Visa has rolled out VisaB2B, which uses blockchain technology developed in partnership with Chain Inc., challenging the SWIFT messaging network as the dominant method for moving large sums across borders.
The article stated that amid dozens of blockchain experiments by banks and other players, VisaB2B is among the first commercial blockchain products to emerge. Some technology analysts have warned that blockchain will not live up to its expectations.
Banks Invest $1 Billion+
Banks alone will invest more than $1 billion in blockchain technology, according to Greenwich Associates, with little to show to date.
VisaB2B challenges the SWIFT messaging network, the main venue by which large sums of money move across borders among banks on behalf of businesses. SWIFT has suffered hacks and has fallen under intense regulatory scrutiny.
Visa allows card payments for businesses that make medium-size purchases like employee expense accounts.
Visa, using Chain’s software, will enable banks to transfer value to each other using Visa rails as opposed to sending a message via a check or some other means to alert intermediaries to make transfers.
Blockchain Benefits Cited
Jim McCarthy, Visa executive vice president of innovation and strategic partnerships, said paper check-based and wire mechanisms are inefficient, slow and costly.
Due to the risk and complexity of cross-border payments, some firms are attempting to deploy blockchain technology to simplify the process. Using Chain, Visa could ultimately compete against products being developed by bank blockchain startups, such as R3 and Ripple.
Accenture PLC estimated in July that banks will do $25 trillion to $30 trillion in cross-border payments through 10 to 15 billion transactions.
Change Won't Come Fast
The market will not migrate to a new commercial payment network overnight or even over five years, Accenture said, and the degree will depend on competition from other options.
Visa has deployed a prototype B2B Connect with 30 banks worldwide in 10 countries. Visa Europe noted earlier this year it would test a separate blockchain network to connect several European banks.
According to Adam Ludwin, chief executive and co-founder of Chain, blockchain technology needs a vehicle such as Visa, which already has a network encompassing thousands of banks.
Because the market as “ossified” around existing workflows, it is not sufficient to create a better system, but to get the system to the market, he said.
Images from Shutterstock.