Payment providers embrace blockchain

Blockchain is the textbook definition of disruptive technology. The distributed ledger design has only been around for about a decade, but it’s already become an integral feature of the global financial landscape. According to researchers at Credit Suisse, the total market capitalisation for cryptocurrencies now sits at an estimated $700bn – an increase of more than 4,000% since 2016.

Yet the applications extend well beyond fashionable cryptocurrencies like Bitcoin or Ethereum. So far in 2018, retail giant Walmart has been awarded a patent for a new blockchain-based medical records system for wearables, Santander has used blockchain as a voting tool for investors at its annual meeting and start-up TrueTickets has deployed blockchain as a means of tracking tickets to try and eliminate the extortionate second-hand ticket market.

That being said, the blockchain developments most likely to pose sustainable impacts for businesses and consumers are occurring in the payments sector. Legacy processors, incumbent banks and innovative start-ups obtained a record number of blockchain patents in 2017, and this year some of those patents are truly starting to bear fruit.

Quite a few innovations are already being brought to market.

Mastercard Blockchain is a prime example. The payments giant’s freshly launched development partnership is currently working to power ultra-secure cross-border B2B payments by processing and documenting settlement requests to the blockchain. In July, Mastercard also won a new patent to start creating a brand-new type of user account able to transact in cryptos using existing fiat currency systems.

Rival payments provider Visa doesn’t appear to be quite as interested in using blockchain to make cryptos more accessible. Instead, the company is focusing its energy on using the blockchain to improve payment journeys using traditional currencies.

In January, Visa kickstarted testing on its new Visa B2B Connect initiative, which is an enterprise blockchain infrastructure designed to facilitate commercial transactions on scalable, private blockchain networks. Commerce Bank in the US, Shinhan Bank in South Korea, UnionBank of the Philippines and Singapore’s UOB have all partnered with Visa to offer bank-to-bank transactions this year with the goal of producing a real-time transactional system that establishes a new gold standard for managing the settlement of high-value payments.

Elsewhere, payments start-ups have been working to redefine blockchain so they can ground the airy-fair concept of cryptocurrencies and transform them into practical and accessible forms of ecommerce.

Jack Dorsey’s hugely successful payments start-up Square may have positioned itself primarily as a POS terminal provider for brick-and-mortar SMEs, but it’s also been pumping a huge amount of investment into an increasingly popular and very trendy blockchain app designed to facilitate peer-to-peer (P2P) transactions. In August, Square’s Cash App announced it had finished testing and would begin processing Bitcoin transactions.

That means the app’s 7m active users now have the ability to buy, trade and sell Bitcoin interchangeably with the normal cash they’ve been storing in their digital wallets. Bearing in mind the app is heavily marketed as a tool with which to help young people split the bill for large pizza deliveries, that opens blockchain up to a very different market indeed.

Meanwhile, the Goldman Sachs-funded P2P payments app Circle announced in May it was ready to roll out a new cryptocurrency backed by reserves of US dollars – subsequently seeking to remove the volatility that’s historically been associated with cryptos like Bitcoin and their dramatically shifting values.

Yet these developments are only the tip of the iceberg. The World Intellectual Property Organization chalked up 406 blockchain patents last year, and it’s only a matter of time before providers begin to utilise those patents in order to bring a far wider range of blockchain-backed products and services to market. At the end of the day, it’s fair to assume quite a few of those products aren’t going to catch on – but either way, they’ll undeniably continue to dramatically reshape the payments landscape.

Related reading

Finance more evolution than revolutionary change