All aboard the blockchain train

Proof of concept activity in the payment industry ramps up the uses for blockchain technology

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From secure online voting to mobile payments, many cross-industry markets are trying to understand and apply blockchain in ways that will help speed up, improve, or make transactions more efficient and secure.

One of its potential uses is to improve upon today's payment ecosystem, said Roger Oliphant, chief architect at ACI Worldwide who sees great potential in the underlining technology, which is open source through communal projects like Hyperledger.

"This year has shown increased activity around building a first production roll out of a solution that has at least a component of it being supplied and used in the blockchain world," said Oliphant.

The technology will naturally progress over the next year to two years as customers grow more trusting. "It's still not quite there. In the payment industry, there is a desire to watch and not be the first out of the gate," Oliphant said.

In order to see a wider integration of blockchain with payment technology, there’s maturity that needs to happen. "There is a high volume and velocity of processing, and from that perspective, maturity around performance and latency and response time needs improvement," said Oliphant.

Understandably, trust in the payments industry is one factor that prevents industry leaders from being on the bleeding edge of technology. They have a certain amount of risk aversion, said Oliphant, because there is a lot of risk that something could go wrong.

"Financial institutions have to be available 24/7/365 without any instance of when that set of services are unavailable. Customers gain trust in those kinds of attributes through their longevity with the technology," said Oliphant.

So, the longer they’ve been around a technology that is performing with all the attributes, the more they become trusting of it. "Blockchain is in the untrusted arena right now as they gain more experience with control deployment," said Oliphant.

But how do the technologies gain trust?

"Deploy in infrastructures first, inside their own ecosystems. Learn how to operate, control, and leverage in the way they want," Oliphant said.

The second phase of gaining trust comes through public deployment, what Oliphant said are "Externally facing products rolled out externally but in a controlled manner. Those customers will reap the benefits of that technology being part of the payment flow of their transaction," said Oliphant.

With their payments done faster, their funds are available sooner. Oliphant said they may not understand the transaction was done over something like a blockchain technology, but they will understand that it was done faster.

"One of the key contributors to that speed will be blockchain. We will see it start internally, where it will build up a level of trust in operational efficiency, then it will be exposed to the outside world through retailers, ecommerce portals, digital banking, online banking," Oliphant said.

One hope for blockchain technologies is that they will allow for cross cohabitation. "Transactions are starting to cross boundaries they have not crossed in the past with a convergence of verticals. In this vertically challenged world, crossing boundaries is nearly impossible for banks today," said Oliphant.

The expectation, though, is that it will not be long before the payment industry sees more widespread use. "It's already happening. There's been an expansion of the enterprise payment ecosystems that integrate blockchain for immediate payments using tokenization and other new technologies," said Oliphant.

There will be homogeneous needs coming out of that, Oliphant said, because in all of those verticals, they have an identity management database and umpteen things are replicated across verticals.

"Reference data uses blockchain in the internal network to consolidate identities within the institution into a single trusted location. All of the areas of the bank that want to validate an identity go to that location. Some countries are taking that to the next step sharing that information on a block chain between institutions," Oliphant.

When all of the institutions can access that one data set, it takes all the redundancy out. Across a country, there are thousands of financial institutions. By consolidating, thousands of microsystems in the banks go away, Oliphant said.

"Anywhere in a business where they have multiple pieces of data that need to have a unified data set, like foreign exchange rates. Across the world, they can have shared foreign exchange rates in a single place in real time. They can be maintained from anywhere in the world," said Oliphant.

Once those externally facing products are rolled out and the trust of those "first out of the gate" is validated, many believe that adoption of blockchain technologies across sectors will on-board at rapid speed.

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