The digital payments technology blockchain received a boost in late October when Visa announced its forthcoming Visa B2B Connect, a new enterprise blockchain infrastructure that will provide financial institutions with a secure method to process business-to-business payments globally.
"Widespread blockchain technology adoption in the credit union industry, and across financial markets, is far closer than most think," said Perianne Boring, founder and president of the Washington D.C.-based Chamber of Digital Commerce. Boring spoke during the Money20/20 - Leading Payments & FinTech Event in Las Vegas where Visa made the announcement, and she noted that this type of solution was "unheard of" just a few years ago.
"The time has never been better for the global business community to take advantage of new payment technologies and improve some of the most fundamental processes needed to run their businesses," Jim McCarthy, executive vice president, innovation and strategic partnerships, Visa Inc. said in a prepared statement. "We are developing our new solution to give our financial institution partners an efficient, transparent way for payments to be made across the world."
The Visa B2B Connect pilot will launch in early 2017 in conjunction with Chain, a San Francisco-based firm that builds, deploys and operates blockchain networks for financial products and services.
Credit Union Blockchain Maverick
The Chamber of Digital Commerce has roughly 50 members, including USAA, DTCC, Cognizant, Microsoft, Deloitte and IBM. The organization recently welcomed its first credit union to the fold.
"We have been exploring blockchain technology for the past few years now. Finding the Chamber of Digital Commerce and seeing what they are doing when it comes to education and advocacy for this technology seemed like a good fit," said David Araujo, vice president of technology at the $7 billion Marlborough, Mass.-based Digital Federal Credit Union (DCU).
As one of the first CUs in the industry to have a website, which launched in 1995, Araujo explained that DCU continually seeks early adopter status. With blockchain technology, however, there remain unknown variables.
"I would categorize us, and several other CUs, to still be in the research phase," said Araujo. "This technology is just starting to get to a point where there are commercially viable solutions that can be driven by the distributed ledger."
In an effort to further dialogue on this new technology, the Chamber of Digital Commerce offers education programs, advocacy initiatives and working groups, and works closely with policy-makers, regulatory agencies and subject matter experts in the industry.
"Our goal is to develop a pro-growth legal environment that fosters innovation, jobs and investment," said Boring. "This is of significant value to prospective members because we offer a unique forum for dialogue and the exchange of ideas with CU industry peers and other leaders in Fintech."
Don't Be Left Behind
As the lone credit union and the Chamber's newest member, DCU is taking a measured approach to understanding both the benefits and challenges of blockchain. Araujo concedes that it will "take time" for blockchain to replace the level of confidence achieved with current payment systems. And it could be a tough sell for Digital's 550,000 members – although with 250,000 of those members active mobile users, there is hope that new technologies will be embraced.
"If organizations that are involved in the lifecycle of a member's experience to buy a home, a car or insurance products can come together and leverage this technology, I believe that we will see success in this space," said Araujo.
Whether other CUs follow DCU's lead and join the conversation remains to be seen, said Boring. She contends, however, that the development and integration of this technology is inevitable.
"The steps being taken by DCU are the first for the CU industry in realizing the transformative potential of blockchain technology, and the importance of collaboration," said Boring. "We're already establishing best practices, shaping regulation and exploring new applications. Those that 'wait and see' will forfeit the chance to make their voice heard in one of the most important conversations taking place in the financial markets."
