The banking & cloud connection

Some people are very worried about their data. They contend that data stored in the cloud is open to advert targeting, compromises legal ownership, open to theft and abuse (multi-tenancy arguably making this easier), legally accessible by many Governments and not exactly open (i.e. in silos) in terms of passing data between organisations. All of this is oppressive, reduces flexibility and is ultimately little different to proprietary software.

These feelings are attributed to practical experience, distrust of large organisation motivation, appreciation that data centres are inevitably farmed out to third-world countries and doubts over centralised security. On this latter point, certainly hackers could break your firewall accessing your personal data but the effort/risk simply isn’t worth it just for you. The same effort/risk for millions of people’s data is a different matter entirely (not exactly like locking your door when you’re not at home).

Cloud vendors including social networks aren’t (understandably) forthcoming about their security protocols. Key targets for security concerns are Google/Facebook since they have been most successful at getting our data to date.

People evidently believe they want control of their own data back. What options do they have? There are parallels here with the start of banking: 

1. Leave it where it is but demand more visibility/control. Cloud vendors can expose detailed controls to the user e.g. privacy/security/access/ownership etc. Some options free, maybe some on a payment scale e.g. reducing the level of advertising/data mining. This is complicated for consumers especially since they need to do this consistently across several services. They like things nice-and-easy.
2. Take it back. Putting your data back into your own network is impracticable. You need to remove duplicates, comply with legalities, elect who can access it, keep it current, ensure its connected to the newest services, access it remotely through your firewall, tag it, back it up, archive it, analyse it, share it and maybe sell it. You need USB keys to move data around and you’re at risk of direct physical loss/theft. You need to handle all this using common standards (so you know it can be accessed in future). Directly controlling your own data is a lot of work for all but the most paranoid/justifiably wearisome.
3. Leave it where it is but apply competitive pressure. Data portability allows you to pull your data out of one site and put it into another at will. This too is convoluted. It is also somewhat of a nuclear option in that consumers won’t actually do it unless cloud abuses are so flagrant (and widely reported) that they feel compelled to and competing sites exist that can import it using a common format and their friends do it too i.e. almost never. The threat of it is arguably enough to keep cloud vendors mostly honest. Despite making in-roads over the last year, Facebook comes in for most criticism here (since at time of writing, it doesn’t allow you to download your social graph or emails). Google with Chrome OS though will surely trump this (due to its sheer cloud nature) when released.
4. Leave it where it is but apply third-party pressure. It is still unclear how much pressure third-parties such as the Cloud Security Alliance, ENISA, general certification or indeed entire Governments can realistically muster against distributed clouds operating under multiple jurisdictions.
5. Give it to a specialist. A mostly utopian ideal is the concept of the personal data locker. This focuses on holding your identifying information, financial credentials and personal information e.g. allergies/airline seating preferences centrally online with a trusted dedicated organisation. With your permission, companies/services you subscribe to e.g. social networks pull data from your locker – each using it for their own value-add functions. It could also act as an agent – storing your purchase criteria - providing deals to you and perhaps even trading your data on a open market for a return.

Continuing our banking analogy, personal data becomes less about control and more about oversight, trust, commoditization, service differentiation, commission and regulation.

The obvious missing element with cloud/data is an open market for trading – much like banking/cash relies upon today. Google are fine getting into Enron-esque energy trading to moderate their data centre energy requirements. Why not building the foundation for a data trading market? They are ideally placed to analyse, quantify, monetize and then sell data. Will someone else steal the lead much like Facebook did with our social graph? Building a data trading market might actually allow them to build on Facebook’s social graph and make real money trading. It would create a commission-based eco-system where much needed data integration/consolidation/MDM could be funded. In this world, Facebook are relegated to merely banknote printer. 

Which consumer model above will prevail? Much like retail banking at least they all will. There’s no silver bullet. Some people prefer direct control/hoarding/easy access, others will trust specialists as they are too busy (and pay for the privilege), others will lobby Government (maybe they closely identify w/ a particular ideology).

Cloud has been around for ages (pre-1990 it was called - Terminal). It is only in the last decade though that there has been both a wealth of data and the widespread desire/capability to do something with it. An open data trading market is needed to consolidate and then drive forward personal data management.

Money makes money

Following on from last post, clearly one of the key benefits of digital cash is that it does not incur transaction fees. This is the main method of monetization for services currently providing cashless transactions. The digital cash concept is not exclusively people-focussed/altruistic; there are ways to make an on-going business out of it. Here are the obvious ones off the top-of-my-head. I'm sure there are lots more (?):

1. Affiliate fees. The validator site can also function as a free service, able to connect to your bank(s), retrieve your bank account details/transactions and provide value-add services with the data e.g. Mint. In particular, would allow you to see where your money is being spent and give you hints on how to save money. Money would be made through affiliate fees/recommendations.
   
2. Marketing. Digital cash contains with it, details of what was bought, when and for how much. Analytics analyse consumer transaction patterns, build spending usage pie charts and suggesting relevant ways to save or make more money via competitive offers. Marketing managers would purchase the analytics to analyse usage patterns, create marketing campaigns and target specific demographics and customer types e.g. through Google AdSense. All of this would be tied to the (anonymous) cash rather than the individual.
   
3. Purchase sharing. A modish site (Blippy) enables the controlled sharing of purchases to see what others are buying online and in real life. Blippy lets you share purchases by syncing already existing e-commerce accounts e.g. iTunes, Netflix, Woot, eBay. It is thought to monetize through turning links on Amazon purchases into referrals/featured vendors. Analysing purchase data is a gold-mine for analytics/consumer behaviour insight. Card companies cannot share this information but having consumers proactively share with others overcomes this obstacle (and when aggregated sold on). Facebook's Buy With Friends feature works in a similar way for virtual goods only. Purchase sharing in general is a great way to drive group buying behaviour e.g. Groupon.
   
4. Exchange service. Digital cash could be freely exchangeable into physical cash and vice versa. Existing currency exchange outlets would have the infrastructure for this and this would afford them a new revenue opportunity. Also a non-monetary currency exchange could be established. There is a trend toward metacurrency: treating movement of non-monetary flows of attention, participation and trust e.g. frequent flier miles, college degrees/grades/credits, five-star ratings, certifications, bus passes, votes, your eBay rating, scores, coupons much like physical cash. Transactional commission may be made on converting between these. Obviously you cannot buy votes or college degrees but it is certainly possible to buy coupons or frequent flier miles.
   
5. Banking. Digital cash being essentially being stored in a personal data locker - free secure cloud storage identified to you. As with a regular bank, it would store your digital cash for when you need it (download to your wallet) and (like banks) make money by market speculation.
   
6. Loyalty/payment card service. Existing proprietary loyalty/payment cards such as those operated by Tesco and Starbucks respectively could be outsourced to a new consolidated, cheaper service. Anonymity could be preserved with this new solution and subscriptions could be charged to the store.

How to get money

Following-on from last post, there were some questions around how you might actually get digital cash, there are three basic methods of obtaining digital cash that I can immediately think of:

1. It could be given. Directly acquired by interaction with others (tap and pay). This is the simplest method. It incurs zero transactional charge, is quick and can be performed offline.
   
   1. Conceivably, digital cash could be printed out using a home printer (essentially becoming physical cash). The value is in the number; the bits containing its identity (value/history/security key). The number could be rendered as an abstract pattern as a security measure. Mobile app vision solutions e.g. Google Goggles on Android and Word Lens on iPhone are highly sophisticated and could read details of printed digital cash, enabling transactions/validation to be conducted, allowing printed digital cash could be exchanged without a mobile. Fundamentally, it's no different to one-use vouchers validated by merchants. If the consumer copies a voucher and tries to double-spend, it would be caught at POS.
      
2. It could be earned. This can be physically earned (in a way identical to above) e.g. a paymaster gives you $100 for a day's work (tap and pay). Other consumers/online solutions can also give you digital cash (downloadable to your mobile) in exchange for some service/incentive; for example, with Twitter, you earn a credit when someone acknowledges your tweet e.g. one cent for a view, three cents for a click, five cents for retweets and eight cents for a favourite. In this way, it behaves in a similar way to virtual cash only becoming digital cash once downloaded.
   
   1. Conceivably, digital cash could be earned by enabling the mobile app to use idyll CPU cycles to run a distributed version of the validator. In this way, a separate validator web site would be unnecessary (w/ associated costs). It would function in a similar manner to Bitcoin, an open source virtual cash solution for desktops. However, due to the complexity of decentralising the encryption algorithms involved, the need to maintain a "spent" database, the limited processing power of mobiles and the need for physical separation to prevent hackers back-engineering the validation process, this may not be entirely practicable. The situation is worth monitoring however since it makes restricting digital cash solutions e.g. by Government sanction very difficult.
      
3. It could be bought. When bought online, PayPal or similar could be used. It would be analogous to going to an ATM. PayPal last year announced PayPal for Digital Goods. Payment transactions cost 5% plus $0.05 per purchase under $12, lower than most previous micropayment transaction standards. Alternatively it could be physically bought by visiting a currency exchange with higher exchange rates.