July 28, 2020 By Ling Wu 3 min read

There are three words that cut to the heart of what make digital payment systems work: trust, consensus and convenience. To the average consumer, anywhere in the world, convenience resonates most, hands down. But the truth is, in the ephemeral world of digital payments, none of it is possible without trust—a consensus on underlying truths—to hold it all together.

Trust, for example, that parties will do what they’re supposed to do. And even more fundamentally, trust in identity: that people presenting digital payment are who they say they are. Up until now, the institutional credibility of the world’s big banks has been one of the essential building blocks of trust. Building that trust has required them to invest lots of capital in their systems, processes and reputational assets.

Aside from the underlying cost, the trouble with this bank-centric system is that there are billions of people in the world who are “unbanked,” outside the banking system. Thus, these unbanked are out of reach of digital payments. Changing the game in digital payments to a more inclusive scheme requires a new way to create and convey trust. That source already exists, and is as close as your mobile device.

A new path to mobile payments

We at TBCASoft, which stands for Telecom Blockchain Alliance Software, believe that telcos represent a new way to embed trust in mobile payments—and in the process, make them more inclusive. Consider, for example, that two-factor authentication, the standard that most security professionals recommend, uses a text message to help authenticate a customer’s identity when logging on. With this, in today’s security hierarchy, telcos have a huge unrealized opportunity. We believe blockchain, because it’s scalable and secure, represents the ideal technology for telcos to harvest Know Your Customer (KYC) profiles to bring digital payment services to billions of people served by telcos around the world.

We founded TBCASoft and the Carrier Blockchain Study Group (CBSG) Consortium with Japanese mobile telecom giant SoftBank Corp. based on a powerful, transformative vision: to create a global network of telcos that collectively use blockchain to enable differentiated growth services such as cross-network mobile payments for their subscribers. Today, the CBSG Consortium has nearly 20 carrier members, representing nearly 1.3 billion subscribers. This idea took another big leap forward when we partnered with IBM Services to leverage their telecom industry expertise and experience to recruit and onboard carriers onto TBCASoft’s HIVEX Network, which is a cross-network payment system.

Welcome to the trust zone

HIVEX Network is a kind of mesh that enables interoperability for different mobile payment services that all currently operate only within their silos. HIVEX Network members can greatly expand the user and merchant base for their payment service, accelerating the network effect to a global scale. Mobile subscribers can use a smartphone app to make purchases at HIVEX Network merchants, with the bills for the purchases conveniently charged back to their phone or similar bills. Through the HIVEX Network, mobile carriers now have an entrée into differentiated new services and revenue streams.

For telcos—whose average revenue per user has stalled as data has become essentially free—this presents a game-changing opportunity to monetize the trust they have come to embody. One key element that makes it all possible is the use of blockchain—specifically the immutable distributed ledger technology at its core—as a secure and reliable platform to manage that trust across all CBSG Consortium member carriers.

Another is blockchain’s inherent openness and flexibility. The fact that the HIVEX platform can be deployed across multiple cloud environments gives carriers the interoperability they need to clear payments with each other across the ecosystem, as well as the scalability needed to grow it as new operators join the HIVEX Network. In addition to providing business model and telecom market expertise, IBM was instrumental in helping us deliver our solution to maximize its flexibility and scalability.

Inclusive banking and contactless payments with blockchain

It isn’t often that a whole industry sector—namely, the world’s telcos—get the chance to reshape a system as fundamental and entrenched as payment processing. But with our blockchain solution and the partnership we’ve formed with IBM, that’s exactly where the industry is poised today. It’s not just the world’s telcos that stand to gain from cross-network mobile payments, but also their subscribers, the seven billion people or so around the world who have mobile phones.

In the big picture, we also see our solution as being in synch with big, important shifts in the global payments landscape. The first is the rapid rise of contactless payments—displacing card-based transactions—which we see as inevitable outgrowth of the changes in customer behavior in response to the COVID-19 crisis. The other, even more fundamental shift in the payments paradigm is that the terms banked or unbanked won’t matter anymore. It’s will be whether you’re “mobilized” or non-mobilized”—and that’s a pretty big umbrella.

Listen to learn more about how TBCASoft is using blockchain technology to transform mobile payments.

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