The Age of Consent – The Case for Federated Bank ID
The Age of Consent | The Case for Federated Bank ID 11 Many fiat currency systems are still built on batch processing and store-and-forward messaging. There are several ways in which the fiat currency stack can be improved to bring national currencies into the 21st century. The blueprint for Fiat Currency 2.0 includes: • Privacy and data protection . The European GDPR regulation sets the gold standard for the right of the individual to control their own data, and it establishes “consent” as a purposeful act. Digital ID schemes can be misused if not underpinned by strong privacy regulation. • Digital identity : National ID schemes like Aadhaar in India and the federated Bank ID scheme in Sweden show how powerful digital ID can be as an enabler of electronic payment systems and wider engagement with the digital economy. • Real-Time Gross Settlement Systems (RTGS) . The root of national clearing systems is the RTGS mechanism for moving central bank money — these can be made 24/7/365 to move beyond “cut-off times” and “end-of- day” processing. • Faster Payments . Most countries are building real- time retail payment schemes for credit transfers, often incorporating proxy databases so that payments can be sent using mobile numbers or email addresses. • Request to pay . The Indian Unified Payment Interface (UPI) enables real-time request for payment from bank accounts, backed by Strong Customer Authentication (SCA). Every country should consider the implementation of a similar scheme. 17 Postscript: Fiat Currency 2.0 • Open banking . Financial institutions should work on standardised application programming interfaces (APIs) for retail and wholesale banking services to enable fintech innovation and provide the financial layer to the global digital economy. • International payments . Innovations like SWIFT gpi make international payments faster and cheaper, leading to the potential to interconnect national faster payment schemes. • Messaging standards . Many clearing systems are migrating to ISO20022 messaging standards, enabling payment messages to carry much more information between commercial counterparties. • Point-of-sale innovations . QR codes have reduced the barriers preventing merchants from receiving digital payments. QR code standards developed by EMVCo have the potential to open more of the economy to a variety of digital payments providers. 18 • Fintech Innovation : Regulators should create environments that support fintech innovations that can enhance the way that digital money works. Digital wallets built on E-money regulations have enabled non- banks to provide digital payment services to hundreds of millions of consumers. Governments, regulators, banks, and fintech and bigtech firms have the opportunity to unleash enormous innovation through the revitalisation of national and international payment systems.