Mastercard (NYSE: MA) announced Friday that it is opening up its blockchain to certain banks and merchants as an alternative—and potentially more efficient—method of paying for goods and services, Fortune reports.
The move comes after IBM (XETRA: IBM) revealed on Monday that it had also begun processing payments over its own proprietary blockchain between banks in the South Pacific.
Like IBM, Mastercard is also targeting cross-border payments between businesses as the primary purpose for its blockchain, which can only be used by invitation.
The Mastercard blockchain, however, differs from the tech giant’s in an important way: While the IBM blockchain only transmits money in the form of Lumens, a virtual currency created by the non-profit Stellar, Mastercard’s blockchain operates independently of a cryptocurrency, and instead accepts payments in traditional local money.
“We are not using a cryptocurrency, and we are not introducing a new cryptocurrency, because that introduces other challenges—regulatory, legal challenges,” says Justin Pinkham, a senior vice president at Mastercard Labs. “If you do a payment, then what we can do is move those funds in the way that we do today in fiat currency.”
Pinkham says Mastercard has one advantage that the Bitcoin (Bitcoin) blockchain doesn’t have: A settlement network that includes 22,000 banks and financial institutions around the world.
Mastercard hopes to provide the benefits of blockchain technology—including a more secure and transparent way of making and tracking payments—within the existing financial system, without the hassle of digital currency.