Recently, Visa and blockchain startup, Chain, Inc., announced the launch of a new B2B payment industry platform utilizing blockchain technology for international payments. As reported by Luke Parker for Brave New Coin on October 23rd, Visa B2B Connect will significantly reduce payment processing times and failure rates of overseas transactions. Its Chaincore technology allows institutions to connect to and use blockchain to securely carry out financial transactions and reliably track them from end to end.
What is blockchain?
In 2008, the advent of an electronic currency called Bitcoin gave rise to the new digital payment protocol that facilitated its use. Although Bitcoin soon became steeped in controversy, its blockchain protocol has become a promising payment industry trend for digital currency transactions.
How does it work?
Electronic financial transactions, such as credit card purchases, are currently administered through a trusted central authority, or bank. The bank verifies and records the transactions, then distributes the payments and associated fees.
Blockchain eliminates the need for a central authority, replacing it with a digital proof of verification through distributed ledger technology. This means that a network of participating parties can conduct business directly using an agreed upon algorithm called a consensus mechanism to verify the digital signature of a transaction on one shared ledger.
Each computer, or node, on the network, verifies, approves and retains a real-time copy of each transaction as it occurs. Approved transactions are time-stamped and stored as blocks on the chain. The transactions cannot be accepted without the approval of every node on the chain, nor can they be deleted.
The unadministered transparency of the blockchain system makes it ideally suited for the payment card industry for the following reasons:
- Security Blockchains can be public, as in the case of Bitcoin, or permissioned, for B2B use between financial institutions. Hash values assigned to the transactions are opaque and meaningless to uninvolved parties so there is no usable information for hackers to steal. Because every computer on the network must approve each transaction in real-time, attempts at fraud are easily discovered and thwarted.
- Accuracy Because all involved parties have a constantly updated copy of the same ledger there can be no dispute over who paid what to whom or when the transaction took place.
- Immutability Transactions are recorded permanently and cannot be changed.
- Immediacy The chain operates in real-time; no more waiting for payments or transferred funds to clear.
- Cost Because the parties do business directly, this system cuts out the middle man and his extra fees. Additionally, there is no need for reconciling manual accounting processes across multiple ledgers, saving both payroll and time.
Visa is not the only organization in the process of adopting this revolutionary payment industry trend. MasterCard is using it to underly its Safety Net program to monitor billions of transactions in progress, guarding against security threats and “cash out” attacks. Blockchain also shows promise as a secure vehicle for mobile payment systems.
Stay on top of growing and changing payment industry trends. Contact us at IRIS CRM for B2B payment industry software and solutions.
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