The blockchain could take a central role in 2016. Your Contactless Intelligence Weekly News Review

The blockchain could take a central role in 2016

Everyone by now has heard of the digital currency Bitcoin. Like it or not, it's not disappearing any time soon and why should it? With the changing face of payment mechanics and the slow decline of cash, Bitcoin has just as much to gain as any other payment solution. However, the foundation upon which Bitcoin is based - the blockchain - continues to demonstrate why this secure and trusted digital foundation could become the real cornerstone of 21st century commerce.

To say that its time may have come would be an understatement. Last week saw reports released that pointed to the UK in particular, becoming a 'cash-second' economy as the number of contactless payments rose by 250% year-on-year in 2015 – according to the annual report from Visa Europe. 1 in 7 transactions using Visa cards in 2015 were completed using contactless payment technology, compared to 1 in 25 a year earlier and in a year when more payments were made electronically rather than with cash for the first time in the UK, Visa Europe saw point-of-sale spend rise 9.6% and the number of transactions in the country grow 11.5%. So, good news for contactless payments and, perhaps, lamentations for cash.

However, despite the surge towards non-cash payments, there are still concerns over the security of such transactions. A new study carried out on behalf of Gemalto on payment data security, reported that over half (54%) of those surveyed (3,700 IT security practitioners from more than a dozen major industry sectors) said their company had a security or data breach involving payment data, four times in the past two years on average. According to the study, acceptance of new payment methods such as mobile, contactless and e-wallets will double over the next two years. While respondents say mobile payments account for just 9% of all payments today, in two years they expect this ratio to increase to 18% of all payments. Given the issues company IT professionals are facing in securing payment data accepted today through traditional methods, their companies are likely to face even more difficulties in securing future payment methods.

Many payment technology developers are therefore now looking to blockchain technology to secure payment in the future. Blockchain creates a distributed public ledger that records all transactions in a particular system. The blocks record some or all of the current transactions and once it is completed, the block is timestamped and hashed into the permanent database or blockchain.The blocks are linked to each other in a linear, chronological order where each new block contains the hashed details of the previous block. Thus creating a chain of transactional information so that every block that is added, protects information in the previous one. There are no centralized databases in a blockchain. Complete or partial blockchains are stored in nodes where the database is constantly updated. Distribution and decentralization ensure that no one individual or party in the system has the power to modify or tamper with the data. It also removes the need for a third party or central authority to authenticate or process peer-peer transactions and increases transparency.

Perhaps that is why Gemalto is also looking to the blockchain. The company announced last week that they are to work with Symbiont to enable financial services organizations to securely execute smart contracts and other blockchain-based transactions. Symbiont’s platform uses blockchain to allow institutions and investors to issue, manage and trade a range of financial instruments more efficiently over an encrypted peer-to-peer network. These instruments, also known as Smart Securites™, are self-enforcing, self-executing contracts that offer cost and time efficiencies compared with traditionally brokered transactions. Symbiont’s will integrate Gemalto’s SafeNet HSMs to ensures a high level of regulatory compliance and trust for cryptographic identities authorizing these transactions.

In fact, the use of blockchain technology is starting to be used in a variety of payment-based offerings. Last week, Fin-tech startup ToneTag, which offers contactless payment solutions through sound waves, brought a new layer of security to its contactless payments by introducing blockchain technology in the contactless payments for its global customers. ToneTag enables sound wave based contactless payments that are, according to the company, traceable, transparent, and secure. Every party involved in the transaction is protected by the blockchain since it maintains a record of every transaction that ever took place in the system and blockchain in ToneTag system will ensure safety against fraudulent transactions for both merchants and customers; record and validate each and every transaction, protecting them from the threat of hacking; and will eradicate anonymity and pave the way for traceable transparent transactions, claims the company.

While paying through ToneTag, customers can identify whether the merchant outlet they are dealing with is exposed to risks or if it has witnessed fraudulent transactions in the past. Similarly, merchants  can detect if the transaction is unusual or if the customer was involved in fraudulent transactions earlier. “ToneTag has always been at the forefront of disruptive technology in the Fintech space. Blockchain technology has the potential to completely redefine the way transactions take place as it brings unprecedented advancements in fraud prevention,” said Kumar Abhishek CEO, ToneTag.

Expectations that blockchain technology will have such a disruptive effect on payment system security is one of the reasons that Contactless Intelligence has invited London-based blockchain company Epiphyte (provider of a block-chain-based software as a solution (SaaS) for immediate financial transactions), to speak at our Spring Conference on the topic of ‘The Blockchain - what is it and why should you care?”. The company recently worked on a proof of concept with Visa Europe Collab to utilise the blockchain to facilitate international money transfers and have developed software that enables payments to be sent from a fiat currency in one country (e.g. a legal tender like GBP) and to be received in another. For those of you who want to know more about this technology and what it could mean for your company or solutions, we highly recommend that you take in this session.

Because they way things are going - the blockchain could end up being THE technology of 2016!

Until next week.

Steve Atkins
Contactless Intelligence