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Innovations in financial services: the Mastercard multi-token network
To be safe and effective on a large scale, any network needs rules, standards and guarantees. This was true 50 years ago, when we built a payments ecosystem that benefits all participants. This is true for open banking and national interbank networks. And we’re demonstrating it today for the world of digital assets and programmable payments.
Last summer we announced the Mastercard Multi-Token Network bring a set of tools and standards to power innovative new business models across various sectors leveraging tokenized bank deposits. Now, after months of beta testing, including a first of its kind Innovative sprintMTN’s promise is about to come true.
With Standard Chartered Bank (Hong Kong) Limited, Mox Bank Limited And Liberawe pilot pay for a token form of carbon credits with token deposits. Last year we finished another pilot in Hong Kong which demonstrated MTN’s ability to settle digital asset transactions involving decentralized applications, and concluded a similar project in Australia. In all cases, our network standards and infrastructure have successfully enabled reliable transactions on the blockchain using either tokenized deposits or central bank digital currencies.
MTN, built on our private and secure blockchain, combines the versatility of technology with the governance, compliance and convening power of Mastercard to create a platform for the next generation of financial applications. This opens up more opportunities and capabilities to transact in the digital asset space with your bank account balance. It is important to note that MTN is built on trust. To harness the full potential of blockchain technology and revolutionize cross-border and business-to-business payments, we believe it must be safe, secure and scalable.
Drawing on years of experience developing network capabilities for banks, we offer simple ways for them to apply this type of programmability to bank deposits. Banks do not need to manage a new blockchain ledger to participate in MTN; they can start with existing interfaces, such as maps, for simple use cases and can move to standards-based APIs to power more complex use cases.
Inspiring the next innovations in financial services
A range of app developers including Coala Pay, Inveniam, Fresh Supply Co., Senken And Vayanaamong others, are already turning their attention to MTN, channeling the power of blockchain to transform everything from loan disbursement to carbon credits.
For example, the real estate transaction company Coadjute moves the deposit process to the MTN blockchain, creating a seamless infrastructure for transferring funds. In any real estate sale, waiting for the paperwork to be cleared can take weeks. During this time, the deposit is stuck in an escrow account, where neither the buyer nor the seller can earn interest on it. The Coadjute application allows the buyer to block the money in their bank account; a smart contract then automatically releases the payment once the conditions are met.
Coadjute is also exploring automated earmarking – the process of setting aside money for a specific purpose – which is enabled by a blockchain system and combined with MTN rules that subject each party to earmarking conditions. This simplifies a nearly impossible process, with transactions triggered automatically: no additional communications, no confusion, no delay. We explored automated allocation with the Hong Kong Monetary Authority’s (HKMA) e-HKD pilot program to successfully use smart contracts to ensure the quality and delivery of physical goods.
Pair point, a Vodafone company, is using MTN to enable smoother, automated money movements to support its vision of device-to-device interactions, starting with electric vehicle charging payments. With the Polytrade app, investors can finance fractions of invoices and sellers can automatically manage complex payment flows.
Application developers are responsible for managing the complex business processes needed to facilitate payments, but their products are brought to life through MTN’s building blocks, rules and money movement protection mechanisms. One app can connect to MTN and instantly work with all financial institutions on the network. This creates a safe space for banks to explore new services.
And after?
In some countries, MTN beta serves as a testbed for new payment and commerce capabilities. As we bring more applications online, we work in parallel to connect financial institutions to the network. It’s a virtuous cycle: when new banks join us, MTN becomes more attractive to application providers, and as we integrate new applications, the benefits of the network increase for financial institutions and their businesses customers.
We believe this will take time, but we are working to ensure that from day one our network is valuable to all participants, enabling people and businesses around the world to transact digital assets with more than flexibility, efficiency and control.