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Blockchain interbank payment patent filed by JPMorgan


JPMorgan Chase has filed an application with the US Patent and Trademark Office for an interbank payments system that uses distributed ledger technology (DLT) in the hope of speeding up fast cross-border payments, writes Neil Ainger.

The skeleton patent application was lodged initially in October last year when JP Morgan unveiled plans to pilot its Quorum DLT smart contract and payment platform. But it has only now been made public by the Patent Office with subsequent revisions expanding its potential scope of operations.

The Quorum technology uses a permissioned-variant of the Ethereum blockchain. Other banks, such as ANZ and RBC, have already been invited to join the newly-formed JPM-led Interbank Information Network (IIN) to test out the data capabilities of the new DLT platform for global trade, correspondent banking and payments.

The public patent makes plain the bank’s intention to spin off the evolving Quorum unit as an independent entity that can explore new use cases beyond banking, in the payments field and so on. No doubt cash management and many other payment and financial and physical supply chain end uses around the world are also intended.

In its patent application, JP Morgan describes network payments for financial exchange settlement and reconciliation purposes as its main aim. The bank describes DLT-based systems and methods in the patent that may be used for:

  • A payment originator initiating a payment instruction to a payment beneficiary.
  • A payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer (P2P) network.
  • The payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a P2P network.
  • The payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.

The system will record transactions using the Quorum peer-to-peer (P2P) network with a confirmation kept on the blockchain and all associated data.

Speaking at the time of the Quorum announcement last year, Emma Loftus, head of global payments & foreign exchange (FX) for JPMorgan Treasury Services, said the: “Interbank Information Network (IIN) will enhance the client experience; decrease the amount of time; and costs associated with resolving payment delays. Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks.”

Processing times should fall from weeks to hours in some complicated cases. The correspondent banking end use may not directly impact the instant payment (IP) networks proliferating around the world at the moment, which are more retail-focused, but the potential is there for disruption. The long-term goal for many domestic IP schemes is to link up across borders and provide an interoperable supranational service and this may be threatened by DLT in the long-term.

The corporate end use case for some IP schemes, such as the ones recently launched in the US, may suffer if blockchain-based alternatives such as JPMorgan’s take off. Equally, there are many other challengers such as Ripple with one its investors Santander recently launching a mobile app for cross-border payments that relies on its xCurrent system. The incumbent player SWIFT is also hoping to maintain its position as the nexus for international interbank traffic by developing its global payments innovation (gpi) project into new areas, such as possibly providing a foundation for a new cross-border real-time payments (RTP) service in Asia Pacific.


Author: Neil Ainger