Blockchain makes its first step to everyday payment. Your Contactless Intelligence Weekly News Review

Blockchain makes its first step to everyday payment

We’ve all heard a lot about the magic of the blockchain, described by some as the ‘secure internet’. I am not sure that I want to get into the what and wherefore of the system. Needless to say it is considered secure, safe and more importantly - the future. To date, I have seen more written about the capabilities and future possibilities of the technology. What it WILL do, what it COULD do but very little about what it is ACTUALLY doing. That changed a little last week.

Deloitte, SETL and Metro Bank last week completed a series of firsts. SETL provided the first contactless smartcard enabled blockchain allowing digitised payments; Deloitte exercised the first blockchain ID system known as Smart Identity and Metro Bank hosted a connected client account (a first for this kind of blockchain/contactless application). In an initial test, over 100 users were issued with contactless smartcards and used them to make purchases from merchants equipped with contactless terminals. Consumers and merchant balances were updated live-time with all balances held at Metro Bank.

The successful implementation of a blockchain smartcard retail payment system offers the possibility of significantly reducing current high costs for processing retail transactions. In addition, it opens the door to competition in merchant servicing to challenger banks, which are all but excluded from this activity by the incumbent clearing banks. The service, which is provided by SETL Payments Ltd, subject to appropriate regulatory approval, could launch as early as 2017.

SETL’s capacity to process billions of transactions a day with burst speeds in the tens of thousands per second means that it could easily keep up with the volumes processed by the large card networks who process around 2000 to 3000 transactions per second on average with burst rates of around 14,000 transactions per second. Instant settlement for the retailer and the possibility of charges being only a fraction of the credit and debit card schemes could prove to be powerful incentives for its adoption.

In on-boarding participants, Deloitte demonstrated its Smart Identity blockchain solution communicating with SETL’s payment blockchain. Customers taking part created their identity records on the Deloitte blockchain and had their key details certified by Deloitte. These certified details were then asserted to the SETL Blockchain to set up user credentials. This is believed to be the first commercial inter-blockchain application demonstrating how portable, cryptographically secured identity might be applied in a real-world consumer environment.

Furthermore, the use of point to point encryption significantly reduces the possibility of the kind of wholesale data leakage that has impacted the legacy consumer payment infrastructure over the last decades.

We are still barely a few days into this specific area but the fact that companies are already looking to create such projects is an encouraging sign that commercial retail payments still has a journey ahead of it. It is even more impressive when one takes into consideration that non of the interested parties look upon this last week as a ‘pilot’. “The team are leaders in the field of transaction implementation and retail banking service and our common focus on high speed, capacity and resiliency makes us natural partners. This is not a proof-of-concept or a prototype; it will be a revenue generating implementation of distributed ledger technology,” noted Peter Randall, CEO of SETL

Expect to read more about blockchain integration into retail payments early in 2017, because the technology still has a LONG way to go and a lot more to prove.

Steve Atkins
Contactless Intelligence