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Digital Payment Tech Gets Massive Upgrade with Blockchain

New open-source program promises to shake up the digital payments arena!

 

Can Blockchain Get MasterCard and Visa to Step Aside?

There are mixed views about the future of virtual currency, with key industry players like the Chief Executive Officer of JPMorgan Chase of the opinion that governments around the world will step in to curtail the actions of virtual currency operations before they gain too much momentum. JPMorgan Chase’s CEO believes that a government crackdown is imminent, or at least highly likely to take place before the burgeoning industry gains mass-market appeal. Dimon stated that in the event that a virtual currency is pitted against the US dollar, the US dollar is going to take precedence and government will shut down virtual operations, or regulated them accordingly.

There are however several really interesting developments taking place in the digital money transfer arena, and one of them is known as blockchain. This innovative technology is light years ahead of the competition, and its cost effectiveness, efficacy and security guarantees that it will be used by financial services operations the world over. So what exactly is blockchain technology and how is it going to impact on credit card companies like MasterCard, Visa, Diners Club International, American Express et al? First of all, the payments landscape is in a state of flux – evolving at a rate of knots. Big changes are afoot as is evident from things like Square.

But it's the blockchain technology that is really gaining traction with industry pundits. What makes it interesting is its open source nature. It is easily shared on the Internet, accessible to anyone and it cuts down on all the ‘bureaucratic red tape’ that is so commonly associated with payments processing options. This is most evident in the incremental processes that are completed by payments companies like MasterCard, Visa and others. The various layers that are involved in the clearing of payments from party to party are not only time-consuming, but redundant. Since digital technology is all the rage, there is a keen interest among those in the know about technologies like blockchain and how they can revolutionise the financial services sector. When Square was announced in November 2015, it got tongues wagging. Square is really useful in the sense that it offers electronic readers for payments processing to all of the merchants who need it. Such was the phenomenal success of this initiative that the share price is now 33% higher than the offering price.

Are Square and PayPal the future of Payments Processing?

Suffice it to say, Square and PayPal are the first in a series of many steps geared towards the evolution of the payments processing industry. Open source software is precisely where everything is headed. It all began with Bitcoin, but it is certainly not going to end there. We all recall with a mix of interest and concern how Bitcoin shot to prominence and then plummeted to relative obscurity soon thereafter. However there is tremendous interest in virtual currencies and blockchain technology is leading the charge. What this software does is highly complex, but it effectively keeps records of debits and credits between payers and payees via a series of computer codes. It doesn't really matter how the payments are made – it could be hard currency or it could be virtual currency.

There is plenty of benefit to be had from using blockchain technology for payments processing. First of all it eliminates multiple layers of complexity and redundancy that presently characterize the financial services market This has an impact in terms of costs and time. It is especially useful since it is not owned by anybody, and there is a mad rush for financial services providers to occupy this space for their own personal benefit. There are major industry players on Wall Street looking to push for increased transparency in the way that blockchain operates. These include Digital Asset Holdings and its CEO Blythe Masters. There is plenty of capital being shifted in all directions to Silicon Valley companies investing in blockchain technology. Companies are looking to create private blockchains for loans, banking and financial contracts among others.

Since this type of technology is not specific to the financial industry, and is merely Internet technology, it has received particular attention from a wider group of Internet-savvy developers and innovators. It is open source software and it is really organically created and not regulated by any financial services authorities. It has the potential to replace many financial parties that typically occupied a fixed space in the payments processing world. This includes, but is not limited to the Fed and other commercial banks. The fact of the matter is that this technology is so cutting edge that it has a global appeal and could eliminate multiple levels of financial complexity. Since all the financial transactions are merely software programs on the Internet – there is no need for banks to be involved with all their levels of complexity. Everything is already worked out on huge sets of computers known as registries. It is the DNS system that characterizes computers all over the world. It is a fingerprint of World Wide Web activity.

Credit Card Companies Fear Blockchain Tech

Since Bitcoin has failed to gain traction as the virtual currency of choice, fiat currencies like the USD, the GBP, the Euro and others will have an indispensable role to play for years to come. So what you get with blockchain technology is the removal of gobbledygook in financial ledgers and registries, and their replacement with highly usable computer programs. Banks are not going to go away overnight, nor should they. They will no doubt act as underwriters for risk-related blockchain activity. The real change will no doubt come with redundancy of credit card issuers like MasterCard and Visa. These are simply nonessential services that can easily be replaced. Visa is scared of the rampant changes being brought on by blockchain technology. In fact, the annual report issued by Visa made mention of the significant tech changes in store for the industry as a result of crypto-currency, e-Commerce, tokenization and blockchain. One thing is for certain: big changes coming to the way in which payments processing is being shaped by blockchain tech! 

 

Blockchain Weighs in on Financial Markets
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