Last week Visa announced the test phase of a new Blockchain-based payment system called B2B Connect. MasterCard recently unveiled a similar platform, and Visas move signifies the arrival of Blockchain in financial technology outside the realm of cryptocurrencies.
Collaboration between international banks
The new platform is set to become available in the middle of 2018 allowing enterprises to execute secure and transparent payments. The platform is a collaboration between a number of international banks (Commerce Bank, Shinhan Bank, Union Bank, and United Overseas Bank) and the Blockchain start-up Chain and should work to solve some of the current problems associated with international transfers /1/.
The risk of international wire transfers is high in a number of ways, the first being the large risk of accounts being overdrawn since transfers to not operate in real time and currency rates change from day to day. International wire transfers are also associated with a high risk of fraud; when transfers can be initiated online or over the phone malicious parties can authorise transactions relatively easily /2/.
Blockchain to mitigate risk of international transfers
The Blockchain platform should facilitate secure yet transparent payments between banks executing transfers across borders. Blockchain enables transactions to be secure from manipulation by distributing copies of the transmitted data throughout a larger, distributed data bank; this requires an unauthorised party to change 51% of all instances in order to successfully manipulate data. Blockchain databases are additionally protected from unauthorised access through an elaborate encryption procedure. To read more about Blockchain, click here.
Visa is currently test running bank-to-bank transactions over the platform and following this phase, the project will move to commercial launch.