Mastercard and the blockchain software provider announced that they will work together to create a solution and pilot it.
The solution will use Mastercard’s payment network and capabilities as well as R3’s blockchain expertise to limit issues like processing costs and problems with the connections between banks and clearing systems, per CoinDesk. The solution will also use R3’s Corda blockchain platform, which includes over 300 of “the world’s leading financial services firms, technology companies, central banks, regulators, and trade associations.”
The collaboration could help Mastercard match Visa’s offering that leverages distributed ledger technology (DLT), Visa B2B Connect. Mastercard is eyeing business-to-business (B2B) payments with this new partnership, as its EVP of New Payments Platforms Peter Klein called out the firm’s interest in “Developing a new and better cross-border B2B payments solution” in the release.
And B2B payments are a huge target — the US B2B payments industry is projected to be worth $21.8 trillion in 2019 alone — which is why it merits this kind of focus. Visa’s B2B Connect went live this June with similar intent to use DLT to link financial institutions (FIs) around the world and alleviate pain points in the B2B market. By working with R3, Mastercard might be able to develop a comparable offering so it can offer a service to compete with Visa’s and capture more cross-border B2B payment volume.
This partnership with R3 continues Mastercard’s efforts to build out its cross-border capabilities and access noncard rails.
- Mastercard acquired cross-border account-to-account money transfer platform Transfast earlier this year while looking to cross-border for growth. Being able to facilitate B2B and other cross-border transactions gives Mastercard greater ability to capture volume, and with global cross-border payment volume forecast to rise from $24.8 trillion in 2019 to $34.9 trillion in 2024 there’s a tremendous opportunity in the industry. This is especially true of corporate cross-border payments as the segment is projected to make up 87% of that volume in 2024, so it could cause Mastercard’s revenue from cross-border volume fees to surge past the almost $1.4 billion it recorded in Q2 2019.
- The firm has been investing in noncard rails for years, and working with R3 can give it access to another avenue for payments. In addition to Transfast, Mastercard acquired Vocalinkin 2016 and Transactis as well as part of Nets’ business earlier this year, all of which allow Mastercard to diversify its business beyond cards. If Mastercard wants to continue to grow its business while noncard payment options, like real-time payments (RTP), pop up, it needs to have a hand in those new rails, and it appears to be trying to do so.
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