Visa latest on blockchain bandwagon
Visa said it was “inviting a small number of European banks to participate in the project.” (Pixabay)
Financial services giant Visa is the latest to get on the blockchain bandwagon, launching an interbank payments pilot based on the BTL Interbit platform.
“A blockchain-based settlement solution can reduce the friction of domestic and cross border transfers between banks,” wrote Hendrik Kleinsmiede, co-founder of Visa Europe’s innovation hub, Collab, in a blog post Thursday.
Observers say the company is playing catch-up to rival MasterCard.
Blockchain, the technology underlying the digital currency bitcoin is also known as “distributed ledger” technology, because it uses encryption and distributed computing power to create a constantly updated and cryptographically secure ledger, or record of transactions — distributed among all its participants.
Boosters see opportunities to cut red tape and back office operations by introducing a software-based (rather than human-operated) instantaneous and cryptographically guaranteed record of interbank payments and other money movements.
Kleinsmiede said the Visa-BTL pilot would explore “reducing cost, settlement time, credit risk, and leveraging smart contracts to streamline and automate many of the regulation and compliance requirements of domestic and international transfers.”
Visa said it was “inviting a small number of European banks to participate in the project.”
Participating banks will be able send funds to other banks in the network denominated in multiple currencies.
“We’ll work closely together on the development and implementation of the PoC, ensuring that all participants come away with new knowledge and insight into the role that the blockchain could play in interbank settlements in the future,” concludes Kleinsmiede.
[Read more: Big banks join UBS on blockchain plan]
In June, MasterCard’s President of International Markets Ann Cairns said the company was “already building use cases in our laboratories to see how to include it together with our core systems.”
And last month, Deutsche Bank, Santander and BNY Mellon, as well as the broker ICAP, signed on to UBS’ plans for a “Utility Settlement Coin,” another blockchain pilot for international bank settlements.
Don Tapscott, consultant and co-author of “The Blockchain Revolution,” told FedScoop it was “a good thing … that Visa is starting to show a little more interest” in blockchain. “The stakes are very high,” he said, predicting that the technology would upend the financial system.
“It looks like they started to follow the money,” he said, adding that ignoring the issue was no longer an option for the financial sector.
“They can run, but they can’t hide,” he said.
