Money 20/20 experts debate blockchain impact on payments

  • By Tom Cleveland

  • October 24, 2018
  • 5:56 pm BST

The recent Money 20/20 conference in Las Vegas entertained a debate on a topic that is near and dear to the hearts of every cryptocurrency zealot on the planet: Will blockchain technology have a dramatic impact on the future of the payments industry? Two experts presented their opposing arguments before the gathering – David Schwartz, Chief Technology Officer for Ripple, and Esther Pigg, FIS Payments Senior Vice President of Product Strategy.

Mr. Schwartz posited that current payment systems might be forced to switch to a blockchain approach because they are “putting bandages on a system that dates back to the dial-up era.” He cited small-valued payments as a serious flaw that only blockchain technology can solve with an efficient and cost-effective solution. He then continued with an analogy between the Post Office and emails:

“If you look in your email right now, I’m sure 99 per cent of what you see would never have been a postal mail. They’re too low value; they can’t tolerate time delay. We have payments that can’t tolerate time delay, and they just don’t happen. What will happen is the companies that can provide those high-speed low-cost payments will get the business, and those that don’t will have to adapt or die, just like in any technological revolution.”

Mr. Schwartz neglected to mention that there have been countless attempts at providing some type of low-cost distributed wallet over the last two decades. Most all have failed miserably, due to their inherent high-cost nature. Critics have also noted that price volatility is a larger problem for cryptocurrencies that wish to be a store of value at the point of sale. Changes in market value are difficult to convey in a distributed system.

Ms. Pigg began by asking a simple question: “What problem does blockchain solve that cannot be solved with existing payment platforms equally as well?” Recent experiments with Western Union and Ripple did not demonstrate cost savings, but just the opposite. Maintaining a blockchain in its present form can be burdensome from an administrative perspective, and history has already demonstrated that security issues, considering the hacking losses to date, are formidable.

Ms. Pigg’s responses are the standard replies that have always been put forward by the payment industry. In the background, however, the major players in the industry know that blockchain technology will be important, perhaps, even as a disruptor, but the path is unclear at this time. Each has a current task force performing an R&D function with regards to blockchain technology, its benefits and its drawbacks. The fault in these arguments is that predicting the path of future innovations and their impact on current established “beachheads” is a daunting task, but change will come. You can count on it.

In the end, Ms. Pigg chose her words carefully, admitting that blockchain should be explored since it is agreed that it has great potential, but it is “not clearly understood nor vetted,” and will “absolutely not” displace the payment platforms of today.