Should my business be concerned about cryptocurrencies?
Anyone who follows the financial industry has heard of cryptocurrencies by now. And because of the potential for cryptocurrencies to disrupt the current payment ecosystem, the business world began paying attention to this new technology a few years ago. With all the talk surrounding cryptocurrencies, many of our clients are wondering if their business will be affected by them. So what is a cryptocurrency and how will it affect your business? Let’s find out.
What are cryptocurrencies?
A cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, all while operating independently of a central bank. Each transfer of funds is entered into a peer-to-peer (P2P) database that no one can change without fulfilling specific conditions. Now that we know what cryptocurrencies are, lets discuss how they operate.
How do cryptocurrencies work?
The technology that allows cryptocurrencies to function is known as the blockchain. The blockchain is a continuously growing list of records, called “blocks”, which are linked and secured using cryptography. Each block typically contains three things: a cryptographic hash of the previous block, a timestamp, and transaction data.
When a new transaction occurs, the requested transaction is sent out to a P2P network consisting of computers known as nodes. Using algorithms, the network of nodes attempts to verify the validity of the transaction. If all the nodes agree that the transaction is valid, a new record of the transaction (a block) is created and added to the current blockchain in a manner that is permanent and unalterable. This means that, by design, a blockchain is inherently resistant to modification of transaction data.
Do you need to be worried about cryptocurrencies within your business?
The short answer is no, you don’t need to be worried about cryptocurrencies within your business. However, the technology that is running all cryptocurrencies has the potential to revolutionize the payments industry. How?
A few months ago, Visa’s blockchain team was looking at options to make transactions run faster and more securely, on the back of blockchain technology. To do this, Visa partnered with a blockchain technology company, Chain. This is what Chain had to say about their new partnership with Visa:
“Visa is working with Chain to build Visa B2B Connect using Chain Core, an enterprise blockchain infrastructure that facilitates financial transactions on scalable, private blockchain networks. Building on this technology, Visa is developing a new, near real-time, transaction system, designed for the exchange of high-value international payments between participating banks on behalf of their corporate clients. Managed by Visa end-to-end, Visa B2B Connect will facilitate a consistent process to manage settlement through Visa’s standard practices.With Visa B2B Connect, Visa aims to significantly improve the way international B2B payments are made today by offering clear costs, improved delivery time, and visibility into the transaction process—ultimately reducing the investment and resources required by banks and their corporate clients to send and receive business payments.”
As you can see, this example is just the tip of the iceberg as far as what will soon be possible with blockchain technology. As other industries and companies begin to utilize blockchain technology, it’ll be fascinating to see all the new fintech ideas that result from its use and modification.
Conclusion
In closing: No, you don’t need to be concerned about the effect of cryptocurrencies on your business. In fact, you should be excited to see the new ways this technology will be utilized to improve banking transaction processes and efficiency.
What Are Mobile Payments and Why They’re a Good Thing
Apple Pay, Google Pay, and Samsung Pay are all mobile payment tools utilizing near field communications (NFC) technology. NFC has been around since the early 2000s but up until the last few years it hasn’t been a common way to make a payment. The adoption of chip based (EMV) credit and debit cards in the U.S. has forced most merchants to upgrade their payment acceptance hardware to allow for chip payments. In doing so, NFC capable devices became a lot more prevalent in the marketplace. Today, in the U.S., you can pay with a smartphone or smartwatch at most major retailers and at approximately half of all small businesses.
The mobile wallets behind Apple Pay, Google Pay, and Samsung Pay safeguard your payment information when you complete a transaction by utilizing a unique card ID every time. By doing this, it makes that card information useless to a thief or hacker as that card number was only good for that one transaction. This level of protection is a main driving force behind why consumers are using mobile payments more often. Secondly, not having to search for a card in your wallet or purse makes the payment transaction a lot more convenient.
In Europe, mobile payments have become much more common because public transportation systems are utilizing NFC based smartphone wallets for fares. Passengers who use smartphone wallets eliminate the need for paper or plastic cards and can add money to their public transportation wallet, for the system that they are utilizing, right through their phone instead of on a machine at each subway or train stop. As this type of technology comes to major cities in the U.S., there will likely be a significant increase in the use of mobile payments compared to taking out a physical card. It should also help reduce the overall operating costs for our various public transportation systems.
By combining technology with real world systems, mobile payments will make soon make transactions like riding the subway easier and help ensure consumer credit and debit card safety. This win-win scenario is a sign of things to come and a boon for business and consumers.