Mastercard has announced that they will begin to use blockchain technology to process B2B payments. IBM recently announced similar measures.
B2B Payment Service
Mastercard has announced a major development in their financial technology. They revealed that they are opening up access to a blockchain based B2B payment service. The service will be called “Mastercard Blockchain API”. The service will mean that users will be able to send money via blockchain, rather than swiping a credit card.
Blockchain is the technology which behind Bitcoin, the cryptocurrency which is gaining a lot of attention in the financial world. Bitcoin is something of a taboo subject among leaders in the financial world. Recently, Jamie Dimon, CEO of JPMorgan Chase, referred to Bitcoin as “fraud”. However, he did acknowledge the possibilities of financial institutions using the technology behind Bitcoin’s advances.
While Bitcoin is a controversial currency, sometimes for its use in illegal transactions, the technology behind it is often described as ingenious. Blockchain technology effectively is like a spreadsheet that self-duplicates several times over. By storing blocks of information that are identical across its network, blockchain cannot be controlled by a single entity. Neither does it have a single point of failure, meaning that it is less susceptible to attack. It also has the ability to self-audit, meaning that it self-checks transactions in its system roughly every ten minutes. To manipulate the numbers would require an immense amount of computer power, meaning that figures can be a lot more accurate.
Mastercard is the second major company to announce their use of blockchain technology. IBM recently announced that they were going to begin to process payments between banks in the South Pacific using blockchain technology.
Justin Pinkham, senior vice president of Mastercard Labs was keen to stress that they were not entering into the bitcoin business. “We are not using a cryptocurrency, and we are not introducing a new cryptocurrency because that introduces other challenges—regulatory, legal challenges,” he said. “If you do a payment, then what we can do is move those funds in the way that we do today in fiat currency.”
Mastercard has an advantage over Bitcoin. It has preexisting agreements with 22,000 banks and financial institutions worldwide. This gives the company an upper hand when introducing the new technology. A number of corporations have already signed up to use the system.
The public will not yet be able to avail of the blockchain technology just yet. For the moment, the system is limited to business to business payments.
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