Visa Europe became the latest enterprise financial institution to announce a blockchain proof-of-concept this month, when it revealed it was working to leverage the emerging technology for remittances.
But while many of its peers are seeking to pursue such projects on closed, proprietary ledgers, Visa Europe Collab innovation partner Jon Downing has clarified that the test project is being conducted on the live bitcoin blockchain.
In interview, Downing and Edan Yago, CEO of blockchain services firm and project partner Epiphyte, discussed the initiative in new detail. Payments in the proof-of-concept, they explained, originate within a testing environment set up by Epiphyte and that funds are then sent cross-border over the bitcoin blockchain and received on Visa devices.
"A payment that would go from fiat currency and be received in [Kenyan mobile money service] M-Pesa, but it would be facilitated through one of the blockchain providers that enables transfers of those funds."
Downing said it was the need to identify a "human use case" with potential global value that led the project to focus on the remittance industry.
The test is notable as the remittance sector has long been identified as one that could come to be disrupted by use cases for peer-to-peer payments on the blockchain.
To date, however, the idea that bitcoin could lower costs in remittances has received significant pushback from incumbents in the industry, such as MoneyGram and Western Union, which have sought to portray cash as a payment method unlikely to be displaced by any digital alternatives.
Solving the last mile
In remarks, Yago took issue with the idea that the remittances challenges described by MoneyGram and Western Union were accurate, positioning them as the product of a lack of creative thinking by entrenched industry providers.
Yago argued that bitcoin offers a creative solution to the "last-mile" problem, in which it is argued the majority of remittance costs come in the form of physical kiosks that deliver hard currency.
”The big change that really sets the [bitcoin] opportunity apart here, is that by using an open non-proprietary standard, you can have local players integrating with it and providing you with a wide range of network effects," Yago said.
Rather than investing in on- and off-ramps, Yago argued, a large payments player such as Visa could simply extend the reach of its network by leveraging the open bitcoin blockchain.
Currently, the project is more than halfway through its projected 100-day development timeline. The proof-of-concept is being used today for research purposes, with the goal Downing said of showcasing the results internally.
Should the proof-of-concept prove successful, he suggested it could move to an “incubation phase” with use in a particular market and with particular financial services partners.
While other projects have used similar conclusions as reasons to back private blockchains, Visa Europe and Epiphyte have seemingly sought to use the open bitcoin blockchain in a manner best compared to Interledger, a protocol introduced by Ripple for uniting both bank-owned and distributed ledgers.
"Visa has the most powerful payments network in the world and our ability to extend that functionality is very, very strong evidence we can then extend the functionality of any payments network," Yago said.
Through this lens, Yago described its proof-of-concept as a cross-network settlement engine that allows "instant settlement" on a distributed ledger but that ultimately sends transactions across “multiple proprietary payment systems”.
Bitcoin’s security and network effects, he asserted, make it the ideal blockchain for enterprise clients like Visa Europe that are seeking to extend their payment systems. For example, he suggested that if one bitcoin services provider went down, the open nature of the bitcoin platform would allow users to route payments through another provider.
“You can transfer value dynamically on a per transaction basis because [bitcoin] is an open network,” he continued. “It’s not that we’re not bound to one provider, but even further, you don’t need to know in advance which providers you’re going to use.”
Yago used this strength as evidence of his belief in the bitcoin blockchain.
Downing was also keen to put the project within the context of the more wide-ranging efforts by Visa Europe Collab, the company's innovation arm, to create innovative new proofs-of-concept.
While he noted that Visa Europe is also investigating the Internet of Things and new technologies in the retail environment, he called the blockchain a “very big point of focus.”
“There’s a small group of people within Visa Europe Collab and our focus is to explore cryptocurrencies and blockchain, and what could be the opportunity for Visa Europe and the payments ecosystem,” Downing said.
Today, he said the point of emphasis is for Visa Europe to determine if the blockchain can allow Visa to deliver services faster and with more expanded capabilities.
Started on 10th September, Downing said the proof-of-concept will conclude development on 7th December, at which point the partners will draft an exit report compiling the findings.
He said the next stage for the project prior to its conclusion will be to engage a test group of live users, to be based in the UK.