Centralized payment processors like Mastercard are working with
blockchain applications because of the technology’s ability to record and track
information. Distributed databases are verifiable and often difficult to hack.
If successful, blockchain applications in the credit card industry
could begin to tackle a much larger $2 trillion problem, which includes the
counterfeiting of credit accounts.
“Today, there is no efficient and effective way to prove that goods and
services are what they claim to be and that they have not been altered, forged,
reproduced or duplicated in any way,” according to the Mastercard developers website.
The Mastercard blockchain is providing “new
commerce opportunities for the digital transfer of value by allowing businesses
and financial institutions to transact on a distributed ledger,” according to
the website. Experimental APIs are offered on the company’s blockchain platform
and are “available for selected testing with partners."
Proponents of distributed ledgers would be quick to
highlight the many advantages a decentralized platform can offer payments
companies like Mastercard.
technology will allow Mastercard to track transactions with a greater level of
accuracy and avoid scams such as credit card skimming,” said Arran Stewart,
co-owner of the blockchain recruitment platform Job.com. “Verifying transactions is something that
normally doesn't happen until after fraud occurs, but with blockchain
[technology], fraud can be avoided entirely.”
and cross-border payments are also being eyed by Mastercard for potential
blockchain applications. In one suggested use case, the company stated that its blockchain and authorization
network could be used “to easily track high value pharmaceuticals, art, luxury goods
as they are created, transferred, purchased and re-sold. For example, use a
Mastercard plastic card with a standard payment terminal to record that the
asset arrived at a location on the blockchain.”
Fund transfers across borders could also employ blockchains.
“When two parties agree to transfer funds they write a
settlement request to the blockchain.” The company’s settlement network could read
the blockchain and “transfer the funds between two banks. It then writes a
confirmation of transfer to the Mastercard blockchain.”
As with any large blockchain applications, the real test will come in
scaling up. Can these applications work efficiently for billions of
transactions? At present, blockchain technology is expensive and sluggish
relative to current transaction systems.
The challenge is the ability to add nodes to the blockchain quickly,
which, at present, is a technical problem. With the massive amount of data in
credit card transactions, that means adding millions or billions of blocks to
hold the information. The company has been
researching how to speed up the process.
According to a patent
application filed by the company earlier this year, Mastercard is
proposing to set up blockchains “configured for fast navigation.” Although the
details are involved, “each block [will
include] a header comprised of a fast track flag, fast track reference,
timestamp, and hash value.”
“The technology is being built with
scale in mind and based on success; Mastercard and other institutions will
adopt this technology throughout their service,” noted Stewart. “The biggest
drawback has been cost with running this technology on the blockchain; however,
proof of stake technology should resolve this issue.”
Mastercard, operating in 210 countries, has been one of the most
active blockchain developers in the global financial services industry.
The company has filed for more than 35 blockchain-related patents.
It has also invested in the Digital Currency Group, which helps
blockchain-related companies, and it joined the Enterprise Ethereum Alliance, which links large corporations with startups and
academics. Mastercard additionally said it was hiring 175 new technology