FintechTalks LIVE: Dave Birch

SPEAKER_02: Welcome to another episode of FinTech Talks. I'm Sanjeep Khalida and I'm here at FinTech Meetup. And I'm so happy to be here with my friend Dave Birch. Dave, would you mind please introducing yourself?

SPEAKER_00: Hi, I'm Dave Birch. I'm an author, advisor, and commentator on digital financial services. And yeah, I'm very flattered to be invited, Sanjeev. Thank you for having me.

SPEAKER_02: No, it it it's it's I've I've been around the block a little bit and I never miss a chance to get a chance to talk to you. And and I always love your takes on on the state of the world or state of the industry that are non-traditional, and I I find them hilarious as well. And and um so you know what what what's what's what what's interesting to you at the world in the world right now in in our industry? SPEAKER_00: Uh you mean by interesting, you mean what are clients paying me for?

That's like that's my that's my definition of interesting. Um I'd say there's probably kind of three areas at the moment where so obviously AI, yeah. So uh you can't get over the fact that AI is the most disruptive technology we're going to be dealing with, and that's true for fintech, payments, everything we're involved in. So AI.

The second thing, and this may not be as obvious in the US, but certainly outside the US, the issue of the resilience of payment systems has become a real issue. Uh national and regional resilience. And so, and for me it's very interesting. So, uh doing a lot of work on resilience, okay, and you won't be surprised to hear me say, of course, the other thing is identity.

You know, we still haven't solved the identity problem. Yeah. And actually, because of well, because of AI, apart from anything else, yeah, um, identity is back up the agenda at the moment. So yeah, they're they're they're probably the top three things I'm spending time on.

SPEAKER_02: And uh, and I I I would love to dive into each of those, but I uh let me start with resilience. I uh like how how what does it what do you when you say resilience that can be taken many different ways? How how are your clients or how are our nations thinking about resilience? SPEAKER_00: Well, I mean, first of all, there are more there's more pressure on resilience now.

You've got things like DORA, uh the uh European Digital Operational Resilience Act. Regulators want banks to be more resilient, they want the financial infrastructure to be more resilient. You've had some disasters recently, uh, not just kind of earthquakes and floods and things like that, but the power going out in Spain, for example, or and that's kind of got people focused on it. Um you've got a lot of regular day-to-day stuff.

You know, you go to the supermarket and the car machines aren't working, or banks go down for a couple of days, you can't make payments. But of course, there's also now the issue of well, what if we have to use regional or national solutions? What if we can't use proprietary we can't use they say proprietary, they mean American. We can't use American solutions.

Yeah. How are we gonna be more now? Historically, you know, when you were talking about resilience, like in a bank or something like that, yeah, you'd be talking about okay, how much does it cost to get us 99% resilience? Okay, that's not good enough.

The r how much is it gonna cost to get us 99.9? That's 10 times as much. Yeah.

99.99, 10 times more than that. Yeah, you know, pretty soon you hit a wall, you can't afford to go any further. And yet you're utterly dependent on the same underlying systems.

So the focus on resilience now has got a lot to do with diversity of infrastructure. Because now we have things like stable coins, you know, distributed ledgers, digital assets, CBDC coming in in some places. We've got in many parts of the world domestic networks that can be developed further. So I think resilience now is more about trying to look at what the strategic mix downstream will be.

I mean, to take it like a very simplistic view. If the you know, if the settlement network goes down, can we just send things over stable coins instead? Or, you know, whatever. If the card network is down at the supermarket, can we go to an offline alternative?

Yeah. I mean, obviously without interrupting the consumer experience. So, yeah, so it's but it's it's a priority now because just because of recent events. Yeah.

So that's and it's fun and it's intellectually quite interesting. So I quite like that work actually. SPEAKER_02: I I I I've also uh one thing that I'm I mean, we're seeing in the world is like there's a lot more I'd say like thinking about these payments rails in terms of sovereignty, and and that also fits into the resilience as well. Like almost like an I I I like how and I mean how how do you think about that?

SPEAKER_00: Well, I think in lots of places people have seen, I mean, not just the I mean everybody knows the key examples, UPI, yeah, PICs in Brazil. I mean, everybody looks at these and looks at the numbers, yeah, and whoa, you know, yeah. I mean, to a first approximation, everyone in Brazil has PICs, basically. So um so people are looking at that and saying, well, first of all, why can't we have a national solution like that?

Yeah, which is uh universal, mandated, you know, everyone's got the same interfaces, etc., etc. But there's also the issue of what about alternatives that are being developed by the private sector in different places? This is why I mentioned stable coins, for example.

So could we achieve let's imagine if you're in Southeast Asia, for example, could we achieve regional sovereignty you know, by interconnecting, for example, the real-time payment networks? Yeah, could we interconnect domestic card networks or domestic payment schemes? Or could we look at developing parallel rails you know, using stable coins and so on? And actually, the idea of using parallel rails to achieve higher levels of resilience than building continuous landscape, that's pretty interesting.

Now, and also you said about regional things. I mean, if you look at the example of Scandinavia, you got MPE and VIP, so all of these things are coming together and interconnecting, I think you see different paths to resilience now. So uh and working out what strategy is going to work best in which nation/slash region, uh it's interesting work, you know. SPEAKER_02: Yeah, and and um shifting now to AI it is um yeah, you know, I I'm I remember as you know for when different technology platforms come out, you know, there there's a bit of the the platform itself, then the tools you can get from the platform, and then how that changes even how like for for example, like we use computer files, but they're named after physical paper files, and and but they're they have nothing to do with one one or the other.

But it's it's just sort of a way that we as humans are able to manage you know that this new archetype. SPEAKER_00: No, I know exactly. This is the problem challenge. I mean, this is the this is what finance faces because once you go agentic, once it's agents that are doing these transactions, there's no particular reason why you would think that the existing infrastructure that we have is the best for them.

In fact, you it's got it's almost certainly not, yeah. So, and you know, stable coins are an interesting example. Yeah. So one of the discussions on the stage here this morning.

So we can make some great stablecoin solutions, and you have people like Tempo and so on that are building this stuff out right now. Once you can run stable coins over those rails, actually, you can run any digital asset over those rails. There are plenty of people who know more about finance than I do that say, actually, a US dollar stablecoin, maybe that's not the best. Maybe actually tokenized money market funds would be a better solution, or even tokenized treasury bills, or I mean there's other kind of things.

So now you've got tokens that uh yield-bearing tokens. Yeah. So if you can exchange those seamlessly over those networks, yeah, why would you ever come out of those into fiat stable coins? Why would you ever bother with that?

SPEAKER_01: Yeah. SPEAKER_00: So so the AI isn't just uh, you know, clever ways of doing what we do now, but with different processes. It's bringing into existence very different ways of doing business. And I, you know, I take a mild amount of credit.

I mean, I wrote a thing a few years ago for Wired magazine actually about AI and banking. Yeah. I can't remember how this came about, but it wasn't about banking. And, you know, I looked at what the banks were saying about all of this, and I I just it didn't seem right to me, and I couldn't figure out like, why is this not like they're gonna use the most powerful technology ever invented, and if the and they're gonna use it to send slightly better targeted credit card mailings?

I mean, that's doesn't you know what I mean? It doesn't so and I realize and I'm not the only person that thought this, but you know, but then I realized you know, there is a revolution coming in financial services, but it's because of customers using AI, it's not because of banks using AI. And so this idea that you have the customer's AI becomes your customer, not the customer anymore, if you see what I mean. Yeah, yeah.

And if you take on board, like people are saying, the primary users of stable coins are gonna be AIs, yeah. Like when you put all this stuff together, you end up with a different kind of financial infrastructure, which again I think is absolutely fascinating and intellectually very interesting to try and work out where that's going. So yeah, the AI stuff I'm really interested in is customers using AI. And I mean, don't you think that's kind of I think maybe merchants, banks, I think maybe they don't know what's coming because they don't have a strategy.

I mean, who has a strategy for customers becoming a thousand times smarter literally overnight? Yeah, you know, we have business processes that are I was thinking about car in I had to buy car insurance a couple of weeks. You're a like no sane person wants to spend their time comparing car insurance policies, right? And and even how do you you know, even when I I get the two best quotes from the guy, I download the 400 pages of like how am I even supposed to compare the like that stuff cannot survive the the advent of agentics, so yeah, so it means a different kind of well, not only does it mean a different kind of financial market infrastructure, it means frankly a different kind of web is coming as well.

So no, I I'm fascinated. Like, am I interested in how the bank uses AI to replace some people in the call center? No, I couldn't care less. I mean, that's just not interesting.

Yeah, yeah, no. SPEAKER_02: And to me, I'm sure it's good business for some people, but and and and uh sort of maybe jumping to the next that that that third piece, which is also related to AI and and I I I think in terms of identity, and and you know, if you have these agents rather than customers, um yeah, and they're customer driven, but like then what what what is identity at that point? SPEAKER_00: I mean you're absolutely right to to point to this. This is a this is a fundamental problem with what we have now, which I mean people recognize, but we haven't quite so unless you can work out the identity of an AI, who authorized it, yeah, its reputation, like it's unfortunate like unless you know this stuff, like it doesn't work.

You draw on the whiteboard, oh well, my bot will open a savings account with your bank's bot, whatever. Like that's easy to draw on a whiteboard, yeah. But like you drop it down one level. Yeah, how does my bot know that you actually are the authorized bot for the bank?

How does your bot know that I'm an authorized bot who's allowed to access bank accounts? How do you know I'm allowed to access on behalf of Dave Birch? How do you know what I'm allowed to do on behalf of like when you go down one level, it's really complicated and not fixed. So again, intellectually very fascinating as to what to do there.

And like we kind of the way we semi-fix this at the moment is like you give the bot permission to sort of be you, yeah, but that's not really what we want. What we want is an infrastructure where it's a bot, but it's acting on my behalf. Like, do I know this is? I mean, this is a silly example, but like, does Robin Hood know that this is the real Jim Kramer bot?

Is the real Jim Kramer bot authorized to access who says, you know, is it authorized on behalf of Dave Birch? What can it do on behalf of Dave Birch? You know, etc. etc.

So because I like I'm a normal, I'm a normal consumer of financial services. Yeah. Like the cons most of them are boring, like payments and so on, which I don't want to do them. I want bots to do those.

Yeah. And the ones that aren't boring are so baffling and complex that I want an AI to do it. I don't want to do it myself. Yeah.

Would you, would you back, I mean, even if you just talk about things like like in the UK right now, it's March, it's coming up to the end of our tax year. Yeah. Normal middle class people like me have to look at our savings. We have like these savings accounts, the tax efficient savings accounts.

So you you have to open, like, which one do I want? Do I want the existing one or do I want one of the new ones? I don't want I don't want to spend any time doing that. I want a bot to do that for me.

And I wouldn't back myself to make a better choice of those than even the even the the kickkeeper. Okay. I wouldn't back myself to make a better choice of savings account than even the most rudimentary bot. You know what I mean?

So so actually, I think that's stuff's coming quite quickly. Yeah. If the identity problem that you point out is solved, yeah. Now, I think one of the bonuses to solving that problem, and this may sound a little odd, but I think it's true, is fraud is completely out of control.

Yeah. A lot of that fraud is caused by AIs. Yeah. It's not obvious to me that an AI is harder to fool.

Yeah. Like because AIs don't live in our world. AIs don't live in the world of, oh, this does this look a bit like Jim Kramer? Yeah.

Did Jim Kramer really say, you know, go and buy this stock or whatever? Like AIs live in a world of keys and certificates and encryption, digital signatures. And like I can make a fake video of Jim Kramer saying, oh, you should buy Dave Birch's stock, but I can't make a fake digital signature of Jim Kramer. Like math doesn't work like that.

So actually, I think once we get this identity thing sorted out, I actually think that'll be a much safer infrastructure too. SPEAKER_02: What's interesting? And and uh I I we're we're getting towards the end of our time, and and uh I I wanted to add, I would be remiss if I did not ask you about you know what what's been your experience like here at FinTech Meetup so far. SPEAKER_00: Uh for me, it was great.

I got they they put me on the main stage this morning. My panelists were fantastic. I mean, you saw that it was just it was just great, and it had the right mix of people, yeah. So that the conversation was I said to them, like I only say yes to panel.

I mean, like I don't want to sound like too much of a prima donna, but I do do this quite a lot, you know. I like panels where I'm gonna learn stuff as well, you know, and so wow. I mean, in terms of like like knowledge per minute on that stage this morning, it was terrific. No one was parroting like PR stuff, and they were all really informed, really so great, yeah, but also it's a bit in less tangible, this kind of thing.

But don't you think it just like has a nice atmosphere? Yeah, like I've been just walking around, bumping into people, chatting to people. Yeah, it's been lovely. Uh and also by the way, some of the stands here, yeah.

I have to say the new kind of like base level of swag has gone up significantly. Like there's really nice stuff out there on the floor, and so maybe there isn't going to be a global recession after all. SPEAKER_02: I love that. And and uh I you know I think we're once again we're reached reached the end of our time here.

But I I would be I just want to thank you personally. Like I've known you for so many years, and you have had such an impact on me personally. Oh, you're very I I um I I love your intellectual curiosity. Um it's second to none.

And the way that you talk about things and you personalize things, it it has been a North Star for me. And that's I once again for my heart wanna want to thank you for that. SPEAKER_00: Thank you so much, Sanjeev. That means a lot to me coming from you.

Thank you.