Transcript: Money, payments, and identity in the metaverse

00:00 Dave: Hello and welcome to the Australian Payments Plus Point of View podcast, in which we examine the theme of trust from all angles. Today, we'll be examining the future of money, payments and identity through the lens of trust in payments and identity in the metaverse. I'm your host, Dave Ellett, Chief Commercial Officer at AP+, and joining me today is David Birch. David has been described as one of Britain's most acute observers of the internet and social networks. 

He is an experienced public speaker, an author of four books, the most recent co-authored with Meeco's Victoria Richardson, "Money in the Metaverse: Digital Assets, Online Identities, Spatial Computing and Why Virtual Worlds Mean Real Business". David has advised some of the biggest banks, financial services organisations, telecommunication providers, and IT companies about the future of electronic transactions. He also sits on the board and, or acts as a trusted advisor to a variety of clients in the fintech and digital financial services industries. David, welcome to the AP+ Point of View.

01:10 David: Thanks very much, and thanks for having me. It's very flattering to be here.

01:14 Dave: Yeah, and welcome to Australia.

01:16 David: Thanks, and a beautiful Australia, actually.

01:18 Dave: Yeah, nice to have a bit of weather. Well, mind you, it's summer in England at the moment.

01:22 David: I'm glancing over my right-hand shoulder at the Sydney Harbour Bridge in the sunshine. It's beautiful.

01:28 Dave: So, thanks for your time today, David. We're really excited to have you on the podcast. Obviously, I had to take a look at your book where you explore about the metaverse, but maybe for our listeners, could you explain what the metaverse is and why you think it's important?

01:40 David: Sure. Well, I mean, I always go back to the original definition I read in the Financial Times all those years ago because they summed it up very nicely, and they said, look, you really need three things for a metaverse. You need some kind of virtual world where interactions are going to take place. And there are loads of those. 

We've all experienced everything from Minecraft, to World of Warcraft, to Fortnite, to Roblox. There's lots of virtual worlds. You need real digital assets. So, a crucial distinction between a virtual world and an actual metaverse is in the virtual world the things in that world, the property, the identities, belong to the platform. They don't belong to the people themselves. 

02:24 So you need real property and that means in essence digital assets, tokens, NFTs, this kind of thing. And this is why Web3 is such a big part of that. And then of course you need identities. You need entities that can transact what Jaron Lanier called economic avatars, which I think is a very nice way of phrasing it. You need all three of those things to create a metaverse. And the question we set out to answer was, okay, if that's true, and it seems reasonable as a definition, if you bring those things together, what happens?

What does it mean? And when I originally started to sketch out some of the ideas around that, it became very clear to me very quickly that digital wallets were going to be the sort of central organizing principle where these things overlap. So, therefore wallet strategy was going to be important for two reasons really. 

03:13 One, because wallets are the natural way to interface between the metaverse and the real world. But also because in time, of course, the users of those wallets, generally speaking, won't be people. They'll be bots. And of course this is when I, because I knew the work that Victoria was doing at Meeco about digital vaults and verifiable credentials and this kind of thing. 

And so, you know, I called her to ask her a few questions about it. Like many of these things, like you think you roughly know about something, and then when you talk to someone who actually knows about it...

03:39 Dave: You learn a lot.

03:39 David: You realize, oh, my God. And yeah, and so then we kicked around a few ideas. That turned into a paper, the "Journal of Payment Systems and Strategy", and, you know, it's the way of these things. When you submit something to a reviewed journal, when you see the referee's comments, you can tell whether you're on to something or not, and I could tell from what the reviewers were saying, we were on to something. 

And so then I took it to my publisher and said, "You know, do you think this would make a book?" And he said, "Absolutely." And yeah, you know, the rest is history. And we had a fantastic experience, of course, because I'm up in London, Vic's down in Sydney. 

04:18 Dave: So how did you get that working? 

04:19 David: It just worked, because you have the tools now, like Google Docs and things like that. So, you know, I'm working on it after work in the evening, I go to sleep, she wakes up, she sees the ideas and comments and changes, then she works on it in the evening after work, I wake up the next morning, there's the review comments. 

I mean, we did get together for a few days, you know, to just sit around a table and flash a few things out, but most of it was sort of done online. And of course, what's happened since then is, if you look at the trends in a lot of different areas, you can see that this shift towards the virtual world is actually well underway, and the next generation of consumers actually are already there. 

04:59 You know, I was doing some work for an insurance company recently looking at if you're thinking how are you going to sell insurance to people in five years' time when they get their first car or go off to university or something like that. If you look at the sort of actual figures for attention, where those people are, is actually already in the metaverse. They're already in Roblox, Fortnite, Minecraft. That's where they meet, that's where they create, that's where they interact with people. And that's where brands will go in the future, you know, not only financial services.

05:26 Dave: So, what do you say to people who might say, this is never going to happen, this is just a fad at this point in time? Do you think it's real? Will the metaverse actually come to fruition? And if so, kind of how far out is that horizon?

05:36 David: Well, I think of sort of two ways of explaining why I think that skepticism is real, but it's misplaced. And I try, I use Apple as the example, because I always sort of think, you know, when Apple come into a market, it sort of legitimizes it, doesn't it? So the, you know, the Apple Glass has come along and people sit up again and start to take notice. 

And the quality of those things is unbelievable, you know. But they're, you know, £3,000 or something like that, you know, and no one's ever going to buy those. Well, I can remember buying, I know it's a long time ago, but I can remember buying my first Apple II computer, my very first personal computer back in San Francisco in the early 80s. And I think I'm right in saying, with all the mod cons, like the modem and so on, it was about $2,500. Which is like... 

06:20 Dave: A lot more than 3,000. 

06:22 David: Yeah, it's like a million dollars. I mean I don't remember. 

06:22 Dave: Yeah, crazy money.

06:24 David: But the point is three thousand pound is that's less than what your first PC cost or what your first Macintosh cost. The second thing I always think about is the Apple Newton because I always loved the Apple Newton because you had the modem with it and you could you could write out the emails and the handwriting wasn't perfect and had limited memory and blah, blah, blah..

And then all of a sudden you've got an iPad and I sort of feel when we're looking at the Apple glasses and also, I mean I've got the Facebook Meta Quest glasses as well, you're sort of looking at the Apple Newton of those things. In a few years time, I don't know whether they're going to be spectacles or contact lenses or chips implanted in your head which Elon Musk seems to be doing at the moment, but we're in the early stages.

07:10 But if we want to understand where consumers are going to be within our strategic horizons, we need to sort of understand that more immersive world and have to do business in it and I'm very fascinated by it and there's a particular angle to it, Dave, which I think a lot of the stuff that we have to deal with now, a lot of things that we see as payments problems, push payment fraud and this kind of thing, they're not really payments problems. 

What they really are is identity problems and when the internet came together it never addressed that fundamental issue. We never had like an identity layer a trust layer. But the metaverse isn't going to be like that, the metaverse will be built with these trusts infrastructure. And so that also fascinates me because that creates a safer and therefore cheaper place to do business.

07:53 Dave: Yeah. I mean, you picked up on some themes I just want to explore it a little bit further. So, let's come to how the payments are made in a minute, but talk me through some of your experience, and I know you cover it in the book around Gen Z is already there. I mean, how are they interacting in the metaverse today and kind of how would that evolve over in the future?

08:09 David: I think one of the case studies that stood out for me, I mean, I think, you know, Victoria chose case studies which amplified certain points really very well. And one of them in particular I think is, it's very fascinating the extent to which the way that you look in the metaverse is important. Like, people spend money...

08:28 Dave: So we're going to look like Brad Pitt, me and you?

08:31 David: That's only one of the benefits of the metaverse. But you know, there's a generation coming where the way that they, you know, the clothes they have in the metaverse, the way they look in the metaverse is as important, if not more important than the way they look in the real world. Because that's where they meet their friends and interact with people, and that's where the kind of social mores are being founded in that kind of area. So I think those sort of things are interesting.

I'm very interested in the crossover stuff, the examples of things like vans, and where people are designing things in the metaverse, and brands use the metaverse as a place to test concepts and designs to see what people like, and then go on to, you know, create things in the real world. You know, in some cases, just even by just 3D printing. So I'm fascinated by all of that stuff, you know.

09:15 Dave: So you're paying a vision of, we'll have glasses or contacts or masks where we're in this kind of metaverse. How will we make payments then?

09:23 David: Well, I mean, this is what sort of stimulated me to start looking at it in the first place, because I went to a book launch in the metaverse, which was fun, actually. It was really enjoyable. Chatting with people you hadn't seen for a while, and you know, we're all slimmer and better looking. And it was a really fun experience until I came to buy the book. 

And at that point, I had to come out of the metaverse, go through a 2D interface, scan a QR code, go to a website, type in credit card details. And I just thought, this doesn't seem right to me, because surely the transactions that will take place in the metaverse will be in the metaverse. You don't want to come outside. You don't want external services. I want to give you a token that's money, and you give me a token that's, I don't know, a ticket to go and see a soccer game or something.

10:10 But we want that transaction to take place in the metaverse. And it was thinking about that, and also reading up on what other people were saying about it, talking to some people in that space, that pushed me in the direction of tokens and Web3. And the more time I spent looking at that, the more I started to think, you know, this is a very realistic vision of where we're going next.

10:26 Dave: Yeah. I mean, the payments industry is already moving down the tokenization route. So it's kind of, I think, exploring how you build on that in the metaverse, right? And how tokens become more than just, you know, potentially more than payments as well.

10:36 David: Well, you know, we've also seen, you know, in recent time, you've got people like Larry Fink from Blackrock saying tokenization is the next phase of evolution of financial services, which I think, I mean, he's forgotten more about financial services than I'll ever know. And take that phase. You know, Bank of International Settlements is talking about what they call the FM, the Finternet, you know, the next generation financial market infrastructure, it's all built on tokenization. 

And the reason is, and this is why it will be true in the metaverse as well, is because it's without clearing and settlement, it's just cheaper. So, it's not because of some ideological commitment. It's just, this is a cheaper way of doing business. And so, of course, you know, you need the digital identity around that, but it doesn't seem very farfetched to me at all.

11:18 Dave: So, I mean, obviously there's identity from a couple of angles. It's a business verifying someone, but also it's someone knowing about a business, you know, that kind of intersection is going to be really important to build trust and security. How do you think about trust as it applies to the metaverse and how would companies go about?

11:33 David: Well, this is what brings us back to credentials and, you know, looking at these things in a different way. Most of the transactions you want to do most of the time, I don't really know, like who you are really isn't an important part of the transaction. If I come to deal with you, I need to know, are you actually a lawyer? 

You know, are you, you know, an authorized executive acting on behalf of this company? Are you over 18? Are you an Australian citizen? Are you qualified to drive this car? These kind of things. These things are all about reputation and not about identity. And actually that allows us to achieve something quite interesting because it means in the metaverse, we can have a degree of security that we don't have, but we can also have a degree of privacy that we don't have in the physical world because your personal information is never part of those transactions. 

12:21 And you know, we're living with the consequences of colossal, catastrophic, you know, population-scale data breaches, not just in Australia, although Australia has a few of them. But we need to move away from that way of doing business and, you know, that pushes us towards the metaverse as well.

12:39 Dave: Yeah, I mean, you touched on privacy and obviously, I think from a consumer perspective, privacy is a big thing. But in the metaverse, how should a consumer think about their privacy around the collection of their data and what measures can be taken to sort of address concerns?

12:52 David: Well, in the metaverse, they'll have more choice. If you think about the way it's going to work in the metaverse, let's say I'm going to go to... And you could imagine doing this, by the way. And I always think of this with the glasses as well, actually. So, you know, I happen to support Manchester City, but I only get to go up there a couple of times a year. So could you charge me a few pounds to watch Manchester City on television? Well, actually, you already do. People make a ton of money out of that.

If I could put the headset on and I could watch the Manchester City game as if I was sitting in the crowd, you know, could you charge me more for that? Of course you could. You know, I'd happily pay more.

13:29 Dave: So that's about the experience. 

13:31 David: Yeah, it's about the experience. What if I could sit in the stand and watch the game with my mates through there? Could you charge me more for that? Yes, you could because there's something about that shared experience which is just worth more. So it's not just about the environment, it's also about the connectivity and the sharing. Now, in certain circumstances, I might need to know that, for example, maybe your kids are playing in a virtual world, you need to know that the people that they're playing with are between 13 and 17, very good example. 

So you ask for their birth certificates or something like that. Well, if I was one of those parents, I'm not going to give you my birth certificate because for all I know, you're a crook. You know, why would I give you my personal information? Asking for what you actually need to enable transactions to take place, is this person between 13 and 17? 

14:23 That's a very different question from asking, can you hand me over all of your personal data and I'll check, you know. So the metaverse offers a way of delivering a kind of privacy that you don't have. You have this kind of idea of gated communities in cyberspace where the walls are built by cryptography rather than out of bricks. And they're actually much safer.

You know, the idea that, for example, if you have a space on the metaverse that's just for members of your family, for example, then without the right cryptography, the people don't get in. So they don't have the opportunity to sort of cause mischief and conduct frauds and all this sort of thing. We want to edge towards that and that makes the metaverse safer, you know. Like you'll put on the headset because you need to see a nurse to talk about something and you'll know that you're talking to a real nurse. 

15:08 You won't know who she is, because that's none of your business, you know, but you'll, or you want advice from somebody on, I always think about sort of central heating as something I know absolutely nothing about and drives me crazy. I don't understand it. Every time something goes wrong, you have to call a plumber to come around and have a look at it.

But you can imagine, it's like putting the glasses on and then going and looking and then the plumber can put his glasses on and he's, "Oh, I can see what's wrong, I'll get the right part, I'll be around in 10 minutes", you know? Which makes his work more efficient and pleasurable. So there's lots of different ways that having a sort of safer space to connect and communicate and there'll be lots of new businesses, of course I can't even think about it in that space, but it does fascinate me.

15:47 Dave: Yeah. So in the metaverse, there's kind of digital properties being transacted by the owners of the property. How can identity help in that space? Cause you're kind of just touching on it there.

15:58 David: Well, again, you're talking about reputation rather than identity. Has this person got the experience? Have they bought at this place before, you know, do they have so many loyalty points, that kind of thing? You know, you're talking about a kind of reputation economy. Rather than what we have now, where we use identities as proxies to get to the information that we actually need to make transactions take place.

And I know it's the canonical example and everyone's bored with it, but there is a world of difference between a bar asking if you're over 18 and a bar asking you what your date of birth is. 

16:25 Dave: Yeah. 

16:26 David: You know, and because of, it sounds kind of... But yeah, because of cryptography, we can do that.

16:31 Dave: I think it's a privacy question as well. 

16:32 David: Exactly. So your date of birth is nothing to do with the bar. You should be able to keep that private.

16:36 Dave: Yeah. 

16:37 David: Now, if you say to people, look, you can deliver a cryptographic proof. So not only does the bar know that you're between 18 and 99 or whatever it is, but also the bar has a cryptographic record that they asked for that proof and got it without revealing your actual date of birth, I mean that sounds a bit magical if you're a regulator or a legislator, you're not a technology person, it sounds weird that you could do that, but actually from a technology point of view it's quite trivial. 

17:04 Dave: Yeah and I've got to ask you about, you obviously know about ConnectID which is the digital identity scheme we've been building in Australia and that is based on verifying the information you need to share. 

17:15 David: I mean that's why I'm so interested in it because it's a good example where the banks come together and there's the opportunity to make a real change in the marketplace, to make things really safe and they're not just for financial transactions, but you could imagine that spilling over, I mean the bank knows that you're an Australian, that you're over 18, all these kind of things, so the bank can be the person who provides those credentials for other people to look at and actually banks already have all of this data, they just don't monetize it. 

And in some cases you know you would imagine that there's certain kinds of data that you'd pay for to have the credentials because you want to prove it to other people, there's some kinds of other kind of credentials that other people would pay for because they want to know things about you. But, you know, there's a market going to grow up there, and this is why I'm very fascinated by it. Seeing Connect ID move out into the market, I don't know where it's going to go any more than other people do. So I'm really interested to see what niches it moves into.

18:11 Dave: And I think the verification for businesses as well, I mean, it might be saving an operational cost of like $200 down to a fraction of that.

18:18 David: Well, for businesses, it's a more complex problem. I happen to be on the advisory board, actually, of a company that does digital identity for businesses, so I know. You know, checking that you are you, holding up your passport, looking at your credit history or something, that's one thing. 

But to prove that AP+ is a company, if someone's got to come around and see that it physically exists, someone's got to find out, you know, who's got the bank accounts, who are the lawyers, who are the beneficial owners, who are the executive officers, like identifying a business and working out the reputational calculus around that is actually much more difficult than it is for people. 

18:54 And you've got things about, you know, in some jurisdictions, the beneficial owners are hidden, some you've got to prove that you know them, but you can't reveal who they are, et cetera, et cetera. It's an absolutely fascinating and amazingly interesting issue, but it's very different from the issue of individuals.

19:09 Dave: Yeah. I mean, we've obviously been exploring trust today from a number of different angles. I'm interested to know for you personally, what does trust mean to you?

19:18 David: Well, but see, that's the difficulty because I'm a horrible nerd about this sort of thing. 

19:23 Dave: That's why I asked you the question. 

19:23 David: So to me, trust means something much more specific. Do I trust that, you know, you are a lawyer? Well, sort of, but I trust the system more. You know, I trust the system that actually the cryptography tells me that you're a lawyer, or more to the point, the cryptography tells me that someone I trust tells me you're a lawyer, a bank or someone, and if that turns out not to be true, like if you do something and it turns out you weren't a lawyer after all, I've got some recourse because I know who was it told me that you were a lawyer. 

You know, you've got this kind of trust framework in place. So, you know, if the bank told me that you were a lawyer, it turned out you're not a lawyer, clearly the bank's liable for it. And a clear liability structure is necessary to get something into the mass market.

20:10 Dave: If you were an Australian bank or working in the financial services in Australia, you think about, you know, we've obviously talked today about the metaverse is coming. Should this be on the strategy roadmap for some of those banks to explore, or people in the financial services industry?

20:24 David: I think so, people need a strategy for it. So, you know, you don't have to start building something in the metaverse tomorrow. There's no need for that sort of thing. But you do need to start working on a strategy for it. And I think that's where a lot of people get stuck, because it sounds a bit too esoteric. They don't realise how much is going on in that space already.

And of course, they also don't realise the impact of digital identity and Web3 in that space, it sort of pulls them together. So they're all areas where we need to learn and pilot and experiment. The metaverse isn't the only context where they'll be used, but it's a good way of pulling them all together, you know? 

20:56 Dave: David, how can the metaverse and, or brands that exist in the metaverse build trust?

21:02 David: Well, again, I'm going to push you back to the same answer, which is it's going to have to be technological. I saw a thing from Mark Andreessen, from Andreessen Horowitz, a little while back on YouTube. And he said quite correctly, he said, look, you can't fight AI with AI. You can't fight fakes and frauds and so on. You just get into this race between AIs. If I want to know whether something's real or what you really are a lawyer, this really is AP+, we need cryptography to do that. 

That takes us into the world of certificates and digital signatures and keys, which we have to do on behalf of the consumers. We have to make that so that things like privacy and security aren't sort of back office hygiene anymore. They're actually part of the actual customer proposition. Now in those circumstances, I don't know, and lots of other people don't know, I shouldn't think, what the value of those different things is and how the values relate to each other. 

21:54 It could well be, for example, some sort of credential which means you're an adult and can go and look at certain adult services or gaming or gambling or whatever. That could be worth quite a bit of money because it could save the counterparties a lot of money from having to work out who you are and how old you are. In other cases, it might not be worth that much.

In some cases, you could imagine credentials that will become very valuable. And the obvious one being that you're a person and not a bot because of what's going on in places at the moment. But how those commercial models, I mean, I can see that you need some kind of interchange model and I can see you need some kind of liability model. What those should be, I'm not an expert on.

22:30 Dave: All right. Well, thank you, David, for joining me on the journey through the world of...

22:33 David: Thanks for making it interesting for me, Dave.

22:35 Dave: Trust in the metaverse. I know our listeners will sort of gain many valuable insights into your thinking and expertise in this area. So I really appreciate your time.

22:45 David: Thank you so much.

22:49 Dave: Thank you for listening to the AP Plus Point of View podcast. Be sure to share it with your colleagues. For more information and the latest news and views from Australian Payments Plus, visit www.auspayplus.com.au and follow us on LinkedIn.