Mastercard Institutes Proprietary Blockchain for Cross-Border Payments

Blockchain, Innovation, News, Regulation | October 20, 2017 By:

Mastercard won’t take bitcoin payments. But it will allow you to transfer money over a blockchain using its proprietary technology for payments to goods and services providers.

A select few banks and merchants were invited to be part of the experiment. The technology in Mastercard’s case is strictly for cross-border payments between businesses. The Mastercard blockchain operates independently of a cryptocurrency and instead accepts payments in traditional local money.

A report in Fortune quotes senior vice president Justin Pinkham of Mastercard Labs, the leader of the blockchain initiatives at the credit giant. “We are not using a cryptocurrency, and we are not introducing a new cryptocurrency, because that introduces other challenges—regulatory, legal challenges. If you do a payment, then what we can do is move those funds in the way that we do today in fiat currency.”

Pinkham points out that Mastercard has a settlment network of 22,000 banks and other financial institutions.  “Even in the bitcoin system you need a bitcoin exchange that could exchange bitcoin for euro, so it creates some complications,” Pinkham said to Fortune.

The advantage to businesses is a drop in costs for cross-border payments. Such processes generally go through several banks, accruing fees along the way. With the Mastercard blockchain, the middleman is eliminated and the purchaser’s bank goes directly to the supplier’s bank.