October 24, 2017
Bitcoin introduced the payments world to the blockchain, but late last week, when Mastercard announced it has begun to enable blockchain payments, it also revealed it will use neither bitcoin nor any other digital currency to transmit the money. The Purchase, N.Y.-based payment network said it has opened its Mastercard blockchain API on an invite-only basis to certain banks and merchants to make payments. The technology mainly will be used for cross-border transactions and the payments will be made and settled in traditional fiat currency.
Using blockchain technology for payments will result in more security and transparency, while making it easier to track payments, Mastercard said. Like the bitcoin blockchain, transactions will be available for scrutiny on a “fully auditable and valid ledger,” although it said the details of the transaction will only be shared among the participants. Where Mastercard’s biggest advantage may lie, according to experts, is in its network of 22,000 financial institutions globally that can quickly settle transactions transmitted on its blockchain.
“By combining Mastercard blockchain technology with our settlement network and associated network rules, we have created a solution that is safe, secure, auditable and easy to scale,” said Ken Moore, executive vice president at Mastercard Labs. “When it comes to payments, we want to provide choice and flexibility to our partners where they are able to seamlessly use both our existing and new payment rails based on the needs and requirements of their customers.”
Mastercard was the second global brand to introduce blockchain payments last week. IBM also announced a solution, but it will transmit funds in the form of a virtual currency, developed by open-source blockchain company Stellar, called Lumens.