Distributed ledgers are often referred to as a new database technology, but could they come to replace existing payments rails?
The subject was the center of discussion among Julio Faura of Spanish megabank Santander; Marwan Forzley of blockchain payments startup Align Commerce; Gys Gyman of global consultancy Deloitte; Chris Larsen of distributed ledger leader Ripple; and Elizabeth Rossiello of bitcoin payments startup BitPesa today, the group representing a mix of financial incumbents and startups.
Chief among the discussion points was defining current challenges in existing payment rails and how technologies like blockchain, and specifically the bitcoin blockchain, could benefit such services.
Rossiello offered the strongest opinion as to why problems in the system could benefit from public blockchain technology, drawing from her experience as a startup leader working in Africa.
“If you think about a transfer from the US to Senegal, you want to know what the transfer rate will be. They’ll let you know in 14 days.”
Bitcoin as a rail
There were, clearly, differing opinions on the stage about how bitcoin fits into this role, however, given that only one participant works actively with the protocol, BitPesa.
“Without bitcoin and the bitcoin community, I would not be able to pay my employees or run my business,” she explained.
On the other hand, Faura at Santander didn’t buy into the idea that bitcoin could become more than an experiment.
“By itself, it is a great self-contained experiment. But when you try to work with existing rails and gateways and in people’s lives, my opinion of bitcoin gets a little small. It’s better to go with something like Ripple because with bitcoin, you have different people and different levels of legality,” he said.
Distributed ledger alternatives
But the ultimate discussion when it comes to using a cryptocurrency is the ability to transfer in and out of it, Align Commerce’s Forzley said.
He explained the reason Align Commerce used bitcoin to facilitate its cross-border payments between small businesses is due to the system’s strong liquidity.
“The thing with bitcoin is that it is liquid enough that you can do transactions. The more the network is liquid, the more you can scale payments.”
For future developers and startup owners, the panel had a few key details to consider when launching a payment provider.
Hoffman and Larsen echoed each other, stating that developers must think about the solution and not the technology. Specifically, understand the full scope and then determine which rail is the right one.
Ultimately, Rossiello summed it up:
“If you’re going to come in to a big company with a drastically different technology with questionable regulation, you better come in with great cost savings.”
Photograph by Michael del Castillo.