Blockchain ■
Amon Cohen
abreast of what everyone is doing. Each version of the ledger is called a node, and each change to the nodes has to be witnessed as correct. You can’t update until all parties are happy it is correct.”
DIGITAL CURRENCIES Broadly speaking, there are two types of application for blockchain. One is payments, the other where there is no transfer of value and, instead, the key benefit is the reliability of an im- mutable record. It is the payments part, the reason blockchain technology was originally conceived, where matters get really complicated, especially in block- chain’s role as the enabler of bitcoin and other digital currencies. Bitcoin was conceived as an interna- tional currency, beyond the control of countries or banks, that would allow people to pay each other directly. Bitcoin has had something of a bad press because, as a different article in Fortune put it, “while there is nothing intrinsically evil about bitcoin, its most famous adopters have been a rogue’s gallery of fraudsters, prostitutes, dark web drug lords, and Ponzi schemers.” Early predictions that bitcoin would
precipitate abandonment of fiat (real world) currencies have, so far, proved wide of the mark, although a handful of hotels and even airlines do accept bitcoin as payment. Buyers and sellers do not need to hold digital currency themselves to complete a transaction through blockchain. Instead, the con- sensus is that, depending on whether it is a private or public blockchain, digital currency acts as a token within the process to ensure secure and instant transmission of the payment through the network. At its most radical, blockchain could
theoretically bypass the complicated and expensive eco-system of issuers, acquirers and so on which constitute today’s global commercial payments process. “Blockchain brings the buyer and seller together,” says Patricia Par- telow, associate partner, digital consult- ing practice for IBM. “Over time value can stay in the network instead of bank accounts. It eliminates a lot of the cost we have today, including improving cashflow and eliminating fraud.”
VIRTUAL PAYMENTS Speaking at the Business Travel Show in London in February, SAP Mobile Services senior director of value services Johnny Thorsen outlined his vision for blockchain-enabled travel payment. “The way billing happens in the travel
26 BBT CORPORATE CARDS SUPPLEMENT 2017
POTENTIAL APPLICATIONS OF BLOCKCHAIN FOR BUSINESS TRAVEL
■ Automated, invisible payment without the need for the traveller to get involved. Greater transparency for payments involving currency conversions.
■ Smart contracts where payment is automatically triggered once the terms of the deal have been met.
■ A master system for administering loyalty programmes. ■ A move to virtual, phone-based passports. ■ Control over who can enter an airport. ■ Verified identification and payment between hosts and guests of accommodation sites such as Airbnb.
■ Monitoring transaction and payment flows between suppliers, travel management companies and corporate clients.
■ A clearing system for payments between airlines. ■ Lower-cost digital payments could replace corporate and even virtual cards.
industry today is still very inefficient,” Thorsen says. “If you go into the block- chain world, you eliminate the need for credit cards. Virtual cards, fine. It’s a good transition process, but why not go to instant digital payment where you move money to a [hotel] supplier when the hotel room door opens? When you leave on the last day, it knows what else you used and that is paid for [and docu- mented] instantly. It could eliminate the expense report completely.” As the founder of a virtual card technology company, Conferma’s Barker, unsurprisingly, disagrees that blockchain will replace the card-based payments infrastructure. He focuses on a paradox of blockchains, which is that they are totally transparent to
“Bitcoin’s most famous adopters have been a rogue’s gallery of fraudsters…”
participants within the process but impenetrable through encryption to those excluded from them. “Payments are centrally controlled by governments to ensure there is no money laundering and people pay taxes,” Barker says. “They won’t want to let those controls go. Virtual card numbers, which are built on card rails, are a good long-term bet. The key to payments is global acceptance, which the card rails have spent the last 40 to 50 years establish- ing. Blockchain could be used to send ledgers bank-to-bank, but virtual cards won’t be replaced by cryptocurrencies.”
SMART OPERATOR Barker believes, instead, that blockchain can verify the sending of virtual card numbers to hotels. Fitzpatrick likewise tips blockchain to support rather than displace virtual cards. “If someone in the UK wants to pay for a hotel in Swit- zerland, then today the hotel charges in Swiss francs and a few days later you find out how much it cost in sterling,” she says. “For that reason, you have to add a tolerance of around 10 per cent to the amount on the virtual card. With blockchain, you will know instantly how much it is going to cost you.” For Thorsen, however, the most exciting potential of blockchain for travel buyers is “self-thinking and self- regulating” smart contracts. “The smart contract monitors in the background,” he told his audience. “If [a parameter is reached], the transaction will happen instantly and digitally. Imagine if that were for hotel rooms. You know that after 500 nights, the next night will be 10 per cent cheaper. The contract will regulate itself. All it needs is transaction data telling it what to pay and when.” Thorsen predicted smart contracts will become common practice by 2018. Partelow similarly imagines block- chain underpinning the triangular transactional relationship between airlines, TMCs and their corporate clients. A single ledger logs and verifies the tickets the airline sells to the client, the fees the client pays to the TMC, and the fares the TMC pays the airline. Yet another application of block-
chain, and one that IBM is actively developing, is creating verified iden- tification of individuals, which could greatly speed passengers’ progress through airports. “If you know who I am, maybe I don’t even have to carry
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