Blockchain advocates unite and celebrate, too! MasterCard has seen the “blockchain” light and will strive to improve cross-border payments with leaders in the crypto industry. As Coinspeaker reported: “Mastercard and fintech firm R3 have entered a partnership to develop a solution that will enable cross-border payments which include localized payments and interbank settlements and clearing of payment obligations. The solution will have a primary focus on connecting financial payment systems.”
Peter Klein, vice-president for New Payment Platforms for Mastercard, remarked: “Developing a new and better cross-border B2B payments solution by improving worldwide connectivity in the account-to-account space is central to Mastercard’s ambition. Our goal is to deliver global payment infrastructure choice and connectivity as demonstrated through our recent strategic acquisitions and partnerships, including our relationship with R3. It confirms our commitment to innovation, both home-grown and through partnerships and acquisitions, to support advances and innovation in the increasingly complex global payment infrastructure space.”
The “solution”, as described, will entail using Corda, the name for R3’s blockchain. David E. Rutter, CEO of R3, was quick to add: “We are excited to partner with Mastercard to help shape the future of the digital payments ecosystem. All institutions – large or small – rely on the ability to send and receive payments, but all too often the technology they rely upon is cumbersome and expensive. Cross-border payments can be a particular pain point. Corda was designed specifically for enterprise use cases such as this, and we look forward supporting Mastercard in bringing blockchain-enabled payments businesses across the globe.”
MasterCard is not new to the crypto space. They have made moves to get involved in trade finance with the MarcoPolo network, the largest and fastest growing trade finance and working capital finance network in the world, at least according to its website. It has also made other acquisitions in the cross-border payment arena to create a team to focus on this singular issue – making cross-border payments more efficient, quicker, and cheaper, too.
Once we get past the press releases and the high-fives, it will be interesting to see how these projects play out within the MasterCard context. Both Visa and MasterCard have enormous legacy systems that tie together member institutions across the globe. Their settlement systems, like their members, are batch oriented for settlement purposes. Cross-border transactions are cxombined with all other domestic traffice, but receive a central forex markup or fee. Members receive these transaction daily and are allowed to add a markup to cover their costs, as well, before posting to the cardholder’s account.
How will blockchain technology work to improve this approach? Singular transactions can already move through the system, as quickly as with a foreign ATM transaction. There are separate sub-systems that also allow a member to generate a “push credit” that achieves an efficiency similar to blockchain protocols, but member institutions have been loath to promote forex transactions that circumvent their internal foreign exchange departments, where profit margins are extremely high. But, if MasterCard builds this type of blockchain system, will member institutions come and use it? It remains to be seen.
After the announcement, MasterCard’s stock got a nice little 2% bump, but that rise could be due to any number of fundamental forces. As for the impact on the Crypto-verse, however, anytime that a major corporate entity publicly endorses anything to do with cryptocurrencies or blockchain technology, it is cause for celebration. It is time to raise your glasses high – Prost!