From democracy and digitization to risk and regulation, we explore the future of government
From democracy and digitization to risk and regulation, we explore the future of government
From democracy and digitization to risk and regulation, we explore the future of government
Democracy is in decline. And it has been for eight straight years, according to the latest Democracy Index from the Economist Intelligence Unit, the research division of The Economist Group. In fact, democracy around the globe is at its lowest level since the index began in 2006.
To measure the state of global democracy, the index assesses each country across five categories—electoral process and pluralism, functioning of government, political participation, political culture and civil liberties. Alarmingly, the categories that have recorded the biggest drops are civil liberties and electoral process and pluralism.
According to the report, almost half of the world’s population live in a democracy of some sort (45.4%). Only 7.8% reside in a “full democracy,” down from 8.9% in 2015. (The United States has been listed as a “flawed democracy” since 2016.) Almost two-fifths of the world’s population live under authoritarian rule (39.4%), a share that’s risen in recent years.
The age of conflict
The report, titled “Age of Conflict,” is daunting. The authors point out, “The world’s democracies seem powerless to prevent wars from breaking out around the globe and less adept at managing conflict at home.” While wars rage on in Africa, Europe, and the Middle East, “U.S. hegemony is increasingly contested, China vies for global influence, and emerging powers such as Saudi Arabia and Turkey assert their interests, the international order is becoming more unstable.”
The authors question if the democratic model developed after World War II is still viable. It’s a fair question; and one with no easy answer. But amid the growing global conflicts, and just a short time removed from a global pandemic, we thought it was a good time to explore the future of government and government services.
VISION by Protiviti, our global content resource exploring big, transformational topics that will alter business over the next decade and beyond, is embarking on a journey to assess where government is today, where it’s going and how it’s performing its most important task—providing essential services to its citizens.
"Government for good"
Fortunately, we’ve enlisted some impressive leaders and luminaries to help us do just that. The World Bank’s Ed Olowo-Okere, senior advisor, Equitable Growth, Finance and Institutions and director of The World Bank’s Future of Government report, sits down with Protiviti’s Charles Dong, Global Public Sector industry lead. Olowo-Okere offers a call to action for global government leaders to adopt a new social contract with its citizens to ensure we’re cultivating a “government for good.”
Over the next several months, we will explore how complex problems are challenging governments around the globe as they try to provide responsible, impactful, innovative, and sustainable solutions for the citizens they serve. We’ll examine the evolution of e-government, the digitization of services, data privacy, cybersecurity, national security, regulation, risk and compliance. We’ll also investigate the changing nature of public-private partnerships as well as how business leaders can navigate an ever-changing geopolitical landscape.
“U.S. hegemony is increasingly contested, China vies for global influence, and emerging powers such as Saudi Arabia and Turkey assert their interests, the international order is becoming more unstable.”
We ask Heidi Crebo-Rediker, former chief economist in the Obama Administration and international affairs lead for the Biden transition team, to lay out a plan for leaders in the C-suite and boardrooms to future-proof their business amid all this global geopolitical risk. She is a former CEO and current partner at International Capital Strategies, an executive vice president at America’s Frontier Fund, as well as an adjunct senior fellow at the Council on Foreign Relations.
We also talk with Tom Vartanian, former federal regulator and executive director of the Financial Technology & Cybersecurity Center. Vartanian, a futurist, lawyer, board member and author of The Unhackable Internet, offers a dire warning about the U.S. government’s readiness for a cyber attack.
Part of that vulnerability revolves around the race to quantum and its ability—perhaps sooner than we think—to break encryption of highly classified materials. So, we sat down with Protiviti’s Konstantinos Karagiannis, director of Quantum Computing Services, to discuss the global race to a post-quantum world and what impact, both positive and negative, it will have on governments and government services.
Speaking of government services, we also shine a light on the growing e-government movement and how digitization could be a real game changer for governments. Mauro Guillen, futurist, vice dean of the Wharton School of Business at the University of Pennsylvania, and author of 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything, says governments have issues—everything from trust to tech equity to transparency—and imagines how digitization could be a fix.
Former president of Estonia and current digital pioneer Toomas Ilves doesn’t have to imagine. Ilves has been on a decades-long crusade to digitize government services, and his innovative policies as president from 2006 to 2016 accelerated Estonia’s journey to a parliamentary democracy after it regained its independence in 1991.
The road ahead
Over the next several months, we’ll continue to unveil new insights and perspectives as we ask policy experts, executives, political leaders, academics and Protiviti’s own subject-matter experts to help us make sense of it all. Stay tuned for an exclusive interview with Julie Bishop, former Australia Minister for Foreign Affairs.
On April 29, we’ll unveil our exclusive findings from our Global Executive Outlook on the Future of Government research with the University of Oxford. And on May 9, tune into VISION by Protiviti’s Future of Government webinar keynoted by the World Bank.
Finally, in case you were wondering, Norway remains the globe’s most secure democracy, followed by New Zealand, Sweden, Iceland and Finland, according to the EIU Democracy Index. The United States ranks 29th, right behind Malta and two spots behind Estonia.
Ilves has been on a decades-long crusade to digitize government services, and his innovative policies as president from 2006 to 2016 accelerated Estonia’s journey to a parliamentary democracy after it regained its independence in 1991.
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Nardos Bekele-Thomas, CEO of the African Union Development Agency and United Nations resident coordinator, to talk about what the continent needs to thrive in the future; namely, investment and infrastructure. Bekele-Thomas lays out her vision for the future of the continent and how both the public and private sectors will play key roles in turning Africa into a global powerhouse over the next decade and beyond.
In this interview:
1:00 – NEPAD’s big agenda
3:42 – The Program for Infrastructure Development in Africa
6:34 – Public-private collaboration opportunities
9:10 – Harnessing Africa’s people potential
African Union Development Agency CEO: Infrastructure, investment keys to continent’s future
Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of government, and we welcome in Nardos Bekele-Thomas, CEO of the African Union Development Agency, commonly known as NEPAD, the New Partnership for African Development.
Endorsed by African Union Heads of State and Government, including 33 prime ministers within Africa, Bekele-Thomas became the first woman to lead the Africa Union Development Agency when she took over two years ago. She is a powerhouse who has influenced growth and development in Africa for nearly 40 years, serving in prominent positions with governments of multiple countries, and for more than two decades with the United Nations.
Nardos, thank you so much for joining me today.
Nardos Bekele-Thomas: Thank you so much for having me, and for this opportunity to converse with you.
Kornik: Now, I know NEPAD aims to transform Africa with regional and continental priority development programs and projects. Can you highlight a few accomplishments since you took over, and then maybe talk a little bit about what’s the next big one on the agenda?
Bekele-Thomas: Yes. Thank you very much. Actually, I’ll start by saying that the NEPAD has transformed itself to being the African Union Development Agency, which is really an expanded mandate of making sure the development activities in the continent. There are many, if you go country by country, actually, development cooperation is overcrowded. The space is overcrowded. But how do you coordinate these activities and make sure that they are impactful? This is one of the mandates that was assigned to NEPAD.
Also, to identify the gaps and make sure that these gaps are filled in and that the requisite resources are mobilized for the realization of the agenda that was put in place. So NEPAD actually is really, it’s monumental, has monumental tasks and responsibilities. Therefore, I’m just humbled to being the CEO of this organization.
Now, coming to—when I came to NEPAD, of course, this whole transition took place in 2018, and 2019 being the COVID year, we have to subtract like two years of our time. The two years were really more into COVID and responding to the challenges of COVID. Therefore, in reality, the operationalization of the African Union Development Agency came into effect with my coming into this position in 2022.
Since then, the first thing that came to my mind is, if Africans coordinate its activities, its development cooperation, its development activities at national, regional, and continental level, then we need to have a common framework. We need to have a plan. Therefore, the first thing that we started doing is the review of the 10-year implementation plan. How are we fairing? How did we perform? Where did we go wrong? What are the best practices and how can we build on the best practices but also address the deficiencies? Then, come out with the design of the second 10-year implementation plan.
In terms of infrastructure, which is the bedrock of African integration and industrialization, we had a big conference in Dakar last year in February. This conference was different from the conferences we used to have before. In the past, we used to have politicians come, ministers or whatever, and make statements after statements, commitments after commitments, and sometimes they still remain to be unfulfilled promises. Therefore, we wanted it to be different.
We brought the program owners—these are countries, of course, the project owners—but we brought also the development finance institutions that could do a guarantee fund, that could come out with guaranteed funds, and also the private sector and investors together. We had the rules project by project, we brought them and went into deeper discussions and understanding. This yielded concrete result to the surprise of so many. We brought $800 million for feasibility studies of our pipeline projects under the Program for Infrastructure Development for Africa. More than that, the $86 billion were mobilized for the construction of roads, transport, energy, water, dams and all this, and also on digital infrastructure.
Kornik: You mentioned infrastructure, which I think is interesting. I know that’s one of the priority areas, and I think there’s eight priority areas that you focus on among others of course. Those are, I guess, political, economic and corporate governance, agriculture, infrastructure as we mentioned, education, health, science and technology, market access and tourism, and the environment. I’m just curious what are the biggest priorities for governments in Africa to better serve their citizens? I mean, what are the biggest ones that you need to address?
Bekele-Thomas: All of them are important. I truly believe that we need to do everything. We can do that if we come out with catalytic approaches, catalytic programs, because these programs are intertwined and they can bring all the different sectors together. For us, for example, what we have chosen for the coming five years is infrastructure is very important.
Kornik: You’ve touched on this a little bit in your some of your answers, but can you talk to me a little bit about how the public and private sector companies either inside or outside Africa even can collaborate and work together to move Africa forward?
Bekele-Thomas: Thank you very much. I think this has been really one of my, should I say forte, but I’ve been dealing with the private sector in my past in the UN, that’s an area where I have been working, and I think it’s so critical. No one country can do this alone, and we need all the support that we require. Especially the private sector because they have—it’s taking all this, the development of country or the development of the continent in general, it will offer them more opportunities to expand their businesses so the public-private partnership is critical.
Today, I just finished—actually this morning—a meeting with the Indonesian government where—when I was in Bali for the G20 last year, it was very interesting to see how the private sector and the public sector work hand in hand, and we were having discussions with them. Therefore beyond, also, in our private sectors, we’re going beyond that to the ones that are outside, like Asian Business Council, the American Business Council, the Corporate Council on Africa, the European Business Councils and Chambers of Commerce, we work hand in hand with them. Especially in investment, when we talk about infrastructure. I mean, we really need this.
We need them also to team up with African investors so that together, they build equity and they meet the challenges that Africa has to offer. It’s not a challenge actually. It’s a big opportunity, it’s a huge potential. I think working hand in hand, we can perfect the conducive environment, the environment that they require to thrive, but also make sure that investment flows are smooth and directed in the growth areas that are identified by Africa.
Kornik: Right. That investment is so key, obviously. I’m going to zoom out a little bit and take a 30,000 foot view here and talk a little bit about the continent itself in the future. It is the fastest growing population of any continent on Earth. By 2050, the UN estimates one fourth of all people on the planet will live in Africa. My question is, how can African governments navigate that rapid growth and are there ways that countries can collaborate to help lift the entire continent as it goes through this next two-to-three decade rapid growth period?
Bekele-Thomas: Africa is showing confidence in itself for the first time. You go to the G20, you go to the COP, you go everywhere, Africa is standing, Africa is talking, Africa is taking a space, which it didn’t do before. Therefore, that is foundational, it’s fundamental, and I’m glad that is happening. The second thing that is very important and clear is that Africa has its own vision. Africa started believing in itself and understanding that it’s sitting on a wealth. Wealth in terms of natural resources, but wealth in terms of the human resources and capital.
Therefore, I think for Africans, this is really a time to build on this confidence level and implement the programs that would make them be the powerhouse, the global powerhouse, which I am sure and I am so confident. When I am sitting with heads of states, when I am sitting in the EU Summit, I see so much, so much energy that I leave inspired but also encouraged. We hope that the rest of the world will support us in making the dream, the African dream to be a reality.
Kornik: Well, Nardos, thank you so much for joining me today. I really appreciate the time and the conversation.
Bekele-Thomas: Thank you so much. Much appreciated.
Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit vision.protiviti.com to view all of our latest content. Until next time, I’m Joe Kornik.
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Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Blockchain Coinvestors CEO: If U.S. government won’t lead on innovation, get out of the way
Matthew Le Merle, managing partner and CEO of Blockchain Coinvestors, which provides a broad coverage of the fastest growth blockchain companies and crypto projects, sat down with Lata Varghese, Protiviti Managing Director, Digital Assets and Blockchain Solutions, to discuss the dichotomy between regulation and innovation in government as it relates to fintech.
Varghese: Blockchain Coinvestors, and in fact, the whole space of blockchain investing, might need a little more explanation. Can you tell us a little bit more about it and your role at Blockchain Coinvestors?
Le Merle: Along with Alison Davis, I'm the founder of Blockchain Coinvestors. We have been investing in internet and fintech here in Silicon Valley for about 20 or 20-plus years. And about 10 years ago, we saw those two innovations converging on something new. And so, the internet and fintech came together to create something called Bitcoin, which was put on top of an innovation called blockchain. And we were very taken by the arrival of the world's first digital money, and we thought that that was a transformative moment. So, we pivoted to be 100% focused on investing in blockchain. And we've done that ever since. We've backed more than 800 blockchain companies and projects at this point in Europe, North America and Asia. We do not trade; we're are early-stage venture investors.
Varghese: I know your position is that the move to digital money, commodities and assets is inevitable. That will, of course, require new infrastructure. I’m curious, who do you think should lead that effort? Is it the public or private sector? Do you see this as similar to the internet and its iterations after, which was driven in large part by government investment and mandate?
Le Merle: I’m not sure I agree that the rollout of the internet, particularly the digital communications and content that followed on a global basis, was driven by governments at all. While the government created the internet, it’s widespread adoption was driven by the world's most innovative companies—Apple, Microsoft, Amazon, Google, Facebook—those were the companies that brought digital communications and content to the mainstream. It actually took a while for the incumbents, the large telcos to embrace the internet. And in fact, if you go back to the 1990s, most of them were resisting it because it was disruptive to their current business model.
Any government that purposefully tries to slow down innovation always regrets it later. They discover they lose ground on a global scale. In my opinion, the role of government is to create pro-innovation regulation because innovation drives jobs, GDP and economic growth everywhere in the world. And I could be talking about life sciences, I could be talking about clean energy, I could be talking about enterprise software. It's true across all areas of innovation.
Any government that purposefully tries to slow down innovation always regrets it later. They discover they lose ground on a global scale.
Varghese: OK, fair enough. But I think my question was more about government setting the conditions for innovation to occur with active investments in infrastructure and other related things that allow private companies to innovate...
Le Merle: Governments do not create the backbone or the innovation infrastructure upon which innovators build. Time after time, we see governments waste enormous amounts of money, billions and billions of dollars on infrastructure that the private sector ends up not using. All governments need to do is set pro-innovation regulation and get out of the way—the private sector will make it happen. Look, Tesla created the fast-charging infrastructure of America; the government didn't do it. They could have done it, but they didn’t. Imagine if they had and required it for every transportation mode in America? What a different place we’d be in right now. But they didn't do it, and Tesla's had to build it itself. That’s just one example. I just don't think government is good at innovating. I also don't think large established companies are very good at innovating—a few of them are. I think innovative companies are very good at innovating, and then the rest of us try to figure out how to take those inventions and embed them into business or the public sector.
I also don’t think you can standardize innovation. If in the Betamax-VHS moment, the government had picked a standard, which one would they have chosen? The answer is Betamax; it was the superior technology at the time. So, from an objective perspective, if you had chosen to stop innovation in that moment, we would all be on Betamax, and we wouldn't never have had CDs, DVDs, or downloadable content because we would have made a rigid set of standards that said the chosen way of storing and sharing data is on Betamax tape. Governments make that mistake all the time—you can't set a standard in a moment of time when you have rapid innovation occurring because the next innovation may be superior to anything you understand today. Standards are very dangerous in a world of innovation. A regulator has to create a dynamic, flexible regulatory structure that provides some clarity, but still permits additional waves of innovation. That’s not easy.
Varghese: Right. So, it’s government’s job to provide the regulatory clarity so that innovators can do what they need to do?
Le Merle: Yes, that’s preferable but it’s also very difficult for a regulator to maintain regulation of today's industries, businesses and activities while at the same time trying to figure out what new innovative regulation would be needed for a future that hasn't yet arrived. And so, we always have that tension. As an investor in innovation, my preference would be, of course, to have regulatory clarity, but I understand that’s not easy. The thing we don't ever want is anti-innovation regulation
Standards are very dangerous in a world of innovation. A regulator has to create a dynamic, flexible regulatory structure that provides some clarity, but still permits additional waves of innovation. That’s not easy.
Right now, almost every other country in the world is busy establishing pro-innovation regulation for digital moneys, commodities and assets. And unfortunately, in America, we have some people who believe we should be killing this innovation, and they are working hard to create anti-innovation regulation. And it's holding us back. America has always been an innovation leader, and America has also been the world's financial leader. The real danger here is that America ends up being neither innovative nor a financial leader. For any country, it's never a good strategy to be slow on innovation; and the danger of anti-innovation regulation is that all the innovators go somewhere else, and you lose your competitiveness.
Throughout time, the most innovative countries have captured the lion's share of the global economic trade and value. If I was running the UK, the U.S., the EU, Switzerland, Abu Dhabi, Dubai, Singapore, Hong Kong, I would be passing pro-innovation regulation right now for digital moneys, commodities and assets. But America has been, and I believe still is, the world's greatest concentration of talent. And all we're really asking is for government to help America continue to maintain that position.
the danger of anti-innovation regulation is that all the innovators go somewhere else, and you lose your competitiveness.
Matthew Le Merle is Managing Partner and CEO of Blockchain Coinvestors. Launched in 2014, Blockchain Coinvestors’ vision is that digital monies, commodities and assets are inevitable and all of the world’s financial infrastructure must be upgraded, and its mission is to provide broad coverage of the fastest-growth blockchain companies and crypto projects. Matthew is serves as Managing Partner of Keiretsu — the most active early-stage venture investors backing over 300 companies a year. Matthew’s career has spanned being a global strategy advisor, professional services firm leader, corporate operating executive, private equity and venture capital investor, and board director. His board work has included Chairman or Non-Executive Director roles in 15 public and private companies and active Advisory Board roles in fast growth companies.

Lata Varghese is Managing Director in Protiviti’s Technology Consulting practice and Protiviti’s Digital Assets and Blockchain practice leader. Lata is a seasoned executive with over 20 years of experience in helping clients successfully navigate multiple business and technology shifts. Prior to Protiviti, Lata was one of Cognizant’s early employees when the firm had less than1,000 employees, and she grew with the firm as it scaled to a $17Bn, Fortune 200 enterprise.

Will quantum computing be a game changer for governments?
Will quantum computing be a game changer for governments?
Will quantum computing be a game changer for governments?
In this VISION by Protiviti Interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Konstantinos Karagiannis, Protiviti’s Director of Quantum Computing Services, to discuss quantum’s impact on the future of government, where the U.S. stacks up with the rest of the world, and how encryption and protecting sensitive and classified information will be paramount in the quantum era. Karagiannis has been involved in the quantum computing industry since 2012 and is the host of Protiviti’s popular podcast, The Post-Quantum World.
In this interview:
1:00 – What is quantum’s potential to transform governments?
2:30 – When will quantum become reality?
3:40 – Practical use cases – quantum and AI
5:58 – U.S. and other countries – who’s leading?
7:00 – The quantum threat and protecting encryption
8:35 – Quantum skill sets and capabilities
9:55 – The state of quantum in the public and private sector
11:15 – The post-quantum world in 2035
Will quantum computing be a game changer for governments?
Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of government and I’m happy to be joined by my Protiviti colleague Konstantinos Karagiannis, Director of Quantum Computing Services, helping organizations get ready for quantum opportunities and threats. He’s been involved in the quantum computing industry since 2012 and is the host of Protiviti’s popular podcast, The Post-Quantum World. Konstantinos, thank you very much for joining me today.
Konstantinos Karagiannis: Yes, it’s great to be back. Thanks.
Kornik: Konstantinos, the last time we talked for VISION, I think it was back in 2022, and since then the quantum drumbeat I think has certainly gotten louder and we continue to hear more and more about its possible impact. I’m curious about quantum and its potential to transform governments. Is there a quantum game changer for governments that you sort of see coming?
Karagiannis: Well, it’s best summarized in how the White House put it when they did the NSM-10 memorandum a couple of years ago. They said that in order to maintain our leadership position in the world, we have to make sure that we get ahead of the quantum technology space. There’s a lot there, right? To maintain being a scientific and technological leader, you can’t let go of the thing that’s going to be the biggest technological advance. This and AI are pretty much the twins that are going to take us into the future. Since I’ve been on, of course, AI has stolen a little bit of the thunder but it’s funny because one of the big pillars of quantum is machine learning.
You’ve got optimization, machine learning and simulation, and these three areas are going to affect all aspects of the private sector and the government sector as well. It’s partly about maintaining leadership, which is what a government wants to be able to proclaim in the technological field. That’s part of it. But then, it gets right down to the grassroots level of what’s actually happening. You have energy sectors being revitalized, chemical manufacturing, all types of optimization. Obviously, if you have a government, there’s all sorts of little cogs in the wheel that that could get in the way if you’re not optimizing right. It’s a technology that will just transform all aspects.
Kornik: Realistically, when do you think it’ll have the impact? When do you think some of that could become reality?
Karagiannis: The industry is changing all the time and the timelines of the machine quality is changing and there’s some exciting stuff that’s happening right now. So, the timing of this interview is pretty good. For the first time, we have what are called logical qubits appearing, and these are quantum bits that are error corrected. You usually need some number, large number of physical qubits that you correct for errors and then you end up with these like pure ones that you could do amazing things with.
We’re about two years away from having more logical qubits than we could ever simulate with a classical computer, which means we will have physically the capability of working with these entities that we never could before. If we could only simulate 50, we’re going to have about 100 in two years. Once you have that, you can prove instantly, well, we’re in uncharted territory here. Any advantage that we get, any quantum advantage could be as short as two years away in gate-based, what we call gate-based quantum computing.
Kornik: Where do you see those impacts taking place within the government? What’s quantum’s impact going to be?
Karagiannis: Yes, we’re going to eventually talk in this interview about the threat to cryptography so we’ll put that aside. Before scary things like that happen, there will be an impact in more practical use cases. Right now, with AI becoming more and more important, I think the first thing you’re going to see is that quantum will help certain processes that are either AI or AI-adjacent. That will be some of the first use cases like optimizing information that will be fed to AI, compressing artificial intelligence so it runs better because these machines will always work in tandem, and we’re going to see that most likely in the AI world, too.
Quantum computers are not going to replace classical computers. They’re always going to be that, like extra device that’s really, really good at specific tasks and they’re always going to be in the data center alongside your classical clusters. I think government will, first, take advantage of that aspect of it before they were able to proclaim where the first government that can crack encryption – although, let’s be real, I don’t think any government will proclaim that. I think they’ll keep it as like a secret advantage.
Kornik: Right. We’re going to talk about encryption and sort of protecting classified information in just a minute. Before that though, I do want to ask you, you mentioned earlier about the US sort of m.a.intaining its leadership position. Where is the U.S. government on its quantum journey in terms of funding and R&D compared to other countries? Is it really a leader on the geopolitical landscape?
Karagiannis: Yes, actually we are in some ways. In 2018, President Trump signed a national quantum initiative, and it was supposed to be a five-year act to help boost funding to all aspects of manipulating and using information with quantum. So, quantum information science, basically. That was renewed in 2023. We have the path forward for new money to be given to areas. Two regions in the U.S. were deemed tech hubs for quantum, in Colorado and Chicago, which means there’s going to be extra money in research dollars for developing workforces and coming up with new technologies. So, that’s great. That’s all good. We have these little heartland areas where you can have stimulating quantum growth happening, which will help us as a country. That’s one way the U.S. is leading.
Some ways that we are facing slight challenges. There are other countries where, we’ll pick one, for example China, where we’re being outpaced in terms of scientific papers that are being published and cited. It’s an interesting time where some other countries are obviously generating enough QIS advancements that the world is taking note. It’s possible that we’ll see advantage in some areas come from another country too. Then, it’s a matter of can we reverse-engineer or can they reverse-engineer and how much of it will be scientifically shared with the world like we’re used to seeing in science, or how much of it will be instantly behind locked doors kind of like a secret, that kind of thing is impossible to speculate on.
Kornik: When it comes to encryption and protecting sensitive data, classified information, how important will quantum be in terms of our national security?
Karagiannis: It’s a two-edged sword here. This is all covered also in that NSM White House Memorandum. It’s the idea that we have to maintain our leadership in using quantum computers for things and also in defending against the quantum threat. Eventually we’re going to cross that line of about 4,000 or so logical qubits that can crack encryption. When that happens, overnight, certain secrets will be exposed, and you can’t just flip a switch and rewrite everything. We can’t just overnight have everyone be set up with new encryption standards and all that takes time. So right now, we’re working towards this new deadline. They’ve set one of about 2035 to be ready, and that’s what the federal government’s going to be following.
However, private sector should be getting a little ahead of that because I think 2035 is not really a great deadline. I’m seeing 2030 as being when we have a potential for machines being able to crack encryption. That’s the other aspect that governments have to be ready for and at least the U.S. is making some clear inroads there right now in establishing the things that have to happen. Once NIST publishes the new standards for post-quantum cryptography this year, probably around summer time, there’s certain actions that federal agencies are going to have to take, and regulators, we expect, will copy that.
Kornik: Yes, you mentioned regulators. I’m just curious about skill sets and capabilities. Where do you think the U.S. government stacks up in terms of its quantum talent versus the rest of the world?
Karagiannis: Well, there’s definitely a talent shortage for what will happen as this industry keeps growing. That said, we are doing pretty well on the academic side. We do have a few solid programs here in the U.S. and universities and sort of like groups that are helping develop talent, like the Chicago Quantum Exchange is a great example which is obviously part of the University of Chicago too. We have that kind of growing talent approach, but we’re still not able to very quickly create teams and companies.
It’s still a little challenging to say, “We want to explore quantum. Let’s just build something.” It’s very hard to then go quickly find all the levels of technical skill you need to build something like that out. That’s why right now it’s still very much beneficial to have consulting when it comes to quantum sort of like help you work on your first use case and then start doing the educational path internally. Who can you train up? Who can you hire and bring in? So, there’s still a little bit of a challenge there when it comes down to the private sector.
Kornik: Right. I know you spend a lot of your time doing just that, right? You mentioned the private sector, and I’m curious how quantum in the public sector could impact the private sector. What do business leaders need to know or what should they be doing to sort of prepare for this future?
Karagiannis: Yes, that path towards post-quantum cryptography is a beautiful example of this. It literally says, okay, once these new ciphers are available, federal agencies have to create inventories. They have to show a timeline for how long it will take them to migrate, hopefully before 2030, but they have to establish that. They have to take very concrete actions as a result and we expect that private sector is going to copy that and that’ll be good for everybody because they’ll do the very same things.
They’re not going to do all the R&D required to understand the migration to post-quantum cryptography. We expect they’re going to do the exact same things with rolling out the new cryptography and not breaking anything. It’s that breaking thing that’s dangerous, that’s what we call crypto agility, the ability to implement new primitives and ciphers without destroying everything. The private sector is benefiting.
Kornik: You’ve already sort of taken us out to 2030 and 2035 and talked a little bit about that, but I’m wondering if you could sort of take us out that far or even farther, and talk to us about a post-quantum world and how that will have transformed global governments, or more specifically, the U.S. government or both.
Karagiannis: Yes. When you go out to 2035, of course, you’re in the realm of post-quantum cryptography needing to be rolled out. We’re going to have machines that can reverse RSA, other PK and even other types of cryptography like blockchain and things that we’re using right now. Hopefully, all that will have been replaced, but these machines will be so amazingly powerful by then that it’s hard to even imagine some of the use cases we’ll come up with in 10 years because we are very much scratching the surface right now.
In 2035, I don’t think we’re going to recognize it. I don’t think we’re going to recognize the world by 2030, maybe by 2027 quite frankly, with the acceleration we’re facing so it’s hard to imagine. Let me give you an example of how optimization can change many, many aspects of life. The more data we have to deal with, the more data points, the more moving parts. It starts to become an exponentially out of control situation as you try to make sense of these things. We’ve seen it with supply chain disruptions, the more moving pieces in the supply chain, if something goes wrong with one of them, it affects everything else with like a domino effect.
It all goes back to the traveling salesman problem. How can you visit every country, every city in the country without repeating. That starts to become an exponentially difficult problem to solve. Imagine optimizing the delivery of all sorts of services. They could be physical services like trucks getting to you or trucks getting to you in an emergency. We’ve already seen quantum edge in that. Imagine also delivering much needed resources to people more like digitally or delivering, let’s say things that people count on. For example, the right to vote, how are we going to protect that?
Can one day quantum computing make it more possible to better predict when people will show up, how to have the right amount of folks on hand physically. This isn’t even touching the voting machines. It’s just predicting when people will arrive and the flux and things that will occur. You can really get down to the nitty gritty like that, that things that really impact physical boots on the ground rather than some abstract like algorithm running in the distance, it’s all very visible.
Kornik: Right. Well, we’ll keep up with all those changes by listening to The Post-Quantum World. Thanks, Konstantinos, for your time today.
Karagiannis: Thanks.
Kornik: Thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit vision.protiviti.com to view all of our latest content. Until next time, I’m Joe Kornik.
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Cybersecurity expert: The U.S. is facing big challenges
Cybersecurity expert: The U.S. is facing big challenges
Cybersecurity expert: The U.S. is facing big challenges
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Tom Vartanian, an author, lawyer, futurist, board member and executive director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based nonprofit. Vartanian has more than 50 years of experience in the financial sector and served as a regulator in both the Reagan and Carter Administrations. He is the author of nine books, including his latest, 2023's The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Here, he discusses U.S. readiness when it comes to cyber warfare with our adversaries.
In this interview:
2:20 - Cyberattacks and national security by the numbers
3:53 - Who is running the technology parade?
9:36 - Quantum computing, a game changer
12:50 - A cautiously pessimistic look forward
Cybersecurity expert: The U.S. is doing almost everything wrong
Joe Kornik: Welcome to the VISION by Protiviti Interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource examining big themes that will impact the C-suite and executive board rooms worldwide. Today, we’re exploring the future of government and I’m joined by Tom Vartanian—an author, lawyer, futurist, board member, and former federal bank regulator. Currently, Tom is the executive director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based non-profit that advocates for dynamic financial services and public policies. Tom served as a regulator in both the Reagan and Carter administrations and he is the author of nine books including his latest, 2023’s The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Tom, thank you so much for joining me today.
Tom Vartanian: Joe, great to be back.
Joe Kornik: Tom, as I mentioned in my introduction there, you are the executive director of the Financial Technology & Cybersecurity Center. Can you tell us a little bit about the center and its mission?
Tom Vartanian: Yes. What I wanted to do after being a regulator for a number of years and practicing law for 40 years is sort of bring to bear the concerns I had about the future financial services and particularly how it’s impacted by technology and security questions. What we wanted to do was set up a center that would focus on cybersecurity, focus on the future of fintech and key on to the issues that we think we need to consider to make financial stability the preeminent and dominant concern in the future.
Joe Kornik: Yes. I mentioned your excellent book in the intro and in it you addressed the threats facing the integrity of our national security and our financial services sector including the possibility of cyberattacks by foreign adversaries like China and Russia. Your book poses a challenge to America to take the lead and create a coalition of democratic nations to implement financial cyber strategies. Why do you think this is so critical to the future?
Tom Vartanian: You can go on to the CISA’s website today and look at the numbers that they have prominently on their website. CISA, which, of course, is part of the Department of Homeland Security, says that one in three, five people in America have malware on their computers, one in three. 47% of us in the country have had personally identifiable information collected about us, 47%. 600,000 accounts are hacked daily. $4 billion in crypto is stolen each year and ransomware attacks are now averaging—the theft of more than 500 million—there are more 500 million ransomware attacks every year, 500 million around the world. What you see is a scale of devastation and destruction that has to be put into some context relative to the enhancement of the human quality of life that technology can provide. And I think we are losing the battle in that balance because we’re irrationally focused on the upside of technology and not very focused on what can happen on the downside. We don’t know so much about technology and we’re playing as if it’s always going to be benevolent and good to us, but the problem is that there are so many people increasingly every year using it for bad purposes and to steal money or to influence elections or bring down governments.
Joe Kornik: Let me ask you a question. As a country, is the United States of America doing enough? Do we have the right people on it? Do we have the right investment pointed at it? I mean how are we doing in that realm?
Tom Vartanian: I think, Joe, that we are playing into the hands of our adversaries. Let me say it this way. If we wanted to build a system to allow our adversaries to take as much advantage of critical infrastructures, money, power, and every possible aspect that our government relies on, we wouldn’t built the system we built online, right? Because it is highly insecure and it is increasingly vulnerable to attack. When the internet started in 1969, the ARPANET, it was established to communicate messages, not to store data, and here we are, all these years later, storing all the data on the planet and all of the value on the planet on a system that was never built to do that, right?
Again, I think it changes the scales and the balance of things. It allows countries that shouldn’t be able to punch above their weight to punch above their weight. North Korea is probably the best example of that. It’s basically running its economy off hacking, right? It’s all of this money they’re making from hacking everything around the world, it’s giving this money to run its economy and run a nuclear program. Right? So, we’ve got to start seeing that we can think in terms of traditional regulations, traditional concepts if we’re moving forward in a world where the scale has changed and the balance between good and bad is now moving dramatically.
My bottom line is, is that we need leaders in this country to basically move forward with an agreement among democracies. Forget the other countries that aren’t going to come in, dictatorships and totalitarian governments, they’re never going to come along because they’re now seeing technology as the way that they can control their people. I mean if we had an hour, we could talk about what’s going on in China with 300 million facial recognition cameras, giving everybody a social score, right? For totalitarian governments and dictators, technology is now the greatest thing in their hands because it will prevent them from ever being out of power, because the facial recognition, they will know when two people are meeting that they think shouldn’t be meeting and that’s pretty scary.
I think the answer to your question, the government hasn’t done enough, isn’t spending enough and isn’t focused enough on these issues because at the end of the day, said very simply, a lot of these issues are not campaign issues you can raise money off of, right? Those are the issues, whether they’re important or not, they tend to draw political donations and that the politicians tend to focus on. The second problem is that I don’t think most people on the hill understand more than—about technology than how to turn on their computers. I mean you can watch any congressional hearing you like, the ones with Mark Zuckerburg and Facebook were interesting, and you realize that most of the questions have been written down and the people asking those questions really don’t understand the broad significance of the questions and the answers that they’re getting.
The sad thing is that Bill Clinton in 1996 nailed the problem. He identified critical infrastructure. He had great people working on his cybersecurity proposals and he nailed the problem. And he laid out the fact that we need to protect critical infrastructures because of the inherent vulnerabilities of the systems that they’re on. 25 years later, probably 27 years later now, we really haven’t made much progress. If you compare, as I did in the book, the executive orders of President Clinton, President Bush, President Obama, President Trump, and now President Biden, they look eerily alike as if somebody’s just cut and pasting every four years. Who’s running the technology parade? The technology parade is being run by the private sector: large, big tech companies. At the end of the day, I ask the following question. You may not like the politicians we have, you may not think they’re making decisions, you may not think they’re doing anything, but at the end of the day, do you want them deciding the future of your life as elected officials that you can elect or un-elect? Or do you want Jeff Bezos or Mark Zuckerberg making those decisions, because that’s who’s making those decisions today, the guys that run big tech and that’s not the world I want to live in.
Joe Kornik: Tom, it’s some pretty scary scenarios that you laid out and something that would require cooperation first in this country and then globally among other countries. It feels like a pretty daunting task, to be quite frank.
Tom Vartanian: I’m going to leave you with one example, Joe, just very briefly. Today, RSA encryption, which is the typical encryption being used by financial institutions to protect data, is a 2048-bit encryption which means the key is 2048 bits long and to make it simple, it’s very complicated keys. So, to run a brute force against a 2048-bit encryption data, you probably need 300 trillion years to break it and then you might break it on the first try, but to go through every possible permutation to break a 2048 RSA-bit encryption, you would probably need 300 trillion years. All right? Quantum computing. We are now within 10 years of having high-powered quantum computing, which will be, for some purposes, enormously powerful and enormously useful. A 4099-cubit quantum computer—and we have only now, I think we’re now just approaching 1000 cubits quantum computing— so that’s the ways off, but a 4099-cubit quantum computer can reportedly break that 2048-bit encryption, not in 300 trillion years but in 10 seconds. That’s why it’s being reported that the Chinese are gathering up all of the encrypted information they can today so they will be able to decrypt it tomorrow.
Joe Kornik: Is the United States far behind the rest of the world when it comes to this—making sure that we’re protecting ourselves?
Tom Vartanian: Yes, it’s a great question. I addressed that question in the Unhackable Internet and I said China’s going to have some severe economic problems themselves, but China’s plan is to by 2030 have the largest economy in the world, the most sophisticated technological prowess, be dominant in artificial intelligence and be dominant in quantum computing. If they do those four things, that’s not going to be a good day for the United States of America, and they’re outspending us in each of those areas. They’re outspending us in artificial intelligence, they’re outspending us in quantum computing. They have built bigger quantum networks than we have built. Right? I think we’re thinking like people who have been on top, not realizing it’s harder to stay on top than it is to get there, and everybody else is running fast to get to where we are. We’ve got to spend the money judiciously to guarantee our future in the technological sense.
Joe Kornik: Last question for me, Tom and that’s how optimistic are you about the future when you put it all together and take a look over the next—let’s say 2030 and beyond, how optimistic are you that we’ll get most of this right?
Tom Vartanian: I think we’re getting most of everything wrong today and that makes me pessimistic. I mean, you can talk at any level: social, cultural, financial, political. We just seem to be getting so many things wrong and I equate it to a lack of the ability to prioritize. I think we’ve lost our capacity to prioritize the issues that are really, really important. I think we will continue to muddle along and do just fine as long as everybody else is doing worse, but as other countries and other systems begin to do better, it’s going to shine a light on the flaws in our system. It’s going to shine a light on the archaic makeup of our regulatory system. It’s going to shine a light on the fact that we’re focused on the wrong issues at the wrong time for the wrong reasons. It’s going to focus the light on the fact that we’ve let so much of the financial services business that takes consumer dollars be completely unregulated.
I am what I call guardedly pessimistic. I mean we seem to muddle along and do just fine, but when you look at something over a long trendline, which I look— I tend to look at 25-year trendlines—you can see we’re not going in the right direction on any of these issues and I wrote in one in op-ed that I thought the only solution to those problems was better leadership. I concluded that we just weren’t electing at any level the kinds of leaders we need to confront and solve these issues and that to me is the fundamental problem that we’ve got and unless we were able to stand up as voters and say, “Look, you got to give us better candidates.”
Joe Kornik: Sure. That seems like almost an unsolvable problem. I hope I’m wrong, but that seems like a really, really difficult one to fix.
Tom Vartanian: Yes. No, I agree, that’s why I’m guardedly pessimistic.
Joe Kornik: Well, Tom, you’ve given us a lot to think about today. I appreciate the time, the insights and the conversation. Thanks so much.
Tom Vartanian: Thanks, Joe. Thanks for having me. I really appreciate it.
Joe Kornik: Thank you for watching the VISION by Protiviti Interview. On behalf of Tom Vartanian, I’m Joe Kornik. We’ll see you next time.
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From trust to tech equity to transparency, governments have issues. Is digitization the fix?
From trust to tech equity to transparency, governments have issues. Is digitization the fix?
From trust to tech equity to transparency, governments have issues. Is digitization the fix?
The trend is incontrovertible: Sentiment is at an all-time low when it comes to whether Americans “trust the government to do what’s right almost always/most of the time.” According to the Pew Research Center, only 16% agreed in 2023, compared to 54% in 2001. The all-time high was 77% back in 1964. Yes, there was a time more than three out of every four Americans trusted the government to “almost always” do what’s right. Today, it’s fewer than one in six.
In a survey worded somewhat differently and conducted internationally, only 31% of Americans said they had “confidence in the national [federal] government,” compared to 84% in Switzerland, 69% in Sweden, 61% in Germany, and 43% in Japan.
Yet, we know government is necessary. The market economy does not function well without the public provision of education, pensions, transportation, the rule of law, defense, security, and a host of basic “public” goods such as air traffic control, maritime signaling or weather forecasting. Even proponents of the “minimal state” see a role for regulation to play.
During times of crisis, most recently the coronavirus pandemic—governments stepped up with varying degrees of success to protect citizens from the fallout and to prevent the economy from collapsing. And just as in the private sector, the pandemic invited governments to significantly step up their digital presence. Has e-government lived up to expectations? Has it contributed to enhanced participation, quality, and efficiency? Can the digitization of government service be the panacea for the public sector?
The emergence of e-government
Aside from all the misgivings that citizens continue to have about their governments, perhaps the biggest change in the interaction between the two has involved digitalization. Regardless of whether people find government services useful, efficient, or even appropriate, the truth of the matter is that connecting with the government, accessing a program, and getting “paperwork” done has become greatly facilitated by new information technologies.
According to the United Nations’ biennial e-Government Development Index, which takes into consideration online services, human capital and the telecommunications infrastructure in equal proportions, the top ten countries in 2022 were Denmark, Finland, South Korea, New Zealand, Sweden, Iceland, Estonia, the Netherlands, the U.S., and the UK.
Being within this elite group, however, does not mean that every citizen benefits. In the case of the U.S., for example, access to information technologies is much more unequal than in any of the other top countries. Not surprisingly, this digital divide is more prevalent with those groups who have less access to technology, including people who are living below the poverty line, undocumented immigrants, people with disabilities or mental health issues, and seniors.
France Belanger and Janine Hiller, from the Virginia Polytechnic Institute, proposed a five-stage model for an e-government: information, two-way communication, transaction, integration and political participation. Most governments have sought at various levels to offer services within each of these stages, but without fully deploying each of them.
As a result, the current state of e-government is fairly fragmented, incomplete, and in need of rationalization. This situation creates unique security and privacy risks due to the different protocols and standards that characterize legacy and new IT systems.
Regardless of whether people find government services useful, efficient, or even appropriate, the truth of the matter is that connecting with the government, accessing a program, and getting “paperwork” done has become greatly facilitated by new information technologies.
Technological frontiers
The adoption of cutting-edge technologies in e-government is very heterogeneous. Even in an advanced country like the U.S., only about half of federal agencies are on the cloud. The U.S. government is well behind the private sector in the use of blockchain and AI.
Another critical area for the future will be the use of digital tokens in general and cryptocurrencies in particular. In 2018, Ohio became the first (and only) state to allow taxpayers to settle their obligations in cryptocurrency, although the program was suspended in 2019 citing “legal issues.”
Only El Salvador and the Central African Republic accept cryptocurrencies as legal tender. In the U.S., the recent SEC approval of spot bitcoin exchange-traded funds (ETFs) does not necessarily pave the way towards the government’s acceptance of payments in cryptocurrency. Rather, it reinforces the message that the likes of bitcoin are crypto-assets rather than means of payment.
Data security concerns
Looming large in the background of most e-government developments are data security concerns. The use of cloud computing has led to several high-profile hackings, especially the cyberattack on the U.S. State Department in 2023.
Doubts persist as to the security of recent projects such as the Department of Homeland Security’s system to share information across agencies involved in disaster relief and major sporting events; the U.S. Treasury’s system to process payments; the Labor Department’s effort to consolidate case management systems; and the Department of Agriculture’s management of federal lands.
The Government Accountability Office found in a detailed review that only three of 15 government systems had continuous monitoring of their cloud systems, and issued a set of recommendations that most private-sector companies have been following for years. As noted above, the incomplete online migration of government services to the most advanced technologies, which continue to coexist with antiquated legacy systems, poses formidable challenges in terms of data security.
Accountability, transparency and privacy
It is not clear either that e-government has led to greater transparency, participation, and accountability. In general, information technologies tend to give a false sense of improvement when it comes to transparency and accountability. Governments around the world continue to be criticized on both counts. Research also indicates that transparency can be at odds with privacy. The problem is that, on the one hand, e-government potentially makes information more readily available and easy to publicize. But, on the other, privacy can become a huge issue.
Even if security against data breaches were guaranteed, privacy can still be a big problem. Most citizens are apprehensive when it comes to sharing data with the government. The use of IT essentially means that every interaction with a government agency leaves a digital footprint. In addition, companies might be ordered by the government to surrender data about their customers.
Most citizens are apprehensive when it comes to sharing data with the government. The use of IT essentially means that every interaction with a government agency leaves a digital footprint.
In the U.S., the Government Accountability Office has noted that electronically stored information about citizens includes their school and health records, their extensive dealings with companies, and their interaction with governments. No wonder Americans are feeling increasingly “concerned, confused, and feeling lack of control over their personal information,” as a recent Pew Research Center study concluded.
Moreover, U.S. adults are more apprehensive about how the government might use their private information than about how companies may do so. In a recent study, the Center for Digital Government concluded that “efforts to address digital privacy are in the nascent stages.” The most significant threat continues to be data breaches. But data governance more broadly is also a concern.
Does e-government reduce costs?
One of the most interesting issues around e-government is the finding that increased participation leads to a decline in efficiency. Investments in IT are expensive, especially because they also require investments in training and education of both government workers and citizens.
In 1987, Nobel laureate Robert Solow formulated what came to be known as the IT productivity paradox when he observed that “you can see the computer age everywhere but in the productivity statistics.” In this respect, e-government appears to be no different than the private sector. One cross-national study found that investments in e-government increased effectiveness but not efficiency.
Much remains to be done in terms of changing the public’s perceptions about government—in the U.S. in particular, where less than a third of adults express confidence in it. The use of IT can help, but governments must also clarify what the goals are—namely, accountability, transparency, increased access, effectiveness, and efficiency—especially when these goals find themselves at odds with one another.
Americans are feeling increasingly “concerned, confused, and feeling lack of control over their personal information,” a recent Pew Research Center study concluded.
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
Is the U.S. dollar in decline? Financial experts weigh in on its status in a changing world
There’s certainly no shortage of stories about the de-dollarization movement going on around the world. In late January, retired Wall Street veteran Dick Bove told The New York Times: “The dollar is finished as the world’s reserve currency.” Bove is just the latest expert in a string of stories questioning the long-term viability of the U.S. dollar.
And last August, Brazilian president Luiz Inacio Lula da Silva did more than question when he boldly suggested the possibility of creating one single BRICS currency. The trial balloon was floated shortly after the bloc (with its original members of Brazil, Russian, India and China) had agreed to bring six new countries into the fold—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. The “BRICS+6” account for 46% of the world’s population and 30% of global GDP. The “basket of BRICS currencies” could also be the greatest threat the U.S dollar has seen to its position as the world’s reserve currency for a long time.
Timing is everything: Just a few weeks after President Lula da Silva’s proclamation, VISION by Protiviti launched its exploration of the Future of Money. The theme examines the impact of cashless countries, cryptocurrencies and the digitization of the monetary system on business, commerce, financial markets, the geopolitics of the global economy and, yes, the U.S. dollar. We asked several economic experts to weigh in on whether the dollar could, would, or even should remain the world’s reserve currency— and what could potentially replace it and when.
BRICS currency a “non-starter”
Count The Economist’s Swarup Gupta among the BRICS doubters; Gupta calls a BRICS currency a “non-starter” because the BRICS itself is terribly lopsided.“ Any currency born out of a basket of currencies that make up the currencies of BRIC countries, even with new additions, will be dominated overwhelmingly by the digital yuan, and while that will satisfy China’s ambitions of internationalizing its currency, will other countries agree? India and China, for example, have prickly relations,” Gupta says.
More likely, Gupta envisions the eventual diversification away from the U.S. dollar to a different basket of currencies, one that could include the euro and yuan along with other allied countries. “I do think the gap between the U.S. dollar and other global currencies will decline over the next decade, as will its share of foreign trade, but I don’t see that happening in a significant way any time soon.”
“A race for digital dominance”
At the same time, Gupta says, the U.S. government, along with many governments around the globe, have shown a keen interest in wanting to “take back money and how it’s used as a sovereign tool of governance and policy making.”
This can be done much more easily in a digital world, says Mauro Guillén, Vice Dean at the University of Pennsylvania’s Wharton School, futurist and author of 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything.
Guillén says the race for digital dominance is on amid the uncertainty of a looming financial digital disruption. “The U.S. should be wary of what countries intent on increasing their influence over global financial matters might do,” he says. “China is planning to make a digital yuan accessible to its trading partners. In that case, the dollar, not commercial banks, would be disintermediated,” Guillen says. “Bypassing the U.S. dollar would require interoperability between the digital yuan and the CBDCs of China’s trading partners. That’s a big task, but the incentives for them to do so are huge.”
“The U.S. should be wary of what countries intent on increasing their influence over global financial matters might do. China is planning to make a digital yuan accessible to its trading partners. In that case, the dollar, not commercial banks, would be disintermediated.”
– Mauro Guillén, Vice Dean, University of Pennsylvania’s Wharton School
“A matter of national security”
Meanwhile, Matthew Le Merle, Managing Partner and CEO of Blockchain Coinvestors, asks: How could it make sense for China to do all of its global trade in U.S. dollars? “For the last 75 years, since we went off the gold standard, the U.S. has denominated Chinese global trade in U.S. dollars,” Le Merle says. “If you're the Chinese, or the Russians, you're going to say: ‘We can't have this. It's a matter of national security. We need alternative ways to transact with foreign countries.’”
Tom Vartanian, a longtime regulator who served in both the Carter and Reagan administrations, says we’re beginning to see a walk away from the dollar like we’ve never seen before. “The dollar’s global influence is waning,” he says. “Currently, it’s only used in 59% of global reserve currency transactions. That’s a big concern.”
Vartanian says a weakened dollar not only has enormous economic implications, but political and geopolitical implications, as well. “How does the United States implement economic sanctions on Russia if the dollar isn't the world’s preeminent currency? It can’t. And if we don't have economic sanctions as a tool, that only leaves us the military option. That’s a tough place be.”
“A debt dilemma”
Vartanian says there’s little doubt the dollar will lose its status in the world when someone else steps up to take it away. “Look, in the land of the blind, the one-eyed giant is king,” he says. “For the time being, we're probably okay because no one is all that ready to step up, but the trajectory we're on is simply unsustainable.”
Specifically, the enormous debt the U.S. has is unsustainable. We have a debt dilemma, Vartanian says. “We may not even know when we’ve crossed the line when the dollar is no longer king,” he says. “But once we do, there’s probably no coming back.”
The debt dilemma was echoed by several experts VISION by Protiviti spoke with. David Cowen, President and CEO of the Museum of American Finance, which chronicles the history of U.S. finance all the way back to its origins, put it most bluntly. “Alexander Hamilton famously said ‘if it is not excessive, our debt will be a national blessing.’ Well, it’s excessive and frankly, Hamilton would be spinning in his grave.”
Having the world's reserve currency has allowed the U.S. to run large deficits in terms of both international trade and government spending. If foreigners no longer want to hold dollars for savings, it would force significant belt-tightening at home, Vartanian says
“The U.S. would have to face the economic consequences of the financial pressures it has created over the last several decades from, among other things, gargantuan overspending, if the dollar did lose its status as the primary global currency,” he says. “Business leaders, executives and directors need to prepare for a world where the dollar is less used for global commercial transactions whether the concept of a global reserve currency continues or not.”
Either way, Guillén says, companies and governments would be wise to begin diversifying away from the dollar due to increased perceived risks. “American import-intensive firms would probably experience a spike in dollar-denominated prices,” he says. “American export-intensive firms would likely benefit because their products or services would become more competitive.”
"We have a debt dilemma. We may not even know when we’ve crossed the line when the dollar is no longer king, But once we do, there’s probably no coming back.”
– Tom Vartanian, former federal regulator
Execs still bullish on the dollar
Despite the experts’ caution signs and warnings, dollar doom-and-gloom was not detected among global business leaders VISION by Protiviti surveyed as part of our Executive Outlook on the Future of Money research conducted with the University of Oxford.
When it comes to what they saw as the biggest threats to their companies’ financial stability over the next 10 years, executives ranked the decline of the U.S. dollar dead last among a dozen choices. And nearly four in five respondents (79%) believe the U.S. dollar will still be the world’s dominant medium in 10 years’ time.
As we are about to undergo a seismic shift in the global monetary system, we can at least know that executives worldwide have confidence the U.S. dollar will remain the world’s reserve currency for the foreseeable future. And when we asked executives what could, potentially, replace the U.S. dollar someday, they overwhelmingly opted for another stable fiat currency, the euro (58%), with the Chinese yuan coming in second at 17%. Cryptocurrencies barely registered at all.
Crypto’s not ready for prime time
While cryptocurrencies, in all their many forms, are becoming more mainstream (the Securities and Exchange Commission’s approval of Bitcoin ETFs earlier this year signals they are here to stay), they won’t be the reason the dollar tumbles, says Eswar Prasad, Senior Professor of Trade Policy at Cornell University and author of the book, The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.
“The landscape of global reserve currencies may appear to be at the threshold of disruption as cryptocurrencies gain traction, but despite all the hype, the proliferation of cryptocurrencies will not have a substantial disruptive effect on the major reserve currencies, especially the U.S. dollar,” Prasad says. “The dollar could eventually lose some ground as a payment currency, although I think it will remain dominant both in this dimension and as a storer of value for the foreseeable future.”
And Aaron Lindstrom, the Americas region Head of Transformation and Digital Partnerships for Allianz Trade, says since crypto is not tied to a sovereign government, it fails on both the confidence and consistency measures.
Forecasting the future
“While nothing lasts forever, it’s hard for me to rationalize a world where the U.S. dollar is not central to trade finance,” Lindstrom predicts. “The U.S. economy is still the largest in the world and continues to be a net importer; our consumption and economic strength make us the world’s reserve currency now and that will continue well into the future.”
How far is well into the future? Lindstrom took a shot at a bold prediction for what money could look like in 2050. “I would say it will be transacted digitally but likely backed by water,” he says. “I can see a world in which currency is benchmarked to fresh water as the planet’s most valuable asset.”
Presumably, this will put the U.S. dollar underwater in just a few decades. Let that soak in.
“While nothing lasts forever, it’s hard for me to rationalize a world where the U.S. dollar is not central to trade finance."
– Aaron Lindstrom, Allianz Trade
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Tom Vartanian, an author, lawyer, futurist, board member and former federal bank regulator. Currently, he is the Executive Director of the Financial Technology & Cybersecurity Center, the Alexandria, Virginia-based nonprofit that advocates for dynamic financial services and public policies. Vartanian has more than 50 years of experience in the financial sector and served as a regulator in both the Reagan and Carter administrations. He is the author of nine books, including his latest, 2023's The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse.
In this interview:
1:17 – How is money evolving in the digital age?
3:19 – Crypto — a viable financial development, a hoax, or something in between?
5:50 – Regulation of crypto and digital tokens
8:50 – Is a U.S. CBDC a good idea?
13:40 – The financial world in 2040
Longtime regulator Tom Vartanian on crypto and a CBDC: Proceed with caution
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m joined by Tom Vartanian, an author, lawyer, futurist, board member, and former Federal Bank regulator. Currently, he is the executive director of the Financial Technology and Cybersecurity Center, the Alexandria, Virginia-based nonprofit that advocates for dynamic financial services and public policies. Vartanian served as a regulator in both the Reagan and Carter administrations. He is the author of nine books, including his latest, 2023’s The Unhackable Internet: How Rebuilding Cyberspace Can Create Real Security and Prevent Financial Collapse. Tom, thank you so much for joining me today.
Tom Vartanian: Joe, thanks for having me. It’s a pleasure to be here.
Kornik: Tom, as an author, lawyer, futurist and former Federal Bank regulator, how do you see money evolving in the digital quantum age that we’re entering?
Vartanian: Yes. It’s a great question, Joe, because I’ve been studying money now for, it seems, most of my life and I’ve written about it extensively, at least in the first two books. It’s interesting. Money is constantly evolving, and it relates to the economy, to the cultures and to the people that we become. Interestingly enough, even in this country, we’ve only had a national form of currency since the 1860s. So, it’s not like we’ve had dollars all of the history of the world. These things are relatively recent, in a historical sense. In terms of what I’ve looked at it in money, and the things that I have seen, which includes digital cash, smart cards, money, credit cards and all the like, what I wrote in my book 21st Century Money, Banking & Commerce is that money tends to gravitate towards four different categories that need to be there for people to accept the money. The first is cost. It can’t be costly to use. So, when we pick up a dollar bill, there’s no cost to using that dollar bill. Second of all, it’s got to be convenient to use. People don’t want to go through a lot of steps to be able to use money. Third, the public must have confidence in the money. If they don’t have confidence, eventually they’re not going to use it; and fourthly, and these are the four Cs, there must be a consistency to the value of the money. If the value jumps all over the place, consumers aren’t going to want to use it.
Kornik: That consistency piece brings me to my next question, which is around cryptocurrency, which has been not consistent in its value. Where do you land in the cryptocurrency debate? Do you see this sort of a viable financial development, hoax, or something in between?
Vartanian: I sort of see it as all of the above, depending on your perspective. If you look at my four Cs, cost, convenience, confidence and consistency, I think cryptocurrency fails all four, and that’s important, right? Because at the end of the day, if you’re trying to use something as money and it doesn’t have the backing of the Federal Reserve or a government entity, you’ve got something that is more of a wish and a hope than actually a form of money. I tend to think that cryptocurrency is never going to be money. It may be an investment. It may be a security. It may be a commodity. I don’t ever think it’s going to be money because, first of all, how can you use something that maybe worth $50 in the morning and $100 in the evening? Right. You’re not going to take that vehicle to the supermarket to buy a loaf of bread. It's got lots of problems, but look, at the end of the day, I’m a big believer in allowing people to invest in things where they lose their money, and if people want to invest in computer code that somebody somewhere threw out into the universe and said this is a cryptocurrency, God love them, but I think the problem we have here is that the government has missed the boat in terms of letting this grow into a $10 trillion business, whatever it is. Whether it’s Las Vegas or it’s actually some important development in the financial services. The government has let it grow into a $10 trillion industry. What I mean by that is, there’s $3 trillion of cryptocurrency out there. There’s $3 trillion of synthetics and derivatives built on that cryptocurrency, and there’s $3 trillion to $4 trillion of leverage and margin in that business. You add all that together, that’s about a $10 trillion business, which is about the size, a little less than the size of the U.S. mortgage market, and the U.S. market mortgage is highly regulated. I think it’s fair to say there’s relatively no regulation of cryptocurrencies, and that’s the big problem we’ve got right now. We’ve got a big part of the universe in the financial services system completely unregulated.
Kornik: Right. I was going to ask you about that. How do you see cryptocurrency and digital tokens impacting financial regulation and deposit insurance?
Vartanian: When it comes to regulation of cryptocurrency and deposit insurance, you really got to step back and wonder where we’re going to go in this digital economy to come up with a better regulatory system. What I mean by that is, the regulatory system we have today was built between 1932 and 1940. It’s the same system we have today. It’s been altered, it’s been modified, but essentially, it’s the same system of banking securities, mutual funds that was set up between 1932 and 1940. And I can guarantee you that there’s nothing about today’s economy that looks like 1932 and 1940. So, we’ve got a regulatory system that I have argued is terribly out of date, terribly misfocused, and at the end of the day, focused on only a small portion of the financial services business.
For example, one of the things I argued in my book is that when the banking regulations were set up and we ended up with this bank-centric sort of financial regulatory system, banks were about 95% of the financial services system in the 1930s. Today, if you take banks and their deposits and compare that to mutual funds, hedge funds, insurance companies, and all the money consumers throw in that direction, including cryptocurrency, you’ve got a banking business that’s about 30% to 35% of the financial services market. What does that mean? It means we’re focusing 100% of our regulatory prudential resources on 30% of the market. Makes no sense. So, looking at crypto, I think the fundamental problem crypto has, if we begin to regulate it, is that it is the number one choice for criminals, terrorists, fanatics and creeps. Right? It has enabled crime in all forms, from terrorism to child pornography, to hit a different scale completely, and so there is nothing out there that we’ve ever seen like this, and we have to decide whether or not we want a system like this to proliferate when it is increasing the scale and scope of crime dramatically. I mean, there’s no doubt that technology enhances the quality of our lives, but the scale of the damage that can be done is also monstrous.
Kornik: How about central bank digital currencies? We’ve heard a lot about them. Certainly, there’s a race for digital dominance as governments try to maybe perhaps use the shake up in the monetary system right now to maybe gain an advantage. Where do you see central bank digital currencies factoring into the future of money over the next decade or so?
Vartanian: Yes. It’s a great question because a lot of countries are running out there to do it, and the United States is lagging behind. I think the concern is, should we be lagging behind? I think it’s got to be the answer to the question. I think the Federal Reserve board concluded after a pilot program through the Federal Reserve Bank of Boston, that yes, it’s a good thing to lag behind here so we can see all of the warts and the problems in the system. The folks at the Federal Reserve Bank of Boston were working on this. I know and I’ve known some of them for a while, asked me to give my views. I did give my views and I said, “Look, there’s two threshold issues when you’re dealing with CBDC. First, what’s the overall economic impact? Because it’s going to change the way money moves. It’s going to change liquidity. It's going to change capitalization. So, what’s the impact?” What I referred them to were the 1980s when money market funds took over the market, and for those who were around then or don’t remember, in 1982, interest rates hit 21%. Banks were still paying 5% interest on deposits until they were deregulated around that time, but what happened was necessity was the mother of invention; money market funds began paying a market rate. So, when I was General Counsel of Federal Home Loan Bank Board, we were dealing with 1,500 failing thrifts from a lack of liquidity to an interest rate risk problem. You could see the money just draining out of the banking and savings and loans system because money market funds were paying 12%, and banks and savings and loans were paying 5%. So, you’re not going to stick around even if it’s FDIC or FSLIC insured for 5% yield when you can get 12%. So, the money just flowed out of the system and overnight, we were remaking the business of financial services in America and partly because of that, partly because of the interest rate risk, and partly because of the asset quality risks that emerge in the 1980s, we lost 3,000 banks and savings and loans. And there wasn’t one moment, as I recall, that I dealt with the Federal Reserve Board and all of our failing savings and loans at that time. Nobody considered the global impact on the economy from moving from money going into bank deposits to money going into money market mutual funds.
Now, I raised that only because CBDC could have a similar impact, depending on who holds the accounts for the CBDC. For example, Joe, if you can open up an account at the Federal Reserve Bank and you could use CBDC and you don’t need an intermediary bank, that changes the business of banking overnight. Where do they get their deposits? How do they make loans? Who’s making loans in that environment, right? It’s just a mammoth change in the market that could occur, and the question I always come back to is: what do we want our intermediaries doing, how important are intermediaries, and what is CBDC going to do the future of our intermediaries, meaning banks?
The second issue I’ve raised, and I think this issue is also stuck because I know several folks at the Fed have given speeches; several governors have given speeches about these issues since I’ve written about it, and that is, I thoroughly believe the Fed could do a CBDC tomorrow from a technological point of view. I don’t think that’s the problem, but I don’t think they should do it until they can guarantee it’ll be 100% secure. Because it will be the most sought-after thing online by any hacker on the universe once it goes live, right? Every hacker will be drawn to hacking United States Federal Reserve Board’s CBDC. There could be no more attractive target to anybody. So, if the Fed can’t guarantee the security because a breach in that system would be horrific. If the Fed can’t guarantee security, they shouldn’t do it. I’m pretty sure they can’t guarantee 100% security.
Kornik: I’d be curious to your thoughts just to where you think this all - how this all plays out in terms of CBDCs, cryptos, all those emerging technologies? Take me out to 2040 and tell me what kind of world we live in financially.
Vartanian: I think, Joe, the principal problem is this. You can’t stop technology and you should never stop progress. We’ve got to have progress as human beings. That’s the good part of the equation, but what I’m concerned about is if the scale is changing in terms of the balance. Let me give you an example. When I started in banking in the 1970s as a regulator, the maximum amount that you could steal from a bank was about the amount you could put in two valises and throw in a van waiting outside. Today, the amount is unlimited. There’s $4 billion of crypto being stolen every year. That’s probably more than all the bank robberies in the history of the country. So, the scale is changed. The scale of damage that can be done by these things has changed, and my prediction is that if we don’t get together with all of the other democratic countries of the world and begin to impose rules that control and channel technology to make sure we stay in charge, and you can argue about who’s “we” in that, but to make sure human beings, to make sure benevolent countries, to make sure democracies stay in charge of where that technology goes. I think the combination of AI, facial recognition, the internet of things and quantum computing is going to encourage the criminal elements of the world. It’s going to empower less powerful nations to do things and punch way above their weight. So, unless we start setting the rules now for the way that this will affect us geopolitically and financially in the future, I think rolling the dice on our financial future with all of the things, these things, these technologies are going to be able to do, is pretty risky. I think we’ve got to stay in charge, and we’ve got to drive the bus if we want a future that serves us.
Kornik: Well, Tom, thank you so much for your time today and those insights. Fascinating discussion. I appreciate it.
Vartanian: Thanks, Joe. It’s a pleasure to be here with you.
Kornik: And thank you for watching the VISION by Protiviti interview. On behalf of Tom Vartanian, I’m Joe Kornik. We’ll see you next time.
Thomas Vartanian is an attorney, author, advisor, regulatory expert, board mentor and an expert witness on financial services and technology. Currently, he is the executive director of the Financial Technology & Cybersecurity Center. As a regulator and private practitioner, he has been involved in 30 of the 50 largest bank failures in U.S. history. He is the author of nine books, including his latest “The Unhackable Internet: How Rebuilding Cyberspace Can Create Re al Security and Prevent Financial Collapse” released in 2023.

Joe Kornik is Director of Brand Publishing and Editor-in-Chief of VISION by Protiviti, a content resource focused on the future of global megatrends and how they’ll impact business, industries, communities and people in 2030 and beyond. Joe is an experienced editor, writer, moderator, speaker and brand builder. Prior to leading VISION by Protiviti, Joe was the Publisher and Editor-in-Chief of Consulting magazine. Previously, he was chief editor of several professional services publications at Bloomberg BNA, the Nielsen Company and Reed Elsevier. He holds a degree in Journalism/English from James Madison University.

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Wealth management in a digital future with Greg Dillon of OneTeam Financial
Wealth management in a digital future with Greg Dillon of OneTeam Financial
Wealth management in a digital future with Greg Dillon of OneTeam Financial
In this VISION by Protiviti interview, Joe Kornik, Editor-in-Chief of VISION by Protiviti, sits down with Greg Dillon, founding partner and principal of OneTeam Financial. Dillon, Head of Wealth Management and Retirement Income Planning and leader the wealth management division, talks about the financial future, wealth management and AI, as well as the future of the dollar and the U.S. debt.
In this interview:
0:55 - Risks in wealth management
2:24 - The role of AI
5:50 - Digital payments and crypto
8:32 - Concerns about the U.S. dollar
Wealth management in a digital future with Greg Dillon of OneTeam Financial
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m joined by Greg Dillon, founding partner and principal of New Jersey-based OneTeam Financial. Greg is Managing Partner and Head of Wealth Management and Retirement Income Planning and leads the Wealth Management division. Greg, thank you so much for joining me today.
Greg Dillon: Hey, Joe. Happy to be here and I’m grateful for the opportunity.
Joe Kornik: Hey, Greg. You spend a lot of time thinking about risks and the financial future, obviously. What risks are you most concerned about these days?
Greg Dillon: One that’s top of mind these days is the threat of misinformation. It’s shocking how many folks get their news from social media and other sources. I think one of the impacts that we’ve seen as it relates to artificial intelligence is—whether it’s deep fakes or folks mimicking another person’s voice—I mean, there is a real threat of misinformation, and at the state that we’re in these days, that misinformation can spread very quickly and can have an immediate impact on the market. So, whether that’s some type of flash crash or something more dire, that’s one of the things that I do worry about. As it relates to our business and folks’ finances, the other thing that I worry about from a risk perspective is really longevity risk. It’s fantastic news that with all the advances in healthcare these days, folks are living much longer than they have in the past. However, it’s also sort of a double-edged sword because if you live a long retirement or if you live well into your 80s and 90s, then longevity risk is not just a risk in and of itself, but it’s a risk multiplier.
Joe Kornik: Greg, you mentioned AI in your answer and it seems we can’t have any discussion today that doesn’t involve AI’s impact, or any industry that doesn’t involve AI’s impact. How do you see AI changing the financial services industry in the future? Will it replace wealth managers eventually?
Greg Dillon: So, I think that’s an interesting question. There have been a lot of changes to the wealth management industry over the years, and I think artificial intelligence will continue to commoditize the asset allocation piece, but the best financial advisors that I know, the best wealth managers, are truly invested in their client’s success. They’re doing a lot more than picking stocks and bonds, right? Many folks called for the death of financial advice when robo-advisors came around. Robo-advisors do have a place in the market, right? They create diversified portfolios. When I say that, that part of the business has become commoditized. We see the advisory fees have really not compressed overtime. However, advisors need to step up their game and add a lot more value.
Joe Kornik: Right. It seems like AI’s impact and the digitization of the monetary system, there’s a lot of things happening in the marketplace that are going to radically alter it, I would think, over the next decade and beyond. So, since we’re talking about the future and you’ve already sort of taken us out a little bit about and to talk about AI’s impact, I’m just wondering when you do look out a decade or more, let’s say to 2035 even, what do you see for the space? Do you have any bold predictions about where this is ultimately heading?
Greg Dillon: I mean, when I when I look into the future, I think one of the things—and this might be a little bit of an oddball answer—but I think one of the things that is underappreciated is the potential impact that some of these weight loss drugs can have on our economy. Now, full disclosure, I don’t own the stocks of any of the companies that produce these drugs, but if you think about it, one of the biggest comorbidities outside of smoking is heart disease and other things, diabetes, that are directly related in some form or another to obesity. Really, it’s a big challenge in this country. Whether you’re talking about the food industry, the fitness industry, the airline industry, if these drugs are really the wonder drugs that folks are saying that they are, this could have an impact on a variety of different industries across the spectrum.
Joe Kornik: Very interesting. I mentioned, Greg, that we’re in the midst of this revolution, that’s just sort of beginning, I think, and will only accelerate over time. Physical cash most likely is going to be going away eventually. Digital currencies, I think, will eventually become the norm. New technologies are transforming the financial space. So, all of this is to say we’re at the precipice of a massive transformation of the monetary system. I’m curious, when you sit back and look at that and see how that transformation is taking place, what does that mean ultimately for wealth management?
Greg Dillon: I mean, at the end of the day, I don’t think that the digitization of the monetary system really changes the game for wealth managers, but I do think that the U.S. is behind a lot of countries as far as payments go and the digital payment systems. I think we’ve seen a pickup in Venmo, Zelle, and some of these other solutions that make the money transfer instantly, which is a fairly new phenomenon in this country, but in other countries, they are light-years ahead of us when it comes to that.
Really, the crypto piece of the question, I think cryptos going through some growing pains. I think whether you talk about physical cash or you talk about crypto, one of the challenges that always comes up is the illicit use of those funds, right? When we first heard of the breakout of war in Israel, it’s been public that some of that war was funded through cryptocurrency, and it does have some very positive characteristics. One of those is that it’s not specifically tied to the banking system. But given the fact that it’s not as traceable as bank deposits, it does open itself up for these illicit transactions and things that are outside of the scope of what we really want crypto to be doing as a means of exchange.
I still don’t think that we’ve seen—I think we’re getting there, but I think we need to see stability, because if we’re talking about a means of exchange, the last thing that you want to see in your currency, whether it’s a hard currency or a digital currency, is dramatic fluctuations in the price. I don’t want to go to the car dealership and pay crypto for my car, and then I find out 10 minutes later that had I waited an hour and a half, it would have cost me the equivalent of $5,000.00 less. I do think that we’ll get to the point where the U.S. does have a digital currency. There’s still a lot of issues that need to be worked out, and it will change the payment system, how we bill for advice, for instance, but I don’t think at the heart of it, it will change the role of the financial advisor or the wealth manager.
Joe Kornik: Yes. Thanks. Greg. We’ve talked a lot about digital currency and the future, and how that may all play out. I’m curious what impact, if any, you think that could have on the U.S. dollar. Do you see its position as the world’s reserve currency changing at all because of the digital future that we’re heading towards?
Greg Dillon: Oh, I think that we’ve seen with the U.S. government trying to limit some of the resources that U.S. firms are sending to China. I think there is a race in terms of digital prominence, both from just a currency standpoint, but also from a geopolitical and defense standpoint, that there’s more of an emphasis on that. I don’t know that the U.S. will be displaced as the world’s reserve currency, and I don’t want to be doom and gloom. I’ve already talked about a lot of concerns, but I am worried about the U.S.’ place as the world’s reserve currency. Not necessarily related to the digitization of different currencies and other countries aligning themselves with folks that aren’t necessarily allies of the U.S., but I’m more concerned about the debt, right? So, we recently, I think, crossed the $34 trillion threshold when it comes to our deficit, but now, with the increase in interest rates—and I do know that they’ve come down a bit of late—but that’s costing the government a lot more to service that debt. So, long story short, am I worried about the U.S. as a reserve currency? A little bit, but probably not for the reasons that you were thinking in terms of the digital currency. I’m more worried about it from the unsustainability of the debt.
I think at some point, the politicians are going to have to realize that there’s only so many levers the government can pull, and it’s likely that taxes are going to be a heck of a lot higher down the road than they are today. Because like I said, the other major lever, cutting spending, just doesn’t seem feasible just based on the demographics of this country. So, the demographic shift has me somewhat concerned as well. Especially as a father with two young daughters, I’m concerned about their future and not just continuing to throw gasoline on the fire that is our national debt.
Joe Kornik: It’s going to take cooperation, and Greg, I’m sure those two parties in Washington are going to sit down and hammer out a deal we can all be proud of.
Greg Dillon: We can only hope.
Joe Kornik: [Laughter] Greg, thank you so much for your time today. I really appreciate it.
Greg Dillon: Hey, Joe, it’s a pleasure.
Joe Kornik: Thank you for watching the VISION by Protiviti interview. For Greg Dillon, I’m Joe Kornik. We’ll see you next time.
[End of transcript]
This material and the opinions voiced are for general information only and is not intended as legal or tax advice. Nor is it intended to provide specific advice or recommendations for any individual or entity.
Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SPIC. OneTeam Financial, LLC is independently owned and operated.
Financial Planning and Advisory services are also offered through Prosperity Capital Advisors (“PCA”) an SEC registered investment advisor with its principal business in the State of Ohio.
File#: 6296238.1
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Payments, liquidity and digital solutions with GTS Westpac’s Nish Dharmaratne
Payments, liquidity and digital solutions with GTS Westpac’s Nish Dharmaratne
Payments, liquidity and digital solutions with GTS Westpac’s Nish Dharmaratne
Protiviti Australia’s Director Ruby Chen and Senior Director Rupesh Mahto sit down to talk to Nish Dharmaratne, Managing Director, Global Head of Product (Payments, Liquidity & Digital Solutions) at GTS, Westpac. In this interview, Dharmaratne discusses core payments, new payment solutions, cross-currency payments, corporate commercial cards, merchant acquiring, liquidity solutions, risk, regulation and more.
In this interview:
1:01 - What changes in payments are expected in the next 3-5 years?
6:25 - The customer experience as a key differentiator
10:56 - Risk, governance and regulatory standards
16:33 - Women in payments and why diversity of thought matters
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m happy to be joined by Nish Dharmaratne, Managing Director, Global Head of Product (Payments, Liquidity, and Digital Solutions) for GTS Westpac. She also is a board member for the Australian Payments Network and an advisory board member for Women in Payments. I’m pleased to hand off interviewing duties today to my Protiviti colleagues, Director Ruby Chen and Senior Director Rupesh Mahto. Rupesh, I’ll turn it over to you to begin.
Rupesh Mahto: Nish, so good to meet you again. It’s always a pleasure to talk to you about what’s happening in the payments world. Thanks for doing this for us.
Nish Dharmaratne: Thank you, Rupesh. Thanks for the opportunity to join you and Ruby today.
Mahto: So, Nish, as you are at the center of payments, there has been so much impactful changes in the payments landscape over the past few years in Australia. I can name a few. Like real-time payments, using NPP, Osko, and now PayTo. There have been strong advancements of mobile app payments. There have been great developments in open banking and how to make payments frictionless using the infrastructures that we have developed over the years in Australia. My question to you is, what’s next? What’s going to change in the next three to five years?
Dharmaratne: That’s really a good question. I’ll break that into a couple of parts. In terms of trends, clearly, there are trend-setters and trend-setting, and opportunities that’s plenty. What is really interesting, Rupesh, is in general the payment volumes have been growing. As we all know, the way in which the Australians are making payments have changed, but the most important point is the way in which consumers, particularly individuals, the way they have started adopting into the new payment solutions. What is most interesting is also younger consumers, between, say, age 18 to 29, are the highest adopters of mobile devices. So, the demographic and the flavors are changing, which is also, obviously, helping to set the trend.
I think we are also picking up a number of global trends. Obviously, the wallet usage of mobile wallets has picked up. It’s part of a very tech savvy consumer who wants to make the payments. Whether you make a payment here in the Australian market or overseas. What is also interesting to see is the decline in cash. So, there has been a 90% plus decline in the cash usage in the last—again, in the last decade also and very small population of institutions using cash for various very specific payments now. So, if you will think about it, the overall trend is people are becoming more and more savvy with payments, which wasn’t the case in the past, because average consumer would walk into a bank branch most likely and discuss their payment methods. If they are making a payment overseas or if they are making a payment to buy a house, there are very specific requirements to meet. Now things have become extremely merged into a very, very digital experience. So, the Australian Banking Association, they prepared a report around digital wallets. One of the points that came up in that is about 746 million was the usage of digital wallet total usage in 2018. It has gone to a staggering 93 billion by 2022. So, a lot of these were based on people are registering their cards into the digital wallet which is now standing to be about 15.3 million registrations of mobile wallets. So, that’s clearly one trend which is—I feel that the consumer choice and consumers are making decisions.
The second one is payments going real-time really, really, really fast. We make about 650 billion worth of payments every day. Most of you, and Rupesh, you mentioned, is that the Australian real-time payment system, which is also called New Payments Platform, NPP, it has grown since its launch back in 2018. Today, this payment process is about 1.3 billion transactions and $1.5 trillion worth of transactions. It is still not at the 100% usage. If you compare with the 650 billion we make, it’s still—only a fraction of it has moved to NPP. As you rightly called out, the new functionalities or overlay service that are getting built on top of real-time payments. Things like PayTo, which is equivalent of a request to pay service in other markets, is actually going to change the game really, really quickly next year. We feel that there are not only banks at play anymore because usually we have four major banks and about 20 other tier two, tier three banks, and then there’s about hundreds of credit unions and smaller agencies that provide banking services. But when you look at the NPP there are a hundred payment providers connected with NPP. They vary between fintechs, new ventures, up and upcoming companies that are providing different parts of the payment value chain. So, the reach is higher because it reaches about 90 million customer accounts, and the depth is getting better because of the different types of solutions. All these hundred providers are wanting to provide to the market. So, I feel that the second trend, as I mentioned, is how fast can real-time go, it’s going to go really, really fast.
Mahto: I totally agree. The payments which was quite invisible in the ecosystem has started becoming quite visible to our end user. My question to you is, from you, wearing a Westpac hat, how are you taking care of end user experience as a key differentiator in your role?
Dharmaratne: There are literally two camps as far as the Australian market is concerned. The larger institutions, banks like ourselves, and then there are institutions that are—that have been investing through various investments into fintechs, financial technology. Now, there’s a lot of collaborations going around, but at the same time, we are all used to batch-based payment systems. What it means is we accept the file from a customer and we process two times a day and we are done by the end of the day if possible. The customer then gets the money in day two or day three. Now, that really has changed in the last few years anyway because of the introduction of APIs and host-to-host systems being in a mature stage anyway. What is really interesting about the technology is if you look at the way in which the banks themselves, put together just the banks, invested 28.5 billion from 2005 to 2022, and this is also ABS statistics I’m sharing with you. What that means is, banks have invested eight times over to their technology. So, that clearly says that if you are an institution which is not cloud native, not on cloud, has legacy infrastructure, you got to move and you have a plan to move to cloud. If you haven’t started using latest technologies like APIs and now AI, et cetera, you’re going to be lagging behind.
So, all of that investment is really going to make the customer experience better, because the customer is looking at a lifestyle choice when it comes to payments. They don’t want to make a different decision when it comes to a payment like—a good example we all know, ride-hailing through an Uber or through any other service provider. You do not want to be able to think about their payments. You just want to get to—from point A to point B. Get out from the taxi. Someone else is going to take care of the payments. What is really important for the consumer is, what does that mean from a loyalty and rewards perspective? So, consumer experience on one side. The more digital it is, the better off we will all be. But also, how that’s going to get connected to something that’s going to monetize for the consumer? It’s going to be really interesting because not everyone will be able and has the economics to be able to provide a reward or a loyalty every time you use a service. But consumers, and especially the demographics I mentioned earlier, the 18-to-29-year-olds that are entering the workforce and spending, will expect that user friendliness, will expect that reward, and will expect to be loyal to the brand if everything works fine.
The other part of your question, Rupesh, was around—I want to share an experience and an example with the new feature we are building on a New Payments Platform called PayTo. PayTo for payers is already live. That’s a request to pay service for those who are not familiar with the market. That’s going to be end-to-end digital. What it means is you literally walking into a merchant or let’s say your gym. You request—the gym wants you to pay $50.00 a month. There will be an electronically or digitally created mandate that gets accepted right across from the merchant’s bank to your bank, and then you will accept through the banking app or through the banking channels. That’s going to happen within two to three seconds. True, it hasn’t come into the market fully yet. We are all launching that in the coming year. It will reach some maturing because we are working with a number of institutions, particularly the biller organizations to help them to understand this is going to be the new way of collecting your receivables. This is going to be the new way of collecting—faster collection. So, let’s work together. That’s going to be a really, really interesting customer experience, end-to-end digital.
Ruby Chen: Hi, Nish. It’s so great to be able to interview you. You talked about emerging trends, somewhat the user experience. I was so mesmerized by the new PayTo, which sounds so fascinating. Now, we’re moving on to risk and governance, a topic which is equally as important, I think. So, as we move into new and enhanced digital experiences around payments and the transfer of money, what type of risk, governance, and regulatory standards do you think is necessary?
Dharmaratne: Good question, Ruby. I will take the question in reverse order because I think it’s important to set the context in terms of regulatory, then governance, and then I’ll talk a little bit about the risk. So, regulatory standards. The Australian system or legislation has not been reviewed for the last 15, 20 years. The Check Act goes back to the 1980s, 1990s. The Payment Systems Regulatory Act, which talks about payment systems regulation was back to 1998. There hasn’t been any revision of these legislations for a very long time. Now, this really links back to the announcement and the strategic payment modernization plan that the government and the treasury is keen to implement in Australia. What we’ve actually done is we already started consultancy on the payment systems regulatory act, and there are a couple of discussions happening in terms of feedback of how to go about this change.
What does that mean? As you know, with the plan, we are looking at phasing out checks in 2030 and also looking at a way to reduce the batch-based system called BECS which is a batch-based exchange system for low value transactions. We’re thinking of looking at an organized way of phasing that out as well into the future, quite similar to the checks timeline as well. So, I feel 2023 and 2024 is going to be a very, very exciting time for us with the changes that are proposed through these legislative reviews that are taking place now.
The second part of the governance and regulatory standards is, we will expect also some level of payment standards body to be set up and that will then take care of some of the work we are doing today on enriching messages, ISO 20022 standards, and the things we need to do even around fraud, et cetera, is all going to be part of the standards that we expect through a standards body. That’s going to be a piece of work that the industry is going to work towards.
The last part about the governance is licensing. Australia has been a very free market led by demand and supply of consumer choice, consumer rights prevail over many things. But we’ve never had—other than the standard banking licensing regime, we’ve never had a payment service provider licensing. So, you do find a lot of the global brands and global providers who are in this market doing extremely well providing the services, but there’s not much of governance going around it. So, the second part of that really, Ruby, we expect that the governance is going to get better, obviously, for the betterment of the consumer.
Now, let’s talk about risks, because I think the biggest risk at the center of all of the risk categories is fraud and scams. This is really a huge, huge area that the banks, all of the participants, including the government, is really keen to look at some solutions or enhance the existing capabilities that we built. So, the Australians put together—lost about 3.1 billion from scams last year. Mind you, that’s just the reported number. So, the common types of romance scheme scams, lottery scams, money transfer scams, even grandparent scams, who would think, right? So, consumer protection therefore is top of mind for the regulator, government, and ourselves as banks. So, the government through the federal budget, they backed a package of $86.5 million to be able to combat scams and online fraud. On top of that, major banks already established means of fraud checking, payment verifying, and we ourselves at Westpac we have payment verification service offered to the customer when they set up payers in the online banking channel. So, this risk area is a huge area for us. There’s also word that the industry bodies are looking to implement a common confirmation of payee solution that will get discussed in the coming months as well. So, there’s a lot of focus and attention. Everyone is doing their best but frauds and scams continue to be a challenge for many Australians.
The second risk, which I think is really important, is the cyber risk. That is not uncommon to any market anywhere in the world. Cybersecurity, an enhanced means of contingencies in the event of a cyber scenario, is something that the prudential regulator is very keen for all regulated entities to implement and make sure we have the contingency plans to support our customers.
Chen: Another area that is of very big interest to me is women in payments. So, you served on a few boards and you’re the advisory board member for the Women in Payments organization in Australia which reflects your passion around this area. What are you views towards the role women can play in driving the future of payments industry or ecosystem? Why do you think it is so important to have more women involved in shaping the future of the industry?
Dharmaratne: Yes. I think this is the hardest question of all of it. The others are pretty easy given—in the midst of building and delivering solutions to the market. This one I never thought as anything that is—differentiates a person as a female leader driving through changes. Actually, it’s a very good question, Ruby, because when I look back, and I’ve been in the banking for 30 years, and when I think about payments, payments were never in the forefront of banks. Banks were busy lending. Banks were busy taking deposits. I, myself, has been a balance sheet specialist for the early parts of my career. So, I became a payment nerd much later or mid-career. Maybe it’s a midlife crisis, but I moved over more towards payments on the last probably 10 years or 12 years of my career. As I said, when you look back in the banking, ages ago, payments was really—payments could be in the technology area who is just helping you with technical customer payment files or exchanges between banks, or managing when there’s a job failure on the technical side of things. Or, the other career path around payments was just in operations. Basically, there were many systems but all the systems did not talk to each other. There are a lot of manual operations. Therefore, lots of females tend to be more on the operation side as opposed to the technical side. You could almost see that a large part of the technical payment technology side was dominated by males, and I’m making a very general comparison here, but operations jobs were females.
Look around now and you could see that, if at all, equal or more participation from women in payments-related services. That’s really, really interesting because I think it’s a bit like women in technology, but women in payments itself is something that has—we have evolved over time. I think women have been much more learned, much more educated, much more willing to take risks in their career, chosen career paths. That helped to be where we are today. The other thing that is really important is the number of new ventures or financial technology company or startups that women do play a key role.
Now, I’m gender neutral around these things because all types of diversity is really, really important. Diversity brings the best of—diversity of thought, in particular, brings the best when people collaborate and it’s essential during—an area like payments which needs a lot of ideation and innovation, and people need to be working together. So, all perspectives are extremely important. If you’re passionate and you want to do something, now there are many more tools and organizations and support groups particularly for women. I do mentor a couple of female talent in the market. They are very, very excited of what payment services and payments combined with technology together is going to create even more, bigger opportunities. So, a whole lot more to see.
Chen: Thank you so much, Nish. That concludes our interview questions. It’s so great to have you with us today.
Dharmaratne: Thank you, Ruby. Thank you for having me. I really enjoyed this conversation.
Chen: Great. Thanks, Nish. Now, back to you, Joe.
Kornik: Thanks, Ruby and Rupesh, and thank you, Nish, for those insights. Thanks for watching the VISION by Protiviti interview. For Nish, Ruby, and Rupesh, I’m Joe Kornik. We’ll see you next time.
With over 23 years of experience in banking across Australia and Asia, Nish Dharmaratne is the Global Head of Product for Global Transaction Banking business at Westpac Institutional Bank based in Australia. In her current role, she covers core payments, new payment solutions, cross-currency payments, domestic and international receivables, corporate commercial cards, merchant acquiring, liquidity solutions and balance sheet management.

Rupesh Mahto is a senior director specialising in strategy, technology assessment and enabled execution, digital transformation, cloud migration, and application of emerging technology to business demands. He successfully leads interactions with CXO, focusing on increasing operational efficiencies, growth, and cost reduction.

Ruby Chen is a Protiviti director with over 12 years of experience in the financial services industry, for 10 of which she worked within the Big Four banks before transitioning into consulting. She has a broad range of experience providing advisory services and secondments across all three lines of defense.

Ruby Chen: If you were to look at, say 2033, what do you see happening in payments? What’s possible if we get this right? And what could go wrong if we don't?
Nish Dharmaratne: Great question, Ruby! I don't have a crystal ball, but there's going to be very clear trends emerging over the next ten years. Specifically, I think all paper-based transactions—whether it is a checks or direct debits or even someone walking into a branch and filling up a one pager to do a payment—will all be gone. I think that's going to be supported by the level of automation happening in the branches.
The second trend is the increase in real-time payments but more of an overall connected lifestyle for consumers and connected commerce for corporations. Consumers will continue to demand more choices and digital ways of paying. Meanwhile, many organizations, such as utility providers and insurance services, are ready for change. I can share with you we looked at the insurance segment data recently and 50% of insurance claims are still processed via wire checks. So, there are options that we could really look at improving.
The other thing that’s very interesting to me is how much we, as an industry, are paying attention to being socially responsible in how we deliver payments. As you know, Australia still has vulnerable communities, and we need to be conscious of how products or services are accessible to those communities, as well. As we move into a more digital future, we need to be aware that not all demographics or populations are digitally savvy or have access to all technologies. We have a responsibility to take care of these communities who may not necessarily have all the access to financial services in the future.
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