The "odd couple" label may not quite fit, but Kawika M. Daguio and Frank W. Sudia have formed a somewhat improbable union in hopes of making some exotic financial technologies seem less odd.
Until recently, they said, they could not talk to each other for competitive or political reasons.
But now Mr. Daguio, who had spent seven years at the American Bankers Association before leaving in May, and Mr. Sudia, who toiled in several high-tech startups inside the old Bankers Trust Corp., are partners in four-month-old Fintegrity Ventures LLC.
The firm and Mr. Sudia are based in New York. Mr. Daguio splits his time between there and Washington, where he is executive vice president of a trade group he organized, the Financial Information Protection Association.
Their joint goal is to seed and to nurture -- in the parlance of Internet venture capital, to incubate -- promising information security technologies such as those based on data encryption and digital certificates.
As befits their backgrounds, they are almost entirely focused on financial industry opportunities. They think the time is right to marry the mentality and creativity of a high-tech startup with the growing awareness and concern among bank senior managements about the security vulnerabilities of electronic commerce.
They have gone so far as to launch "meaningful projects" with "people who are in a position to buy products" at prominent financial institutions, Mr. Daguio said in a recent interview.
"These are products that sell themselves," Mr. Sudia added.
"Unfortunately," said Mr. Daguio, the companies they are working with "won't let us use their names."
Such secrecy is not uncommon where cloak and dagger cross over into competitive commercial intrigue. Mr. Daguio and Mr. Sudia say this will pass as the new and unproven evolve into standard business practice. They profess to be interested only in making Internet commerce bigger and easier -- and, of course, in a share of the profits that result from brokering deals or licensing intellectual property.
"There are a lot of ideas and money out there," Mr. Daguio said. "But there is a paucity of good ideas and execution that actually get funded."
The Fintegrity partners claim they bring a combination of business and operational sense and contacts with people in power that many startups cannot match. Technical skills and code-writing wizardry are abundant these days, they say, but getting them funded and turning them into businesses require a special touch.
"I come at this as an analyst with a technology policy background," Mr. Daguio said. "We fill in the gaps between the technical requirements and business requirements. We are in a position to form companies that solve problems in a space we know a lot about."
"Security people are still not able to drill down into the operational risk issue the way bankers have to deal with it," said Mr. Sudia, who earned a law degree before being swept into system design and strategy work. "We are leaders in teaching clients about the risks and what these systems can solve."
Unable to name customers' or other supporters' names, the partners must lay their personal credentials and credibility on the line. Mr. Daguio said they have succeeded in getting "several ideas past the idea stage and interested customers with their checkbooks out" because of their knowledge of and contacts in banking and government.
"We are not in a position to do vaporware," Mr. Daguio said. "There is too much at stake."
He said they are able to "work with everybody we worked with before but on different terms."
Mr. Daguio, 33, wore several hats at the ABA in lobbying and technology and payment-system areas. He was instrumental in designing the public key infrastructure for the ABAecom digital certification spinoff. He became perhaps banking's foremost analyst and spokesman on matters of data encryption policy, where there has been much contention over whether federal rules should permit the export of strong, or unbreakable, codes.
He set up the Financial Information Protection Association to "ensure that financial information and infrastructures are properly protected" and to work with "all communities involved in electronic commerce" to promote safe transactions and overall business growth. The group is advocating a national digital signature law in hopes of preventing or preempting a patchwork of state variations.
Utah was the first, in 1995, to pass a law granting full legal standing to electronic documents that are sealed with codes derived from digital certificates. Mr. Sudia, who served on an American Bar Association committee that did pioneering work on digital signatures, and others in Bankers Trust's Certco spinoff had a lot to do with drafting that law. Certco and other Sudia activities may have competed with ABAecom; hence the avoidance of premature conversations between the Fintegrity partners.
Despite the relative newness of the signature issue and the sensitivity to states' rights to legislate, Mr. Daguio said, logic will prevail on the need for uniformity. "At the very least, you should have the option of an infrastructure for enforceability of contracts," he said.
Mr. Sudia, 45, said he spent the early part of his career in the nonprofit sector, but the flowering of personal computers in the early 1980s sparked his interest in "doing things for myself. I am a child of the PC revolution."
He shares credit with Peter Freund, currently chairman of Certco Inc., for founding that New York-based data security company within Bankers Trust's BT Ventures unit, now part of Deutsche Bank. Mr. Sudia contended that no bank saw e-commerce as a business before Bankers Trust, which by April 1994 had a department with six people dedicated to it and reporting to a senior manager.
Mr. Sudia also pointed out that RSA Security Inc.'s April 1995 spinoff of Verisign Inc. is widely viewed as the watershed event in the commercialization of the digital-certificate method of authentication. But Bankers Trust had an "authentication server" in place in 1993, serving a population of 15,000 with hand-held security tokens and still operating in version 9.0.
Those were just two of many advances incubated at Bankers Trust and now reportedly being eyed with great interest by the new parent in Germany. Both Bankers Trust and Deutsche Bank were in the initial group of eight multinationals that formed the Identrus digital certificate consortium last year for the business-to-business e-commerce market. Certco laid the groundwork for that and is competing with other providers of PKI, or public key infrastructure, technology to support the growing number of banks joining the program.
Now Mr. Sudia and Mr. Daguio are turning their attention to removing the obstacles that have prevented the much-ballyhooed PKIs from becoming more widely deployed and lubricating electronic commerce the way they were supposed to.
Numerous vendors -- Verisign of California, Entrust Technologies Inc. of Texas, and Baltimore Technologies of the United Kingdom among them -- are working diligently to do the same. Fintegrity's distinction is the incubator strategy.
Mr. Daguio himself has four patents. Mr. Sudia owns seven and has his name on 10 others. Whether with their own patents or others', they would take the rights, build a banking system and business structure around them, "develop inertia, and hand it over to investors and management that want to grow the company," Mr. Daguio said.
"You need people who dream code, and you need business people to identify killer apps, and you need people to sit in earnings meetings," he added, suggesting that Fintegrity can brew all the necessary ingredients.
"People are stuck in the pilot stage," Mr. Sudia said. "There are no mass PKI deployments because something is wrong with the model."
"We know what the problems are," Mr. Daguio said. "We were there when these models were created. I had to work through these problems" at ABAecom, for example.
One approach Mr. Daguio is willing to mention is a "PKI support infrastructure" that he described as "an igniter ... a missing component" that would efficiently enable PKI operations at large, nonpilot scales. His excitement at the prospect, however, is tempered by the realities of a market that may not scale up to millions all at once -- or need to.
He said, "If you can roll out a technology that supports a business mission, that is more efficient, not requiring changes in client browsers, and at a low enough price that it is not an impediment to a rollout, then you win -- as long as you don't try to control the world."
Mr. Daguio said he is confident that Fintegrity has a winner because it is "business-driven" and has gotten the attention of "people who have decision-making authority and the ability to get it done."
"We also have some ideas that are quite narrow, say, 1,000 customers, but with a need to deploy globally," Mr. Sudia said.
"If there is one thing to know about Frank, it is that he is an idea guy," said Mr. Freund of Certco. "Ideas come all the time. It is a question of getting down to the right ones. He and Kawika are a very interesting pair."
Mr. Daguio is "a very bright guy with a lot of ideas about the intersection of financial services and technology," said Tom Greco, president of ABAecom in Washington. "What he is doing with Frank is in line with where he has wanted to go for a long time professionally and personally. He has always said he likes to see the financial services industry win in the e-commerce arena and on-line trust, and it will be interesting to see how their venture plays out. It's safe to say the jury is out."
Mr. Daguio, reiterating his underlying desire to "solve policy problems and promote commerce," said, "I would be very upset if PKI turned into a technology failure like CASE" -- the 1980s relic computer-aided software engineering. "That seems impossible as long as it comes down to execution on good ideas, and that's what we can help people with."
