Global electronic payments giant Visa is deploying a permissioned blockchain system to facilitate and authenticate direct, cross-border payments between banks and other financial institutions.
The system, Visa B2B Connect, is built on the open source Hyperledger Fabric network, developed by the Linux Foundation, via a suite of dedicated APIs. It will initially be available to participants in a pilot scheme, but there are plans to expand it globally by the end of this year.
Critics of blockchain have long pointed to its complexity, slowness, and lack of energy efficiency. Others have warned of the risk of blockchains not being compliant with Europe’s General Data Protection Regulation (GDPR), which requires that data can be permanently removed from a system under the so-called Right to be Forgotten.
On the face of it, traditional blockchains are unable to offer this facility, as removing any data would invalidate the entire chain. This forces developers to design more complex systems that can accommodate regulatory demands, or to use blockchains to store metadata rather than the source data itself.
However, banks and other financial institutions have been swift to move into peer-to-peer computing and shared/distributed ledgers, because of the audit trail and transparency advantages of blockchain systems. The new Visa network also promises speed, security, and a trusted name in global payments – according to Visa.
It is far from alone in the market. Last year, 75 major banks joined the Interbank Information Network, an experimental blockchain developed by JPMorgan to explore whether distributed ledgers can speed up payments that have been delayed by compliance checks or missing data.
Since then, the network has nearly tripled in size – and the more banks join the system, the larger the pool of data that can be shared and logged on the ledger. The IIN runs on Quorum, a permissioned variant of the Ethereum blockchain.
The IIN is also setting up a sandbox environment for FinTechs to develop, publish, and test applications, which is due to go live in Q3 2019.
The big-picture context is traditional banks’ aim to keep as much of the digital payments market in house as possible, as challengers, non-bank payment platforms, and apps proliferate in a world that is becoming increasingly mobile, social, and targeted by both startups and technology giants.
Earlier this year, the Gibraltar Stock Exchange (GSX) deployed a Digital Stock Exchange prototype on the STACS Network’s Global TestNet blockchain, which is designed to support capital markets.
Meanwhile, IBM is one of a number of technology companies working with banks on blockchain initiatives, via its Blockchain World Wire payments network. This is designed to enable cross-border transactions via an intermediary digital token between fiat currencies. The BWW came out of beta testing last September.
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