Blockchain technology may make credit card payments cheaper and safer.
That’s the aim of a pilot program Visa Europe is launching with BTL Group, an effort billed as “a first-of-its-kind blockchain-based settlement system.”
Visa Europe announced its search for banking partners to participate in a “proof of concept” for international transactions using BTL’s interbit distributed-ledger technology.
Hendrik Kleinsmiede, Co-Founder and Innovation Partner, at Visa Europe Collab, wants to test international payments over blockchain technology between a hand-picked series of banks across different countries, to see if credit risk and transfer time can be reduced without compromising security.
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“For me the opportunity is a fascinating and potentially very beneficial one,” writes Kleinsmiede. “Through the use of smart contracts and blockchains I believe we can create a fast, compliant and low-cost interbank payment and settlement service, with embedded regional compliance.”
Blockchain is a distributed ledger that keeps copies of every transaction made. One advantage is security – each transaction depends on the previous one. Amending previous entries requires the consent of all participants.
According to the Financial Times, if the project succeeds, it could present a threat to Swift, a 43-year-old interbank messaging system that handles 30 million requests a day.
Moving money cross-border can take at least three working days with Swift, and the system has been subject to its own security problems: earlier this year, malware was used to seal $81 million from the Bangladesh Bank through Swift – the hackers were only prevented from stealing more when a spelling mistake in a request prompted Deutsche Bank to investigate.
https://twitter.com/HendrikCollab/status/771303478673244160
Frequently Asked Questions
What blockchain pilot did Visa Europe launch in 2016?
In 2016, Visa Europe launched a pilot with BTL Group, billed as a first-of-its-kind blockchain-based settlement system. It sought banking partners for a proof of concept for international transactions using BTL's Interbit distributed-ledger technology.
What did Visa Europe hope to learn from the blockchain test?
Hendrik Kleinsmiede of Visa Europe Collab wanted to test international payments between hand-picked banks in different countries to see whether credit risk and transfer time could be reduced without compromising security.
How does a blockchain keep transactions secure?
A blockchain is a distributed ledger that keeps copies of every transaction. Each transaction depends on the previous one, and amending earlier entries requires the consent of all participants, which is one of its security advantages.
Why could the project be a threat to Swift?
According to the Financial Times, a successful project could challenge Swift, a 43-year-old interbank messaging system handling 30 million requests a day. Moving money across borders through Swift can take at least three working days.
What security problem had Swift faced in 2016?
Earlier in 2016, malware was used to steal $81 million from the Bangladesh Bank through Swift. The hackers were stopped from taking more only because a spelling mistake in a request prompted Deutsche Bank to investigate.