MasterCard remains cautious on blockchain technology

MasterCard's CIO, Gary Lyon, has said that while his company is "very, very interested" in blockchain technology, it still thinks blockchain is in a stage of experimentation, and the company's approach to blockchain will remain cautious. MasterCard's attitude is said to reflect a wider skepticism regarding the amount of hype the blockchain is receiving. 

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Blockchain, the technology that underpins bitcoin, is one of the most exciting areas of technology at the moment.

It has the potential to strip out huge amounts of administrative costs, and companies around the globe are signing up to get a piece of the action through consortiums and direct investment.

Finance companies are particularly keen, with both Nasdaq and Barclays exploring the technology.

MasterCard is also keeping tabs, investing in the bitcoin company Digital Currency Group toward the end of last year.

One of the top executives at MasterCard told Business Insider in an interview on the sidelines of the World Economic Forum in Davos, Switzerland, that the company was "very, very interested" in the technology. But he added that MasterCard was being more cautious than its market counterparts, as it didn't want to be "blindsided" if anything went wrong.

"Like the rest of the world, we're interested in seeing where blockchain technology goes, and that's why we invested in DCG," Garry Lyons, MasterCard's chief innovation officer, told Business Insider.

Of the main reason MasterCard invested in DCG, Lyons said: "It's connected to 15 different others and they have their fingers in the right pies, so we've got the right engagement right now to see people experimenting with the underlying tech.

"It's not just the industry that's excited about blockchain — it's the world, everyone. Even at Davos, every single tech panel I have gone to mentions blockchain, and some people call it the second coming. But while we think it's very interesting, we don't want to, and no one wants to, be blindsided by rushing into it."

The global head of KPMG's cybersecurity practice told Business Insider earlier in the week that he was concerned by the rate at which many companies appear to be embracing new technologies such as blockchain without considering the security implications.

Garry Lyons, chief innovation officer of MasterCard, spoke with Business Insider in Davos. Mastercard/YouTube

Blockchain is a name for a protocol underpinning bitcoin that uses complex cryptography and distributed ledgers, or copies of records in multiple places, to regulate, record, and enable transactions using bitcoin.

Right now, if you pay someone in pounds, one bank will have to get in touch with the other and tell it to update the balance. Then at the end of the day bulk transactions are moved among banks, via an intermediary, to make sure everyone has the right amount of cash.

With the blockchain, all that hassle is wiped out — you just pay another person directly into a digital wallet. It's blockchain's novel approach to security that makes this possible.

Banks are hoping they can adapt this technology to let them deal directly with one another, making things faster, cheaper, and easier. This would involve either using bitcoin's blockchain or, more likely, building a replica system — a private blockchain.

R3, a startup experimenting with blockchain in banking, announced Wednesday that 11 top investment banks had carried out trades on a blockchain built on Ethereum, an open-source alternative to bitcoin's blockchain.

So what does MasterCard think about the consortium?

"In order for blockchain technology to move to a wider scale, it needs regulation and investment," Lyons said.

"R3 is an interesting way of doing that because it brings several interested parties together to experiment with underlying tech. It's a good opportunity for the banks, and there's more chance of blockchain technology succeeding as a group than disparate parties."