A credit card platform has to process all the transactions of the clients that are making purchases with them. The platform should be able to make the transaction instantly and with the correct information. Every client should be able to see each purchase in their balance and the money should get to the bank account that is receiving the money.
There are millions on transactions every day with credit cards and the platforms should work every time. That is why the companies are always looking to improve the technology in their platforms to make them more efficient. In this article we are going to talk about Blockchain and credit cards platforms
What is Blockchain?
Blockchain is a technology that is able to store digital information (called blocks) and they put them together in a data base which is a public one (the data base is the chain).
For example, every block can have digital information about transactions and include information about who is involved in the transaction, the account of each person and the amount of money.
There are many advantages for Blockchain technology; one of them is the security because the database is not centralized and it can be changed easily. In order to change something in the data base every nodule of the chain should approve it which means that fraud and hacks are harder to make with a Blockchain data base.
The other advantage is the ability to have smart contracts which means that you can preset activities that should happened after other (like transferring money from a bank account to another). So, Blockchain can be useful to store the data and process the transactions made with credit cards.
Blockchain and the credit card industry
The idea of implementing blockchain to the payments is an ongoing process since the companies are looking for a faster, secure and cheaper way to process all the transactions.
However, it is completely implemented because there are things that are unknown or things that may cause doubts. One of it is that having many users in a blockchain platform may turn the process slower and will be worse than the current platform.
Every change in technology come with tradeoffs and in the case of blockchain and credit cards it can make the process cheaper and more efficient but it may take more time to process each transaction if there are too many customers.
However, some developers were able to find a way to make the blockchain platform faster than the current one. That changed the way credit card providers see the technology and wanted to research and look for a way to implement it on their businesses. Let`s see an example of it.
MasterCard is one of the companies that are interested in blockchain and have a program for it. It is called “Mastercard Blockchain” and they say that it “creates new commerce opportunities for the digital transfer of value. Mastercard Blockchain APIs are experimental and available for selected testing with partners” and the features of it are: privacy because only direct partners have insight into their specific transactions; ease of use because there is no need to set up a local node; flexibility because the platform will help you to develop your application protocol; scalability because it can be applicate in other businesses.
According to the MasterCard program the blockchain technology can be used to prove the provenance and that is important because there is no “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” and that produce loses.
With Mastercard Blockchain you can track high value merchants and have the record on the blockchain. And it can also be used for cross-border B2B Payments using smart contracts which will make the transactions automatically.
Other example of the blockchain implementation is the case of VISA. They have a project in which they have developed a platform that is user-friendly and flexible and the priorities of it are: security, governance, scalability, creativity and interoperability.
Visa works with a venture called Chain and they developed Visa B2B Connect which is a payment service that is under testing. This will make direct transactions between customers and vendors which is cheaper than the regular transactions. And there are many other companies working on blockchain based programs to offer an efficient alternative in the market.
What things can blockchain improve?
One of the major problems with the current payment platforms are the high fees because people have to spend money to make transactions. That happens because different intermediaries are involved in each transaction and each part have to take a profit for it.
But the amount of the fees is not the only problem because they are not few. People have to pay different fees when they make transactions including foreign transaction fee, balance transfer fee, online transaction fee, late payment fee and many others. So, the idea of a blockchain platform is to have fewer intermediaries and make the process more direct which will reduce the costs.
Other thing that blockchain can improve is decentralize a centralize business because most transactions are made with MasterCard and VISA. Even if they are the ones that are putting more effort into the development of a blockchain platform the new platform will be decentralize because of blockchain. That means that there is less risk of hacks that may compromise the information of the card holders.
If you want to know more information about blockchain and credit card platforms feel free to make your own research. There is plenty information online and you should discuss it with others.