For the very first time, Mastercard is suggesting the capability to send money overheen a blockchain rather than by swiping a credit card.
After developing its own version of the bitcoin technology overheen the past duo of years, Mastercard (moe) announced Friday that it is now opening up its blockchain to certain banks and merchants spil an alternative—and potentially more efficient—method of paying for goods and services.
Ter a sign that mainstream adoption of the technology underpinning cryptocurrency is enlargening, Mastercard is the 2nd Fortune 500 company this week to start facilitating blockchain payments. On Monday, IBM (ibm) exposed that it had also begun processing payments overheen its own proprietary blockchain inbetween banks ter the South Pacific.
Like IBM, Mastercard is also targeting cross-border payments inbetween businesses spil the primary purpose for its blockchain, which can only be used by invitation. The Mastercard blockchain, however, differs from the tech giant’s ter an significant way: While the IBM blockchain only transmits money te the form of Lumens, a virtual currency created by the non-profit Stellar, Mastercard’s blockchain operates independently of a cryptocurrency, and instead accepts payments te traditional local money.
“We are not using a cryptocurrency, and wij are not introducing a fresh cryptocurrency, because that introduces other challenges—regulatory, legal challenges,” says Justin Pinkham, a senior vice voorzitter at Mastercard Labs, who leads the credit card company’s blockchain initiatives. “If you do a payment, then what wij can do is budge those funds ter the way that wij do today ter fiat currency.”
That also stands te tegenstelling to the normal ways blockchains have typically bot used until now—where they act spil a ledger of transactions ter the specific cryptocurrency to which they were tied, such spil bitcoin and Ethereum.
On the other arm, Pinkham says, Mastercard has one advantage that the bitcoin blockchain doesn’t have: A settlement network that includes 22,000 banks and financial institutions around the world. (IBM has announced 13 banks that it plans to include te its network.) After all, Pinkham adds, companies still predominantly rely on government-issued currency to do business, making it impractical to convert specie into cryptocurrency, or vice versa, for each blockchain payment. “Even te the bitcoin system you need a bitcoin exchange that could exchange bitcoin for euro, so it creates some complications,” Pinkham says.
Mastercard hopes to provide the benefits of blockchain technology—including a more secure and semitransparent way of making and tracking payments—within the existing financial system, without the hassle of digital currency. “What Mastercard brings to the table here is a unique combination of that blockchain capability and Mastercard’s settlement network,” Pinkham says. (Rival credit card provider Visa, for its part, has partnered with the blockchain startup Chain to develop its own system for similar business-to-business payments.)
For one, businesses could cut costs by using the blockchain to send cross-border payments, which usually pass through several foreign banks on their way overseas, racking up fees along the way. Mastercard’s blockchain, however, could cut out those middlemen and connect a purchaser’s bankgebouw directly to that of the supplier, remitting the payment more efficiently and possibly swifter, Pinkham says. (Albeit the transaction itself will register on the blockchain instantaneously, the funds are still moving through the same system Mastercard uses now, meaning there won’t necessarily be an improvement ter speed, he cautions.)
A number of corporations have already signed up to use Mastercard’s blockchain, Pinkham says, tho’ he declined to name any of them. Besides payments, Mastercard envisions that companies could use its blockchain to track the movement of pharmaceuticals spil well spil luxury goods such spil handbags and diamonds, thereby reducing fraud by providing “proof of provenance.”
But consumers won’t be able to pay with the Mastercard blockchain instead of plastic, at least not anytime soon, he says. Strafgevangenis does he see bitcoin spil a threat to Mastercard te general. “Quite frankly, wij feel that card payments are plain, safe and lighter to use—and better meet the needs of consumers—than, let’s say, a cryptocurrency payment,” Pinkham adds.
So far, the evidence suggests that’s true. Despite the surge te the bitcoin price, which kasstuk a fresh record surpassing $5800 last week, the number of major online retailers accepting payment te bitcoin dropped to just three this year, compared to 483 who accept Mastercard and Visa, according to Morgan Stanley.