New Currencies: Visa and MasterCard Bend to Blockchain
Earlier this month, MasterCard filed a patent for instantaneous payments using blockchain technology. Then Visa followed suit with trials of its first ever blockchain-based payment system, B2B Connect.
MasterCard’s patent sets out the company’s shopfront for using a blockchain to facilitate payments to merchants that would be guaranteed instantly, rather than waiting days for credit card transactions to be verified and paid by card issuers.
The filing — which appeared in the US Patent and Trademark system on Nov 9 — reads:
“there is a need for a technical solution where a payment transaction can be guaranteed in a manner that is readily verifiable by an acquiring financial institution and/or merchant…By enabling the use of the guarantee…the guarantee may be used in more situations with a higher convenience to both consumers and merchants, which may result in merchants receiving instantaneous, guaranteed payment while maintaining a high level of consumer convenience.”
The patent has been met with surprise in some quarters, given MasterCard’s public antipathy to bitcoin.
Benefits of the Blockchain
That MasterCard has reportedly been working on incorporating blockchain into their infrastructure for some time should, in fact, come as little surprise given the obvious benefits and minimal drawbacks.
The transparency and irrefutability of blockchain-based transactions make fraudulent manipulation of data nigh-on impossible. If data is changed on one node, every other node would have to reflect that change for it to take effect. In terms of hack-resistance, there is no contest between blockchain and traditional, centralized banking.
And because the technology cuts out the middle men, there is a dramatic reduction in cost compared to traditional forms of banking. International transactions that have for years left customers scratching their heads over long delays and exorbitant fees can be processed very quickly (blockchain confirmation times are rarely longer than a day, and usually much faster).
And because they aren’t even attempting to compete in the cryptocurrency market, MasterCard is attempting to get the best of both worlds by perpetuating the status quo — and their dominance — of conventional fiat currency, while integrating the blockchain to take advantage of some of its benefits. They are edging their beaks in just enough to say that they’re awake to the challenge, but not committing enough to risk souring their current position.
