How Will Blockchain Make Payments Easier for Companies?
Over the past few months, Master Card has announced that it will use blockchain technology. According to the press release, "Master Card's blockchain solution; It is the key of its strategy to offer a new way for consumers, businesses and banks to trade, and to create payment solutions that meet all the needs of financial institutions and end users."
MasterCard plans to implement the technology initially in business-to-business (B2B) transactions. The company believes that the blockchain technology will help address the challenges of speed, transparency and costs associated with cross-border payments.
Blockchain, Bitcoin and Ethereum are the technologies behind the cryptocurrencies. Thanks to this technology, companies can create an irreversible digital account wallet.
“Technology can be integrated into current business processes even in the near future,” said Alexander Borodich, founder of Universa, a block-chain technology company that allows users to create smart contracts. And he added, “Smart contracts can be created for all kinds of businesses from smart houses and property insurance to payment cards and logistics.”
It is also known that blockchain technology removes the need for a central authority to manage transactions, making them extremely secure and immutable against attack. Although this technology has not yet been widely adopted, it has already been proven for large companies with significant operations.
What convenience does the blockchain technology provide for companies?
Blockchain technology provides a high level of privacy by allowing process details to be shared among participants involved only in these processes. There is no need for a third party in blockchain transactions.
However, the level of privacy associated with blockchain payments is a concern among many people in the financial community. Because in blockchain technology, in addition to high confidentiality, there is also a high level of transparency. It is also fully auditable and contains a valid ledger. This ledger is not deleted. Entries in the distributed ledger can only be made if approved by the system. To change this, all other blockchains in the system should also be replaced. For this reason, it is impossible to delete a blockchaining in a privacy stage, and fraudulent transactions can not be added. This transparency removes the need for control and balance, which often has significant resources and human power. Transparency of payment with block chain is automatic.
Smart contracts are a component of a blockchain technology that is self-managing and stored in blocks. Because of the decentralized nature of the system, no one controls these contracts, and for that reason the related parties can rely on their validity. The code has the power to control and restrict how the data in the block chain is accessed and used. Because of the high level of automation in this technology, companies that adopt the blockchain are experiencing significant cost savings.
According to a report by Accenture, a global management consulting and professional services company, McLagan, a compensation data and consulting company, can greatly reduce its costs with blockchain technology infrastructure. An analysis exploring the banking industry showed that “Blockchain technology can reduce infrastructure costs in eight of the world’s top 10 investment banks by an average of 30%, and annual cost savings for these banks can rise from $8 billion to $12 billion.”
Blockchain technology also means that these companies can process their transactions faster. The block chain can also accelerate cross-border transactions. Blockchain transactions can be done within a few seconds while international operations last for days or weeks.