MasterCard is diving deeper into distributed-ledger technology, adding three blockchain-based APIs to MasterCard Developers, its platform for app programmers.
Focused on core blockchain, smart contracts, and faster payments, the APIs will be available to developers from banks and retailers, as well as other clients, and the firm will encourage them to test them for a variety of offerings, including P2P and B2B payments. For context, MasterCard has been historically cautious about its blockchain-based initiatives, so this marks some departure.
The move comes as interest in blockchain begins to deepen. Ninety percent of banking professionals have said their company is currently exploring the use of blockchain, best known for powering cryptocurrencies like bitcoin, according to new data from Accenture. That’s indicative of massive interest, likely because the technology can increase efficiency and reduce cost. Santander estimates that blockchain technology could cut industry costs by up to $20 billion annually through 2022.
And as a result, could provide MasterCard with two distinct advantages:
- Customer acquisition: Strong bank interest in blockchain technology and the benefits that it brings could drive interested firms to use MasterCard’s APIs or engage with the card network more often. That’s especially true because APIs could allow firms to dabble in blockchain while avoiding some of the associated research and development start-up costs. That benefits MasterCard, because in addition to drawing in these companies, it also tightens their relationship and could increase engagement and loyalty.
- Industry competition: MasterCard revamped its developer hub following the launch of a similar Visa platform earlier this year. And Visa recently announced a partnership with Chain for a blockchain-based B2B payments platform. Though MasterCard is going about it in a different way, implementing blockchain and opening up access to the new technology for its clients could help them stay at the top of the space.
Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.
That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.
As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain.
Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.
Here are some key takeaways from the report:
- Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
- Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
- Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years.
In full, the report:
- Examines the funding increases that are pouring into blockchain
- Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
- Explains in full how blockchain technology work and what assets make it valuable and vulnerable
- Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
- Demonstrates the challenges to mainstream adoption and their potential solutions
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