Beyond the headline grabbing stories about Bitcoin, the financial services industry needs to start considering the value of underlying technology backbone behind cryptocurrencies and why it could be valuable - the block chain. So how does a block chain work and why could it be valuable?

A block chain starts with a decentralized ledger that is shared among several groups or companies.  Any and all changes in the ledger must be agreed upon by all ledger owners.  The ledger is publicly shared between the owners.  Any ledger changes must be agreed upon by all owners.  For example, a ledger could represent an ownership registry of commonly held stocks between, say, 10 companies.  Each company would hold a ledger copy showing each company's stock positions.  If two companies want to trade stocks, the ledger would need to be updated to reflect their new positions.  All ledger owners, including the 8 companies not involved in the stock trade, would need to agree that a permanent change has been made to the ledger.  Once all companies have agreed to the permanent change, all decentralized ledgers are updated. The benefits of block chain technology to financial services can be best explained using the TOPS (Transparency-Operations-Permanency-Security) model.

  • Transparency - All transactions and exchanges of asset ownership are very clear and public to ledger owners and even regulators.
  • Operations - The nature of a decentralized ledger forces the ledger owners operate in a common manner, using open source technology, common frameworks, etc. to operate as quickly and efficiently as possible to clear and settle changes in the ledger.
  • Permanency - It allows a ledger owner to demonstrate enforcement and clearing of asset exchanges, e.g. contracts.  Once an agreed upon exchange has been made by all ledger owners, the exchange is permanently recorded.
  • Security - the very nature of a decentralized ledger means that no one single entity controls it, including changes to it.  If one ledger is compromised by a data breach or other disaster, the other ledger owners can verify and validate current ownership of assets.  It restores the breached ledger.

About Michael Moeser

Michael is the JAVELIN’s Director of Payments. He advises clients on the rapidly changing payments industry. Michael is focused on tracking the evolution of the payments industry, covering specific areas such as person-to-person payments, U.S. and global EMV card migration, digital wallets, merchant acceptance of different payment forms, cross-border payments, real-time transactions, and digital payments.

Michael specializes in assisting clients in developing new payment products or repositioning existing services to capitalize on market opportunities, understanding how to market to particular consumer and small business market segments, and developing new corporate strategies that can transform an existing payments franchise.

Michael brings over 20 years of experience from the payments and consulting industries. Before joining JAVELIN, he led the international small business card portfolio at Visa, launching new and growing existing debit and credit card programs with banks and financial services companies across the globe. Previously, he was the Head of Competitive Intelligence at Capital One, a Payments Knowledge Expert at McKinsey’s Payments Practice, and the Head of Product Marketing at Ondot Systems, a Silicon Valley mobile card control startup. He has presented to audiences around the globe, primarily at Visa and McKinsey client and public audiences.

Michael holds a BBA in finance from the Ross School of Business at the University of Michigan and an MBA in marketing and entrepreneurship from the Kellstadt Graduate School of Business at DePaul University.

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