individual humans. People forget what they’ve told the service (favourite pet, anyone?), they forget passwords, they wear chunky rings that confuse hand topography scanners, they get wet and can’t work their thumbprint authentication, they change status or location without telling the bank, they get hit on the head, and of course, they die. But it’s still the same base unit and services have developed to accommodate the fallibilities of humans.

The problem it has created today though, is that every individual has a proliferation of identities, with multiple organisations and platforms holding the same, or similar information about them, some of which is likely to be inaccurate or out of date. Multiple profiles mean multiple passwords and multiple points of failure, as well as multiple potential security vulnerabilities, with all these institutions holding raw personal data.

National ID systems are a good example of how to manage individuals’ authentication identity more effectively and reducing the risk of human fallibility in remembering passwords, by creating a convenient ID and single sign-on for everything from banking to health to tax payments and land registry – Denmark’s CPR number is so ubiquitous you can’t join a gym or sign up for electricity without one, and all services are managed with a single identity and single password. However, these are all currently restricted to individual nations and, as we explore below, many individuals have increasingly international profiles.

In today’s connected economy and the platform world, things are more complicated. There is now a proliferation of instances of personal data maintained by commercial institutions, platforms and communities still using personal data to create analogous identities for the same individual, with varying quality and a growing struggle to maintain data integrity. Individuals may be working in multiple countries or be part of distinct ecosystems in multiple countries, for example within a multinational organisation. And now as people and organisations increasingly become elements of the wider ecosystem, the very definition of identity is becoming less clear.

Who’s the customer?

Who are you?

We tend to think of our identity as just ourselves, stripped down to our basic humanity, but studies have shown that our concept of ourselves is heavily influenced by the stuff around us – obvious things like job, wealth and status, the tribes we belong to, etc, but also physical things like what we wear, where we live, and the things we have. You may identify as “an American”, “a scientist”, “a Chelsea fan”, or “an opera nut”, but you probably also identify as “an Apple person”, “an Android person” or “a Windows person”. You may also identify with brands such as clothing brands, car brands, etc. We explore this further in the branding article.

And as the things you own become smarter, some of them take on aspects of your identity including decision making; your personal identity is expanding. This isn’t new; hundreds of years ago people were delegating authority to act autonomously on their behalf to things they owned, but in the Middle Ages those things were people. A feudal overlord would have been quite comfortable with having autonomous economically active entities in his portfolio of serfs, because that’s what serfs were for. But in the modern age, people don’t own other people, so the concept of the individual human has become much more closely paired with identity and identity management. That’s changing now, as the things you own become more autonomous.

Your phone is already a critical part of your identity. You’re statistically more likely to be reading this article on your phone than any other device, but your route to accessing it was controlled by algorithms designed to feed you personalised news, delivered on your phone. Your decision to read it was made by you, but the experience that led you to make that decision was delivered to you on your phone (or, with decreasing likelihood, your PC). Your phone is independently shaping your behaviour. And in the not too distant future, your car, your fridge and other devices will be going further than this, becoming economically active on your behalf.

It’s 2021. Your self-driving car has dropped you off at work, taken the kids to school, then decides which gas station to go to fill itself up, based on relative prices and distance. Perhaps it chooses one that has a carwash because it’s a while since it had a shower. Filled up and shiny, it plugs itself into Uber or Lyft and starts earning money, until you need it again. It’s doing quite well via Uber, because you don’t really go to the office much, after all you’re working mostly via AR from your home office, and only go in because it’s nice to see people in the flesh occasionally. So the car suggests it’s time to rethink your economic strategy – should you be getting a new model that carries more passengers to capitalise on more ride sharing profits, or conversely move to a collective ownership model instead?

The fridge, meanwhile, is trawling the online grocery stores for better quality meat. It knows you don’t mind paying a bit more, but it needs to get a supplier who can guarantee decent shelf life, because you have a habit of letting things go off, even when it gives you relevant recipes – some aspects of your behaviour haven’t changed that much! It also knows if it clubs together with three of the other fridges in your road, you can get a pretty good quantity discount and it can organise the distribution logistics. It’s having a bit of an argument with the thermostat about the underfloor heating though, it’s using more power than it forecast in the cooling system and you don’t really need it to be that warm, so you will be asked to arbitrate.

These devices are making independent decisions and transactions, on your behalf. Needing a thumbprint or a PIN code to authorise transactions would add friction to your personal ecosystem, which by its very nature only works because you’re not intervening at a transactional level. So they have become economically active autonomous extensions of your identity, and need some other mechanism for telling the bank, the supermarket, the gas station and Uber, that they are part of you. IOT devices are already proving an achilles’ heel for hackers, so security and authentication both need to be robust, without recourse to traditional mechanisms.

Do you care if your customer is human?

This leads to an interesting challenge in traditional identity thinking. As we’ve said above, identity and humanity are currently tightly linked – every transaction that’s performed today has to be authorised by a human, either directly as in typical B2C transactions, or via a business rule that a real person has approved, such as a Direct Debit or a bulk ordering system for B2B. But our 2021 learning devices are building their own business rules, independently of you – you haven’t told the fridge directly that you’re comfortable paying a bit more buying better quality, it’s drawn this conclusion from observing your behaviour data. That means, as a retailer, you’re providing goods and services based on a decision made by a machine, independently of any explicit business rules or instruction from a human. And as a bank, you’re facilitating that transaction with no human authorisation.

At the other end of this equation, is the “I’m not a robot” challenge. As machines get smarter, it will become harder and harder to detect machines posing as humans. The two big headaches are in the traditional touchpoints – relationship initiation and transaction authorisation. Current barriers – typically pictures that humans can process and machines find more challenging – will cease to be effective as machines get better at picture recognition, and they’re creating additional friction for real people as they get more sophisticated. People will continue to design new checks as machines get more sophisticated, but there will be a tipping point when the additional friction becomes unacceptable for humans.

Banks, in particular, try to deal with this challenge by putting robust barriers to entry into their system, so that only real humans can transact with them and see their data. However the barriers tend to be at the peripheries of the system, leaving them open to massive attacks once that periphery has been breached. The operating model of most banking online services is still very close to that of the traditional bank with the iron grille and a vault with a big combination lock in the back – they’re hard to get through, but once you’re in, all the money (or data in this case) is wide open to attack.

Given that it’s now possible to apply business rules that can control access and authentication to services and products, while tracking behaviour for known and predictable patterns, banks can learn from platform approaches to matching customers with services or products, to apply appropriate access based on behaviours and apply authentication at the point appropriate to that service. More of this below.

Who is trust for?

As we’ve said above, trust is for the bank, institution or service giving you access to its services, and it’s for you. But consumers/customers of trust have different needs, which should lead to different rules for different consumers, although beyond strata of authentication, this is rarely the case today. Here are some examples:

Looking at these examples, the consumer of trust isn’t always that interested in who you are. Yes, if you’re the customer opening a bank account or the refugee, some of the guarantees are associated with who you are, but if you’re a service provider such as a restaurant, or even a small business borrower in the context scenarios we’ve given, nobody’s actually interested in whether you, John Smith, are or are not from a particular country, of a particular age or even what your credit history is; the important question for those trust consumers is, in the context in which they are supporting you, are you trustworthy?

The big identity question

Banks have always struggled with the problem of a “single view of the customer”. In short, the problem is that individuals can be customers, companies can be customers, and individuals can represent companies, charities, consortia, funds, etc etc. Organisations are the original distinct ecosystems in this sense: single entities made up of multiple actors, many of whom can represent the organisation. Again, this makes sense in the old world, because there’s always a human (or multiple humans) benefitting from the economic activity of a company (the beneficiaries). There are further complications for banks because they hold several different views of the customer – from a legal entity perspective, from a credit risk perspective, etc, all organised in different hierarchies, which exacerbates the problem.

Because the base unit is a human, though, this creates a fundamental challenge – an individual may be both a person (retail customer) and a company official (e.g. CFO of a company). As a bank, from a KYC perspective, you might be happy for them to be a retail customer but less happy about them being a CFO, because they’re married to a senior politician. And that’s before you even start looking at the problem of presenting a single view of the bank from the customer’s perspective. Today we manage this by granting different levels of authorisation to different individuals – as a departmental manager, I may have authority to sign off EUR 100,000 and as a sales rep, I have a company credit card with a EUR 3,000 limit; all of these authorisations need to be associated with individuals, and those individuals authenticated.

As we move into the ecosystem economy, it becomes even harder to maintain a single view of the entity. The top-down hierarchy, still embedded in companies, is becoming less clear as the edges of service, customer relationships, data ownership and data processing, traditionally ringfenced within organisations, start to crumble. Beneficiaries become members of a distinct ecosystem, benefiting from networks and platforms, more than from direct sales which can be neatly summed and divided into cost of goods sold vs revenues from sales.

By extension, communities have identities as economically active entities. Collectives and community organisations such as football clubs and choirs have been around for centuries, while crowd-funding and fractional ownership are growing the economic clout of communities and moving them closer to mainstream business paradigms. As these communities grow and collaborate further, more ecosystem-based economic entities emerge, with their own capacity for decisions being made by multiple, instead of individual humans, together with opportunities for the application of AI to those decision-making processes. A good example is the Danish banking organisation, SDC, which supplies core banking to its 120 customer-members. Those members collectively make decisions relating to its investment portfolio, and in turn fund the portfolio.

A consortium of small builders, who may have met over a trust platform such as hiveonline, will have no central leadership and be managed via the ecosystem platform, where decisions are made by consensus and business rules rather than individuals. For example, they may agree to set up a contract that executes only when seven teams have agreed that they can put the time and sufficient money into a particular project; on execution of the business rule, hiveonline presents evidence to the bank that they’re committed and gives the indelible trust record that demonstrates creditworthy behaviour for all members; the bank then decides to grant a loan based on its own business logic and hiveonline executes the setup of the job with no need for human intervention. This sort of conditional, collective decision-making that is traditionally corralled and managed by human representatives, is increasingly being facilitated by platforms and business logic.

The end of human-based identity?

The human-based identity paradigm makes sense only as long as individual humans are the only entities capable of making decisions; regulators will quickly need to decide how to handle this scenario, which equates to extending personal identity beyond humans, to the things that they own, or to the broader community, and agreeing protocols for security and authentication that can be used in practice by these things. Once we start developing paradigms of identity as a collective, non-human or distinct ecosystem based concept, we can also start applying authentication that is more robust, less subject to hacking, and more appropriate for the modern era.

To do this, several things need to change. First, how we manage authentication; taking the human out of the equation means using different approaches and technology and while biometric identification is likely to retain a key position in frictionless identification of a human individual, we think that cryptography will replace passwords and that behaviour signatures will start to replace biometrics, as the distinct ecosystem identity becomes the standard unit. We describe some emerging paradigms supporting this movement below. The fundamental change that’s needed, however, is in regulation and how regulators view identity, which in turn is tied up with legal concepts of possession, data protection and in particular, consumer protection. We we are already seeing regulators thinking about these identity challenges, but it’s very early days.

It’s likely that, as with most new paradigms, changes in practice in response to evolving customer needs will outpace the development of the regulations needed to govern them effectively. As with all emerging paradigms, this will leave early adopters exposed to poor practice and almost certainly, a lack of consensus on standards for addressing these concerns. RegTech is likely to lead the debate on many of these challenges and the answers may be driven more by the available solutions, than by the needs of customers and communities.

Barriers to entry in the ecosystem and platform world

of course Facebook, LinkedIn and Twitter, the megaplatforms, couldn’t go without a mention. They’re part of the losing battle to maintain relationships only with humans, and face the same challenges of customer identity as banks, which is already leading to some strange compromises. For example, all have some sort of facility for companies to set up versions of their platform offering as though they were individuals, however Twitter treats the company as a person, whereas LinkedIn and Facebook treat it as a company, allowing multiple administrators who are real people. None have really nailed what they mean by a company vs a person in the context of the page setup, while regardless of the paradigm, they require page owners to be real people, and spend a lot of money cleaning up the data.

To illustrate it’s still possible for an individual to set up multiple pages – all you need is an online identity, of which most people have several. Consequently people set up pages for their cats, infants, hobbies and so forth, and while Facebook is constantly cleaning up the data, the scale of the challenge is huge. The problem is that your Facebook credentials become an online identity, providing a level of authentication, which can be used to validate that you’re a person, even if you aren’t, and give access to further online services as though you are a person. We all know someone whose cat has a Facebook page, and as that identity ages, it wields quite a lot of online power. Let’s assume you wanted to set up an Airbnb account, which requires both national documentation and an online identity. The sockpuppet Facebook or LinkedIn page you set up 8 years ago gives a strong level of confidence that your fake ID belongs to a genuine person.

As with banks’ identity and authentication management, turning the problem round and assuming that an online identity does not necessarily equate to a real person, opens up a much more manageable scenario.  The fact is, that there is no one to one relationship between people and online identities, any more than there is between people and bank accounts, or people and mobile phones. Accepting this as a starting point allows us to design authentication and service access to respond to this paradigm, and to apply adoption barriers where they are needed, at the point of service delivery, rather than as an entry point to online identities.

This then raises the question of where the barriers to entry to a system should lie; these platforms are fighting a losing battle trying to curate the quality of entrants. Instead, we think it’s time to move away from trying to make the periphery more robust, and rather to apply more robust authentication, in particular, cryptographic keys and behavioural authentication, to restricted services. to demonstrate true trust and use this as a quality filter, accepting that there will always be fake identities, robots, and genuine but non-human platform members.

Collective ownership identity challenges

Companies, charities, clubs, residents’ associations are all existing examples of communities which have a collective identity but individual officers with particular access rights (usually power of attorney on the bank account, or company issued credit cards). The trust that goes with this level of access is today tied to the level of trust that company or organisation has in the role that person fulfills.

Then there are communities with governance, shared goals and a shared trust authentication system operating as single entities in the distinct ecosystem based identity paradigm. But just like in companies, not all collective ownership systems will be amongst communities of members with equal trust or transparency. Fractional ownership is a particular challenge, because in many cases, the justification for fractional ownership is the low liquidity of the participants, which in turn means that trust history may be patchy.

Peer to Peer lending is another example of shared ownership where there may be a mismatch between the due diligence done on the lender, and the needs of the receiver. Peer to Peer lending platforms face challenges of quality curation vs. scale, and while this may be less of a problem for smaller, unregulated businesses, the greater the scale of the platform, the harder it is to manage the KYC on these small investors and the businesses they support.

Distinct ecosystems as trust consumers

We already see examples of distinct ecosystems where there is no individual responsibility for decision making – collectives that require a critical mass of members to approve before an action can be executed, and where there is no single figure of authority with power to press the button. Our collective of builders is a good example of this; but as well as making economic decisions about the priorities or behaviours of the collective, this also extends to decision making about the trust barriers for suppliers to that distinct ecosystem. For fractional ownership or peer to peer lending, what are the acceptable criteria and how can this be validated? Traditionally, trust based systems rely on third party authorities and brokers, who hold trust evidence for individuals and organisations. But with the availability of platforms and new approaches to behavioural based trust, is there an opportunity for communities to use trust records without recourse to the traditional means?

We’ve seen this in action to a large extent with platforms like AirBnB or Uber; in this case, reviews in sufficient volume provide a critical mass giving confidence, although it’s not infallible; while a large distribution regresses to the mean, platform reviews are subject to crowd dynamics including plebocracy and early adopter advantage. However, if we can reduce or remove the bias, assuming both supplier and customer have access to a trust-based system that can translate behaviour patterns to scoring for benchmarking and for validation, there’s an opportunity to move beyond traditional validation funnels towards a platform-based approach, with communities applying the same criteria they are expected to meet, protected by the protocols that guarantee veracity rather than by historical trust relationships with authoritative entities such as banks.

Borderless platforms and regulation

One of the most significant challenges facing regulators is the movement from national to cross-border value systems, such as multinational organisations and more recently, cryptocurrency. Regulations are, with very few exception, still defined by extensions of government within territories (national or bloc) and while compromises and workarounds have been developed such as passporting of licences and consensus agreements, even in today’s’ corporate culture, national differences create significant barriers to operating as global entities:

  • Socio-economic differences between countries: for most developing countries, ultra-stringent regulations can strangle development, yet more developed countries are rightly wary of doing business because of the opportunities for fraud. Governments and regulators in developing countries struggle to find a balance between policies that allow for growth and restricting opportunities to trade with richer economies.
  • Cultural differences between countries/regions: Western regulations in general are geared towards protecting consumers, whereas in APAC and China in particular, regulators take a more economically focused perspective on protecting markets. While these viewpoints are not incompatible (regulators should and do consider both), the different weighting of these considerations can lead to policy differences which may be hard to reconcile.
  • Different approaches to taxation: the most obvious of these is the FATCA US tax withholding mentioned above; the USA taxes all US persons, regardless of where they are, whereas many other countries have reciprocal tax arrangements for nationals working abroad, or businesses with foreign branches. While this makes things very complicated for banks and tax authorities, these different approaches are also a significant barrier to true globalisation.

The ugly compromises that have developed are almost all bilateral deals between countries and/or blocs, specific to two or more regulatory regimes – for example, I pay tax in Sweden if I work there more than 20 days a year, while I get the equivalent break from my Danish payments. Banking regulations in Denmark are more or less the same as elsewhere in the EU, with some sovereign differences, and because I’m lucky enough to live and work in a region with a single central bank and more or less united rules this works pretty well until I need to buy services or set up a legal entity outside the EU, when different regulations apply again.

Currency without borders?

The Euro has had some pretty rocky times and bad press, trying to address the single currency/cross border issue – even with a single central bank and parliament, national economic differences have raised questions of whether cross-border currencies can survive. The US dollar is probably the most successful example of an unofficial global currency, historically valued because of its stability relative to local currencies in many countries, but it’s achieved this status without official policy to support it.

And despite growing acceptance in the mainstream and the emerging trend of central banks to propose issuing their own versions, cryptocurrencies are subject to significant uncertainty, as they don’t fit the traditional, country-based model. Governments and regulators are still unsure whether to treat them as currencies or as something else – tokens, or bonds, which as tradable digital assets, they could equally well be. Consequently there’s been a difference of opinion, and therefore level and type of regulation, from country to country and, in the US, from state to state. In fact, the same could be applied to any traded currency – or, in fact, any currency (the US dollar being the most obvious example) where supply and demand affect local value, but regulators have at least some clear definitions around what a currency means and it’s still not clear where crypto will finally land.

We think the consensus is likely to move towards the “currency” camp, in particular as central banks start issuing sovereign cryptocurrencies, so for practical purposes their cryptos have to be equated with fiat currencies. Adverse response from the business community to the FED’s restrictive regulation of cryptos in the early days has now resulted in a relaxation and even reversal of early Bitcoin classification there, but other markets, in particular in South America, are still slow to react. Meanwhile markets in Asia in particular are embracing and accelerating cryptocurrency adoption by reducing regulatory barriers, while in sub-Saharan Africa the relatively stability is an attractive reason to move away from local fiats and towards a more controllable crypto.

But this still doesn’t address the cross-border challenge, and one of the reasons Bitcoin’s value is so unstable is because of the lack of a single government/nation underpinning it. The value of sovereign fiat currencies is directly associated with the risk of that country defaulting, which is why central bank stability is so critical. Where there is no central bank, there’s no guarantee and no stability beyond the collective mood of the market. While central bank issued cryptos will not be subject to this instability (assuming they’re pinned to local fiats), they are also subject to cross border challenges.

Identity without borders

Similar challenges apply when we consider personal and organisational identity. While most people still live in a single country, possibly with occasional travel, and earn money in that same country, things are pretty simple; you pay tax to the local government, which supports you with the services paid for out of those taxes. You follow the local rules as they apply, whether regulatory, tax or social. The same applies to companies, which typically do business in small, local areas.

But that’s changing as people and, more significantly, businesses, do work, create value and spend money across multiple countries. From the small supplier selling goods, to the business employing a “gig” economy worker, the internet has broadened the reach of even tiny enterprises and individuals to become truly global. For direct sales, the rules are pretty straightforward, although far from consistent and usually not advantageous to either seller or customer, but for value creation and employment of people overseas, it becomes very complicated very quickly, as regulations are not designed to accommodate an increasingly flexible, global workforce. Many of the fundamental challenges are rooted in the fact that local services from schools and hospitals, to roads and infrastructure, are paid for by local taxes, so it’s reasonable for governments to expect rewards for work produced and people employed in their own jurisdiction, but as these rules create massive additional complexity for individuals and businesses, is there an opportunity to rethink them at a community level, leveraging the broad range of cross border services to allow business and worker communities to pool their contributions?

That sounds unduly restrictive, because we’re still tied to the idea of an individual being synonymous with an identity. But if we accept, as we’ve said above, that individuals already have multiple identities, it’s easier to visualise a scenario where any individual may belong to a number of different identity entities, with different roles. My identity as a parent would be firmly tied to my own family unit, while my identity as an employee of a global enterprise could be more sensibly associate with a community of Danish or Australian architects of global financial enterprises, for example. Similar to the approach of multi-entity distributed computing, this means that only necessary information need be exposed at the entity level, rather than every individual having to expose all their details, leading organisations to deal with the consequent complexity.

In effect we do this today, allowing organisations to treat us as more or less homogeneous groups when it comes to salaries and tax in different jurisdictions. The strength of extending and formalising the community based approach to communities and distinct ecosystems, is that it both reduces complexity and allows for additional richness to be associated with that identity (for example, certification, regulations) without having to manage these on an individual basis.

Evolving approaches to authentication

Most banks still perform their own checks, supported by agencies such as Experian and similar third party brokers who validate customer information to the banks, which they then hold on record as part of your customer data. This process is expensive and cumbersome, as several data sources need to be consulted for full checks, and can lead to long customer onboarding, especially where the customer is an organisation and checks have to be run against multiple individuals representing the organisation. It’s also highly duplicative, as each bank typically gathers and holds the same data about a customer, even if that authentication has already been done by a different bank, with brokers and banks holding customer information on file, at risk of exposure to an attack

Third party KYC has been available for many years, and while banks have been naturally reluctant to outsource such a critical business process, as the services offered have become more established, many are starting to use these services. The challenge for banks is often integrating these services into their often legacy systems used in the customer onboarding process, which typically spans many systems.

And the challenge for many individuals when facing these checks is that if you’re not in the system already, establishing an identity is hard to impossible, meaning access to financial services and utilities is beyond their reach. This applies to 2 billion of the world’s population, adults who are unable to prove their records to sufficient standards and of whom 1.5 billion have no official identity papers such as birth certificates, severely restricting their ability to participate in business and financial activities.

Blockchain based broker authentication

Moving into the world of distributed ledger based authentication, things are starting to change. Now broker services can offer cryptographic identity that build up a profile of the customer, based on traditional authentication data, creating a unique cryptographically encrypted token identifying, for example, whether an individual is credit worthy or meets other criteria. Banks and other interested parties can then compare encrypted data with the broker service’s version, and the broker can then confirm with the tokens that the data was correct, without either the broker of the bank exposing the original data.

This has two main impacts – one, that the checking only needs to be done once, and can be used by multiple service providers, and secondly that the data is not exposed, which will make the customer more comfortable – the #1 worry that customers have when being authenticated is who’s seeing their data. This clearly has advantages in protecting personal data, and reduces the duplication effort, but still requires banks and other businesses to hold some personal data, with consequent challenges of duplication and deterioration of data quality. There’s also the consideration that no encryption method yet invented has outlived the personal data it’s protecting, so storing of even encrypted data on a public network is highly inadvisable, which means the trust authorities still need to maintain the personal records.

And it doesn’t address the identity / financial inclusion challenge. The transparency and immutability of identification can, however, open up traditional records to individuals who may not have had access to them previously; land ownership recorded on the blockchain is an early use of trust records proving provenance, and the same can be achieved with personal records, supporting many of those without current certification.

Behaviour based personas and identity

Many fintechs and telcos are starting to address the financial inclusion problem with the development of behavioural profiling, typically using mobile phone records to demonstrate that a user is trustworthy. This is an extremely powerful method of identification; with the right algorithm, data such as geographical movements, phone calls, text messages and who your contacts are gives a much richer and more accurate confidence score than many traditional methods, and is far less open to fraud. Added to this, consider that 80% of the world’s population have a mobile phone, including 1 billion of the 2 billion unbanked mentioned above.

Behavioural based identity does present challenges, in much the same way that other personal identification methods do; your behaviour signature is as unique as your thumbprint, so questions of identity protection are extremely relevant and as the technology is emerging, regulations will struggle to keep pace. Behavioural identification of this sort, while extremely appealing to an unbanked person trying to establish trust, is likely to be regarded as personal intrusion to a typical German consumer, for example.

We see the future of behavioural based identity as one where the consumer, organisation or entity can choose different personae for different purposes, based on different types of behavioural identification data. For example, my “parent” persona, while also needing traditional “I’m a person” validation, could be linked to records of my children’s birth, schooling and health, while my “architect” persona, where my status as an individual isn’t relevant, would be linked to organisational designs, payments for such and press articles about the impact on the companies I’d designed, for example. As a member of the architecture consolidate, it could also include guild-style peer certifications and community endorsements. Similarly, my organisation can have multiple contextualised distinct ecosystem behaviour signatures based on the customer, government or investor segment relevant to that behaviour – my organisation as a provider of financial services, in collaboration with the partners who support the delivery, for example.

Trust record vs review record (facts vs plebocracy)

The first advantage of these behavioural signatures is that they are based on facts. Clearly, a credit history is also based on facts, but when individuals can have a proliferation of bank accounts with different lenders, even credit records aren’t as reliable as they were. Compared to other platform based trust systems, fact-based history can’t be swayed by first mover advantage, plebocracy or subjective reviews. When applied to multiple personas, it also has the advantage of using only relevant information, both zeroing in on the context so that users from the same context can be confident, and reducing the need for extraneous, potentially personal identity compromising information to be shared. The third advantage is that with these signatures built out of activities performed, you don’t need a trust authority to validate that you’re credit-worthy; the signature itself shows that your behaviour in context is desirable.

When we also accept that communities, including businesses and distinct ecosystems, build behavioural signatures in exactly the same way as individuals, this also gives us a richer and more context relevant view of the community’s reliability to us as consumers of the community’s service. Think about a builder with an impeccable credit history – that tells you he’s generally reliable, but does it tell you he delivers and employs trustworthy partners and merchants? And of course these trust signatures aren’t just relevant to you as a consumer of his services, they’re also relevant to partner organisations, who can see that he’s reliable and a good collaborator for their wider team.

By extension, communities can not only build, but also set parameters for the trust profiles they want to achieve and employ. I can give myself, my workers and collaborators a target and I can specify levels of acceptable behaviour for collaborators, customers and suppliers, creating partnerships only with trusted counterparties. As a collective of builders, as in our example above, we can collaboratively agree to these benchmarks, reducing the typical challenge of one or a small number of individuals being burdened with vetting and selecting suppliers. Taking community based, behavioural signatures as a standard leads to a huge reduction in uncertainty and friction. It also promotes good behaviour; as we’ve seen with platforms such as AirBnB, the very act of becoming a member means that you’re more likely to want good ratings, and adjust your behaviour accordingly.


People and organisations are evolving; every entity within an ecosystem may now be part of many distinct ecosystems. Meanwhile the difference between individuals, organisations and communities is dissolving, as restrictions associated with traditional national boundaries become increasingly burdensome and unrelated to evolving organisations and financial instruments. We need to move away from the old paradigm where the only valid identity belongs to a person, towards accepting and embracing distinct ecosystems as valid entities with identities of their own. People, organisations and the ecosystems that surround them have different, equally valid personas which, when subject to contextual validation, are of use to trust consumers with different objectives.

Traditional authentication protocols are being replaced by emerging opportunities both to apply new approaches to traditional data, and to develop behavioural based trust systems. Behavioural systems are more flexible, more context specific and more reliable than traditional systems. They can be built and used independently of, or in conjunction with, a traditional trust authority, allowing financial inclusion for the unbanked community and a focus on outcomes for trust customers.

Blockchain and cryptography, together with behavioural data, give us the opportunity to create and use different types of signatures as applied to individuals, organisations and communities, moving towards rich context-specific and peer authentication, coupled with factual records and immutability. There’s a growing number of platforms taking advantage of this paradigm change, presenting an answer to the challenge of platform bias in the “post-truth” age, however personal data remains vulnerable regardless of encryption standards.

While technology is creating opportunities, regulations also need to evolve and embrace the changes, accepting that the human based paradigm is no longer the only version of the truth and that national borders are blurring. We’ve seen some encouraging developments, and eagerly await further changes as behavioural based identities and validation become mainstream.