The idea of using a blockchain has had such an impact on the financial world lately that even giants like MasterCard are now tipping their hats to it. The credit card company is reportedly rolling out its own blockchain solution targeted at particular banks and other private businesses, offering the ability to process payments more efficiently than with their card system.
However, Justin Pinkham, Senior Vice President of MasterCard Labs, emphasized the idea that MasterCard is not creating a cryptocurrency, saying:
“We are not using a cryptocurrency, and we are not introducing a new cryptocurrency, because that introduces other challenges—regulatory, legal challenges. If you do a payment, then what we can do is move those funds in the way that we do today in fiat currency.”
Blockchains have, until recently, been utilized as the backbone technology behind cryptocurrencies, allowing for a decentralized transaction processing system that is driven by the consensus of all nodes in the network.
Although cryptocurrencies themselves are struggling to gain mainstream traction with financial institutions and governments around the world, the technology that allows them to exist garners their intrigue.
IBM also recently partnered with Stellar in another venture involving the use of blockchain technology to process cross-border payments across the South Pacific region.
The difference between IBM’s solution and MasterCard’s is that IBM makes the transactions through cryptocurrency.
Pinkham added that MasterCard has a settlement network with more than 20,000 banks around the world, which allows it to use a fiat currency blockchain efficiently. IBM is partnering with 13 banks, making it unfeasible to conduct all transactions in the South Pacific using only fiat money.
MasterCard’s blockchain solution will come in the form of an API that banks can use to make cross-border transfers, eliminating the middlemen that many traditional transactions have to go through to get to their destinations.
For now, this solution is invitation-only, but we can expect to see blockchain applications like these catch on around the globe as more payment processing companies feel the pressure to compete and lower their fees.