The Trust Paradox

Episode 253

12/16/2021

Episode 253

The Trust Paradox

Digital Identity has the power to enable “trust” in a matter of seconds. It’s changed the game — from trading assets and voting to obtaining access to everyday services. How do you create trust? On this week’s State of Identity, host Cameron D’Ambrosi is joined by Alexei Stanislawski, CEO at maat.ai to discuss the trust paradox. As government-issued documents become obsolete, we can expect to see a shift towards peer-to-peer networks building a new trust framework from the digital traits of our lives.

Host:

Cameron D'Ambrosi, Managing Director at Liminal

Guest:

Alexei Stanislawski, CEO at maat.ai

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Cameron [00:00:04] Welcome to a state of identity, I’m your host, Cameron Ambrosi. Joining me this week is CEO at Maat.ai Alexei Stanislavski welcome to State of Identity.

Alexei [00:00:16] Thank you, Cameron, it’s so good to be here. I love everything that you guys are doing everything as a building, and it’s super exciting to be a part of this.

Cameron [00:00:24]  You know, I, for one, always relish a chance to have some of my fellow Fordham Rams on the podcast Go Ribs. You know, there’s a few of us floating around in the space and always fun to to toot my own horn there. But you know, before we get into, you know what, you and the team at Matt A–i are building, you know you have a really interesting background, some interesting startups that you founded and sold. And I always love to ask my guests, you know, how did you find yourself in this digital identity space? And kind of what was your career journey to finding your way to digital identity? So if you wouldn’t mind, you know, would you mind sharing a little bit of that journey? Some of those earlier startups you founded and how that led you to, you know, leading the team that Matt.

Alexei [00:01:16] I absolutely came out, and I think that’s a great question because I think that most of us in this space really don’t. We get to this phase of very interesting ways. So I love to hear about that because of that question. And in my case. I think one of the motivators definitely very common in the tech space, a love for efficiency and hate, for inefficiency at its pricing efficiency. And the other thing, I think it’s also look for fairness. Talking about my past startups, I’ve figured that it’s most of the things that I’ve built. It’s about bringing fairness to a system that is on balance. One of the entities involved in it has is that symmetry has more power, has more knowledge, lots more money, although there’s a want for interacting. But the way that things are interacting, either the person in power doesn’t want to be in that much power anymore. You know, it’s a little bit of a sense of unfairness or guilt on their side. And then on the other side, you know, the person being dominated or at the end of the day, part of the platform being dominated obviously wants out of there. So one of the one of the startups, my first one was design. So again, you know, there was a design boom in Mexico. It started a few years ago, and now we’ve seen a lot of Mexicans winning a lot of awards in creative areas and movies in architecture and design. And then this was some of the rights of Mexican artists, and they wanted to share the designs. I wanted to share what they were building and what people wanted to buy. But it was difficult. You know, there was not a platform, let alone a digital platform. So that’s that’s what I built. And a year and a half later, we didn’t even know what being bought wasn’t even what a startup was like two thousand nine in Mexico. But I think private investors liked it, apparently, and they bought me after that. My second startup was in the boom of social media, and it was a platform where you could connect with people with similar hobbies than yours, and you could go to places to watch or play chess, you know, or it was sort of like this long tail kind of hobbies. And then the third one was connecting companies with non-profits. I really like that one because. Again, companies wanted to have better social impact that this was back in 2014, so now we see that all the time. Companies Will Tattersall’s are starting to use more resources, more consciously starting to involve beneficiary oriented design. And now you see big retailers, even luxury brands, to house them for some sneakers or whatever. And people are like, oh, zero waste or zero carbon emissions. So now that’s a thing. But back in 2014, you know, companies were just started and they really didn’t have knowledge inside. So what what we started doing was connecting them with non-profits that knew about zero emissions and knew about zero waste. They knew about all these things. And together they could collaborate because nonprofits, on the other hand, are usually only about donation. And that’s not sustainable. They also have to give something back. So by balancing these two guys out, it was way more fair. Companies would pay them for services, and then nonprofits would give something back for their money. So that has always been the line. Fairness, efficiency. And then years later, I was talking to one of my co-founders. He’s one of the best lawyers in Latin America. It’s not me who sets the legal 500. It’s when the rights guys. And he was in, you know, in a lot of trouble because one of the one of his clients was issuing shares in the New York Stock Exchange, and there was a lot of people who had to be fulfilled. And a lot of anti-bribery laws that they had to comply with. And that means a lot of background checks and a lot of paperwork. Having dealt with people it myself. You know, we’re getting purchase anything, you know, getting a visa, even tying it up to the foreign, I’m sorry. I’ll tell about having a little bit. But having dealt with a lot of people who’ve been very frustrated with that and how inefficient it was and how unfairly they treated wood, you don’t have that paper. That’s immediately when I when I was found with with his mission that said, listen, isn’t right. So let’s break this whole paperwork. You got to find a way to automate this whole paperwork. We got to find a way to make more efficient because can I believe that? You know this this company. Is spending more time and more money and background checks and actually the diligence of the company with them from the diligence, other supplies? It was all destruction of value everywhere. The numbers say that the world loses six trillion dollars and twice the size of the U.S. in bureaucracy. And this is a certain amount nobody wins when something like this happen. It’s not like somebody is making that money. It’s destruction of value all together. So we decided to start this and we got a third co-founder and use this as an automation engineer again obsessed with with the efficiency and also a very political guy. So there’s there’s another component there that I’m seeing me and then yourself, another and other people that you’ve spoken to over fairness and wanted to do things right. I wanted to do things quickly. And those were kind of like the values that we brought to the table when starting Mario.

Cameron [00:07:46] I guess the perfect Segway into what is Matt A.I.? You know, what problem did you set out to solve and how are you currently solving it in market?

Alexei [00:07:56] For sure. So Maria was or is still figuring things out, you know, how to start a world is a digital identity platform. So on one side, you have people owning their digital identity, owning their documents, owning all the information that lets you interact with the world. And then on the other side, you have people that requests information, financial institutions, health care and stations, universities, education and then all of the network. So. Well, what we build is a way for people to hold the information securely, have access to it, comply with data protection regulation, be controlled with it and on the other side, we for this, we’re going to see institutions that need this information to be able to access it and know that the information is correct and know that the information is verified and know that they are not subject to fraud or identity theft.

Cameron [00:09:03] And in terms of your geographic focus, you guys are really focused right now on the Mexican market. Is that correct?

Alexei [00:09:11] That’s where we’re starting due to our our network or personal network, you know, as a father, you start with the research that you have in hand. So we’ve started in Mexico. But we found similarities in other countries from Latin America, which are things that we could chat more about today because there’s a lot of opportunities in the region. And historically, you know, we’ve we’ve we’ve tried to come together as a region before. Obviously, Europe is is the the example to follow. But there are here have been historically some attempts here in the region. And what we’re seeing in digital identity is that there might be something there to exploit because the problems are similar. Again, inefficiency is something that we see in the region and corruption as well. We’re seeing things only as a way to fight bureaucracy because bureaucracy then brings to things corruption inefficiency. So definitely when institutions are plagued with, you know, with the power of the bureau, you know, bureaucracy, the power of table. That’s something that I’ve always found absurd. And then unfortunately, in the region with people holding this power want to monetize it. Once monetized power is all over the world. Obviously, you know, bureaucracies all over the world, it’s very ancient st. But there’s a lot of those symptoms, memory. And seeing that being raised here, my life, that made me really sad to see the potential that we have as a region. But then how these people in power. Wanting to monetize their position, make it very difficult for people to do business, make it very difficult for people to own assets, make it very difficult for these people to to move. You know, there’s there’s even this as many stories as I could tell. Probably you people in the audience are going to have. I’m going to find stories of which bureaucracy really limits it, their their freedom. But one one story that connects points is there was a movie Roma, you know, Mexican movie famous won some awards and stuff. And the Mexican guy, one of the main actors that you was, he was nominated for an Oscar and he couldn’t go to the ceremony because he didn’t get a visa and the paperwork. So this guy was not allowed to even go to the Oscars ceremony, which is a once in a lifetime thing. So, you know, those kind of stories I find so frustrating and infuriating and yeah, worth fighting for, you know, like that. What are these stories? What other human potential, whether economic potential is lost due to paperwork?

Cameron [00:12:15] Yeah, I mean, you’re preaching to the choir or the converted, whatever. Pick your pick your analogy here in terms of, you know, my fundamental belief that this is a core problem that needs to be addressed. I think anyone listening to this podcast is probably nodding in agreement, which is why you’re listening in the first place is because you’re involved in this space in terms of, I guess, two part question for you. You know, I know from my perspective, digital identity is kind of, in many ways inexorably linked to cultural elements. You know what it takes for platform to succeed in a given market, I think needs to be considered alongside how your target users kind of view digital identity and and how they interact with those underlying attributes. Curious to hear how you know your decision to launch in Mexico as a target market kind of inform the product design. And then I guess second follow up question there is, you know, what is your go to market strategy broadly? You know, we’ve seen, I think, across markets a challenge for digital identity wallets. More broadly speaking, you know, user centric digital identity platforms to gain traction because of the difficulty in, you know, educating consumers, getting them to adopt what is largely still kind of a foreign concept to them. So I’d love to hear your thoughts on how you plan on breaking through some of that inertia.

Alexei [00:13:41] Absolutely. I think what you say about culture is it’s super interesting and there must be. A way to start absolutely your call to my guess, it’s pretty good question, Karen. So culture wise, where we’ve seen the most need for this on on the receiving side of identity is the financial sector financial institutions. Mexico is one of the countries in the world where financial institutions established banks have the largest return on equity. So and we saw it with the crisis, you know, everything’s connected and we saw definitely what happened with the banks in the crisis and then Mexico, then when the banks started collapsing in other parts of the world, Mexican branches started bailing out the headquarters, which was in saying, You know, you would’ve thought we’re the world’s is a Mexican branch of the German banks and send money to Germany or the US or Spain. But that was what was happening. And then we started to find out that illiteracy in the region is so bad that establishments have been able to. Become very strong here and get a lot of return on their equity. So then what happened is new challenges start to emerge. We started to realize that an educated middle class with access to the internet started to think, Hey, wait a minute, what is going on around here? So start to emerge. Mexico was one of the countries with the most growth in fintechs the past few years and now works in venture capital. So that’s something that we’ve seen fintechs and alternative lenders starting to come with new proposals that have now made the banks rethink the positioning, and now the banks also become more digital, more competitive. Check the whole status quo has changed. So we’ve seen in the financial sector is one of the ironically one of the top spots to two entry here. Obviously, there is still huge learning curves. Obviously, the sales cycle sale cycles are very long in and Maxhosa need a lot of security because this is a very core product, so that’s taken a while. However, there’s a lot of adoption for that in Mexico, in Latin America because of that, because of how competitive this whole sector has been. And then on the other side, people. Business people and again, this middle class that I was talking about earlier are the ones with the most pressure to move know when you get economic crises. Middle class is also one bad business decision away from falling. So they really need this agility. They really need this flexibility in order to be able to do business and move around and migrate, make the changes needed to stay afloat in a very difficult, competitive environment. So on both sides, that’s what we’re seeing. We’re starting with the financial sector. And we’re seeing a lot of openness to collaborate because of the whole Obamacare movement. So we’re also seeing that open banking is something that the world needs you guys to talk about it. But. It’s very difficult, you know, Bouncer who cycled even within, so a solution that we’re seeing. To that is taking information outside. If it’s the banks only information, that’s something that we’ve seen in the US, Canada, it fits the banks only information exchange and information. There’s a lot of details that need to be posted and the conversations take a lot of time. But it information leaves. The bank belongs to a personal and righteously belong. And Mexico also has a great data protection regulation if information belongs to the people, and it’s ironically easier to tell from bank to bank. And also. Through what we call moments of bureaucracy, usually when you get access to financing micro loans, growing the region personal loans, then you do something else, then you either buy assets, travel, start a company, you know, perform a medical procedure. So that’s something we’ve seen when someone starts getting the loan and getting money. That’s not either which start in a reference. So we’ve seen it zoom out and we’re seeing that. Banks are getting people from somewhere and then after the loans are going someplace, so banks are very open and financial solutions open to collaborating with the whole journey. A lot of the largest banks here have shown interest in saying, Hey, we’re really offering these guys loans for where they come from, and they’re coming from companies that would love to collaborate with the H.R. departments of these companies or universities or whatever. And then where are they taking this money? Oh, they’re buying a car. We would love to help them with that process. We would love to help them travel. We want to help them buy tickets. So that’s precisely where we started doing win our biggest success story. It’s one of our clients, gives out credit cards for people to purchase airplane tickets. And the collaboration there is really opening the door. People are very happy because say this is the right place for identity. This is precisely what we want. If someone already has the credit card, then it’s going to be way easier to identify them. And the process for it’s going to be way shorter and it’s really validated. And finding those areas just makes it very easy and cheap and convenient for everybody.

Cameron [00:20:00] I love it in terms of the business model that you guys are looking to utilize here. You know, is it your vision that the costs of identity should continue to be borne by the institution? And you can essentially make this completely transparent and costless from a consumer perspective?

Alexei [00:20:21] That’s a good question. I think the business is trust, right? If you pay not the problem, that’s putting a serious lack of trust. And so far, what we’re seeing is it’s still the governments where the current paradigm, it’s still the government’s, the one that generates trust. And I think it’s going to be a gradual shift. Yesterday, I was listening to the history of the word horsepower, and we use horsepower right now for car engines because, you know, at the beginning, we started because we were using carriages and little horses. So I think that transition. And here is something similar, we’re going to see digital identity. Be started by the governments, and therefore in the business model, it’s still the government who’s going to have to issue these documents that allows us to trust each other. I still believe that’s the transition that’s going to be the business model currently. And then the person receiving the document paying and then, you know, companies like us being in the middle, being the channel, enabling this and paying that cost the transaction for computing power processing, power building networks, etc.. But as this evolves. And. A document becomes obsolete. We’re going to start seeing peer to peer trust, and that’s something that we’re building, right, and then we’re going to start seeing. The digital traits of life being a way to create trust, which is very interesting because it’s life, if you wish to document the wild back. Well, who knows, it’s still valid or, for example, my driver’s license, you know, this just happened to me. My driver’s license expired. I still know how to drive even though it expired, so it would be way better to create trust other than another way of knowing if I could drive correctly other than piece of plastic issued by the government. So that’s going to be the next thing. And then the business currently is that way. The person receiving the trust paid to the person issuing that trust, which is the government in the future, we’re going to see all these kinds of interactions, which also is super exciting for us and for the region because. That model, that centralized model has very, very difficult for people on the edges of society to have access to identity. So if you open an alternative model trust, then you’ve given, well, let’s say last number that I was seven billion people with one billion people without access to identity. And with that, without access to it, and you have no access to services, financial services, cable internet. You name it, but if we. The beauty of digital identity that we’re thinking this alternative ways to create trust is that it’s going to allow us to. Open up trusts and identity for all the other person. Oh, all the people that are not currently being serviced in the centralized model.

Cameron [00:23:47] Yeah, I think it’s anyone’s guess as to what the future holds, but I think I agree with you in terms of the broad strokes of where digital identity is headed in terms of, you know, the future. I do love to always ask my guests to make some crystal ball predictions, so I suppose now’s as good a time as any to get your thoughts there. You know, if you had to make some guesses as to what we can expect to see in the market over the next one to three years would love to hear your thoughts there.

Alexei [00:24:20] Oh, amazing. It’s a very fun question. So first hand related to last mobile business model, we’re going to start seeing people monetize their own identity. And people monetizing. Validation of identity. That could be one one one prediction, too. We’re going to see cross-border digital identity. This is something that we’re working towards that makes us really exciting when we mentioned earlier about the region. We are starting to expand to other countries and luckily enough, one of the countries that we’re expanding to its release, which is right next to Mexico. And one of the opportunities that we’ve seen is if someone already has an identity issued. Through Maria, erratic government level, they would be way easier for people to share this technology and be able to move with more freedom. And again, talking about data protection GDPR, the principles of data protection established, you know, by all the countries after the Second World War, it has to be portability. So it’s not only about money. So another thing that’s going to happen is start ups that are working through this. We are going to have to enable portability or we’re going to have to enable interoperability. That’s where I find an organization like you guys. So interesting because right now it’s that a start up level. But then it’s going to be you have to find a consortium, you’re going to have to find the protocols you’re going to have to establish, you know, these connections that are even going to be better than the status quo, for example, right now, passwords. There’s not a centralized, you know, passport database. It’s sensitive information countries haven’t found a way to to do that without, you know, putting people at risk. And the only way to get it is if there’s a, you know, there’s a there’s a felony and then you get the Interpol involved with that. But that’s, you know, the downside. What about the upside? What about migration? What about travel? And what about their experience with Open the World? So one world and then finding a way to connect the world, you have to be able to freely travel. Because I think that that’s where the world is heading politically, economically, you know, we’re seeing the problems that the world is facing right now is so large that no one country consultant economic crisis call it, you know, before, you know, we were the country was strong enough to be able to squash a problem. But now, you know, we need preparation, we need collaboration. And it starts with people being able to travel. People even be able to trust people being able to collaborate with Charlie. Hey, who are you? Is a company that you’re telling me legitimately. We’re sending information and sending pieces of software clients code assets from here to there. And he’s this company based out of the side of the world legitimate. And it’s sort of sending my money. And maybe you’re never going to ship, you know, the the the assets or I’m going to send you those lines of code. And then, you know, what’s the guarantee that you’re never going to use them for yourself once and for your so moving out of the game? So all this, you know, lack of trust that has that’s embedded in a brain, you know, with our brain works that way, but giving us tools to break this out of our brain, being able to collaborate and stop thinking me versus human, I think is going to open the world. And my prediction is, yeah, borders are going to start to to dilute. So people want to Typekit in their own identities. Yeah. And borders and looting, definitely. And one way to to an is a way to collaborate with this decentralized, distributed identity are some of the bowl predictions that I have.

Cameron [00:28:24] Love it. Before we wrap here, I did want you to give an opportunity for a shameless plug for folks who want to learn more about Matt II, whether they are users in Mexico who want to join the platform, or I think more critically, folks who are doing business in Mexico who are interested in leveraging that A.I. for their identity verification needs. What’s the best place for them to go? And if they want to get in touch with you, how should they do that?

Alexei [00:28:52] Definitely. Thank you, Karen, for that. Well, the very easy one is our website to remember because it’s a brand matt audio. That’s a way to contact us. You’ll find the what’s up there that you know there. You’ll also find where to download our app right now. The app is only available in Mexico because we were only able to verify national documents, but now we’re able to verify other documents. So we’re expanding Latin America very shortly through the help of one of our investors actually going to open up in Asia. So this is happening. And if you guys are interested, please contact us Mario also or social media. We’re active on reckless fazlur active on on Instagram. My personal email, Alexei at my thought. And yes, we’re here to chat, to collaborate on. It’s very interesting. So definitely looking forward for users, getting ideas, getting market validation client to business together. Another startup, as I mentioned earlier, I do believe that all of us have digital identity going to need to collaborate in order for this to to be a global movement. And as you say, adoption is is it’s the main challenge. The idea is great. But adoption is a challenge while we’re all. Showing a unified front, I think adoption is going to be easier for people to trust.

Cameron [00:30:15] Couldn’t have said it better myself. Alexi, thank you so much for your time, really appreciate it. Always great to connect with you and hoping I can join you down in Mexico for the second part of our interview. Sooner rather than later, because I’m itching to get back on the plane.

Speaker 2 [00:30:31] Absolutely. Our looking looking forward to that. You guys are welcome in Mexico anytime. Yeah. Looking forward to collaborating with you guys. Well, you guys are doing.

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