Blockchain payments and payroll
Blockchain payments is a topic that’s high on the agenda for those at the leading edge of the financial world.
If you’re involved in making payments in your business it may well be a term you’ve heard of and are curious about. While it’s not a topic that appears to be on the immediate agenda in terms of significant change, it is something that is well worth being aware of.
What are blockchain payments?
As its name suggests, a blockchain is a series of chains that effectively represent blocks of transactions that have been completed over a space of time between different parties. In other words, a blockchain is a track of all bitcoin payments that have ever been made. Being hailed as one of the most disruptive developments in the financial economy, some are suggesting that blockchain could replace current global payment systems sooner than we might imagine.
What is blockchain?
Blockchain, in its most simple terms is a machine-to-machine payment system that uses the bitcoin way of passing payments. The way things work right now, payments from one person to another require the involvement of a third party, like for example, the Bacs system in the UK, which is the UK’s Banks Automated Clearing System. The Bacs system currently allows for fast, cost effective, secure payments to be processed from one person to another. It is the system typically used in conjunction with payroll, but it is starting to look possible that blockchain payments might be the preferred solution in the future.
The simplest way of visualising a blockchain is to think of lots of blocks that represent bitcoin transactions that are joined together chronologically and in line once a payment chain has been effected and completed. The chain shows a start to finish trail. In other words, blockchain is effectively a full record of all transactions that have taken place and confirmation of the movement of monetary value from one party to another.
How is this likely to develop?
Even at this early stage in its development, blockchain payments technology is being hailed as secure and reliable, less open to threat from hacking than traditional systems – lean and local. Such is the global significance of this development, which many of the world’s leading banks have been investing in better understanding and developing the technology around this concept so they can tailor it to suit their needs.
With the possibility of private and public blockchains, there is much excitement around the potential impact that this may have on how we all make payments in the future. Acknowledged by some as one of the most “awe-inspiring innovations since the internet came into existence”, it is easy to see that such a move could have a major impact on how the likes of payroll is processed.
On the face of it, blockchain payments seem to be a real and credible alternative to how payments are made today. And the unique point about blockchain technology is that it allows entirely unrelated people to carry out transactions directly between themselves in a completely transparent way. Needless to say, by removing third parties, costs come down and the movement of funds becomes easier.
A highly complex and currently quite confusing subject, blockchain is a payment option that is still very much up in the air. What seems less up in the air is that it will happen and in fact that it is being tipped by some to become a major player in the payment processing system across the globe. The likes of RBS has spoken out firmly in favour of blockchain being a real and credible competitor for the UK clearing system at some point in the future. They see it as helping them to reduce the onerous costs associated with the current system, which has to be a positive thing. When blockchain is being taken seriously at this sort of level, it certainly becomes a subject worth watching.
So what might all this mean for payroll?
In payroll we all know that speed and efficiency of payments make for happy employees and employers, both domestically and internationally. With the promise of a significantly faster system, blockchain will enable employees to receive their wages in real time, and also remove a significant amount of currency risk where multiple currencies are involved.
So what does this mean in reality? It means that if the blockchain system continues to develop as expected and works as it should, employees are happy because they receive the right amount at the right time. It also means that employers are happy because they have reduced payment system costs and no disgruntled employees looking for their pay. Add to this the flexibility that comes with such a payment system, such as the possibility of daily or project-based payments for example – linked to different currencies – and it’s clear that this could be a great way of motivating your workforce. Thereafter you have claims of higher levels of security and the low cost base, all of which means that although blockchain is a new kid on the block, it’s one that’s worth watching – closely.