Banks and payment companies have been bearish on Bitcoin, but the virtual currency's underlying technology is growing in popularity and attracting investment.

Visa, Nasdaq, Citi Ventures, Capital One, Fiserv and Orange are interested to the tune of $30 million in funding this week for San Francisco-based Chain Inc., which provides blockchain technology for financial institutions.

"It's very plausible to see the distributive ledgers and cryptography of the blockchain, with proper management, creating interest," said Eric Grover, payments industry consultant at Minden, Nev.-based Intrepid Ventures.

The attraction is less about virtual currency than the ability of blockchain to document transactions and replace third parties with a secure network to quickly transfer financial assets. A blockchain can provide a full history of banking transactions, and share that data on all computers in a chain. They enable asset holders to transact peer-to-peer instantly and at low cost, while setting up a network that encourages collaboration among participants.

That potential is enough for investors to look beyond the risky nature of Bitcoin. For example, Ripple Labs has faced regulatory scrutiny from Financial Crimes Enforcement Network earlier this year over violations to the Bank Secrecy Act, but the digital currency firm was doing what new investors are most interested in – providing a money settlement platform for cross-border transactions and payment protocol that allows ongoing monitoring, an attractive use for banks.

"Ripple is an example of a limited blockchain to establish a cross-border value," Grover said. "Maybe it was not a home run, but it is a plausible use case."

Chain launched just more than a year ago and has established itself in working with payments technology provider and processor First Data and with technology stock exchange Nasdaq. Chain's partners deploy and operate blockchain networks for specific markets and assets. Those private networks typically do not use Bitcoin currency, but use the same open protocols, making them interoperable with other open digital currency networks, Chain stated in a Sept. 10 press release.

"We think blockchain technology is very interesting and could have some useful applications especially in the areas of loyalty and rewards," said Jim McCarthy, executive vice president for innovation and strategic partnerships at Visa.

The investment in Chain allows Visa to work closely with a leader in blockchain and explore its potential with clients and co-investors, McCarthy said. Visa wants to experiment while gleaning "new insights and potentially bring new solutions to the market for our customers."

While mobile wallet disruptors gain a lot of attention in the industry, blockchain developers are providing an innovation that could eventually "find its way into the core infrastructure of moving money around," said Maarten Bron, director of innovations at Underwriters Laboratories.

"The concept is actually remarkably easy," Bron said of the blockchain process in which many parties agree on money amounts and values.

"Today, I have $100 in the bank because the bank says so," Bron said. "If I owe someone $100, it is because the bank says I owe it. With blockchain, it is because everyone knows it and agrees."

For larger banks, it is a wakeup call because they generally view Bitcoin "as part of the Wild West, but see this underlying technology as very promising and plausible for real-time payments," Bron added. "I like it because it is a new concept in an old industry that has been doing business in the same way for many decades."

It is too early to tell if warming up to blockchain technology would equate to banks and payments companies embracing Bitcoin as an alternative currency. Even though it is not widely adopted, Bitcoin remains a product that consumers can buy with payment cards.

"Bitcoin is a cryptocurrency that can be bought and sold like any other hard or soft goods, so like any other asset, a consumer can buy and sell Bitcoin with Visa cards," Visa's McCarthy said, adding Bitcoin cannot be processed over the VisaNet rails.

Because of plenty of bad publicity and mishaps for Bitcoin and other virtual currencies, some past "bets on Bitcoin were higher risk…some were operating as acquirers and selling Bitcoin service to merchants, and I think that is a bridge a bit too far," Grover said, adding there are still many realistic blockchain uses.

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