JPMorgan Files For Patent on Blockchain-Based Interbank Payments
American multinational and investment banking giant JPMorgan has recently filed for a patent with the U.S. Patent and Trademark Office (USPTO) for a peer-to-peer payment network between banks. The patent application notes that the network will be using the Distributed Ledger Technology (DLT) like blockchain for settlements across banks as well as internally.
The bank says that the use of the blockchain technology will provide "a unique system for recording transactions and storing data.”
The application also notes some of the limitations and drawbacks of the existing traditional banking systems, especially for the cross-border payment processing. It says: “A number of messages must be sent between the banks and clearing houses involved in processing the transaction… and clearing intermediaries in the payment flow […] [this may be] expensive […] [and] real-time settlement of payments is not possible […] transactions may be risky as there are counterparty and settlement risks associated with [the] correspondent banking network.”
The patent says that the use of blockchain will allow for real-time processing of payments without the need of any third-party required to have the “golden copy” i.e. the records of the audit trail.
The patent proposes four embodiments within a system. 1) a payment originator bank 2) a payment beneficiary bank 3) a peer-to-peer payment network connecting banks 4) a distributed ledger.
The functioning of the entire system is explained in the patent like "In one embodiment, a method for processing network payments using a distributed ledger may include: (1) a payment originator initiating a payment instruction to a payment beneficiary; (2) a payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer network; (3) the payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a peer-to-peer network; and (4) the payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.”
It looks like JPMorgan is getting more serious about implementing the next-generation blockchain technology in streamlining its banking process and wants to stay ahead of the curve. Earlier this year, the bank launched a platform build on “Quorum” in order to facilitate interbank payments. The bank is also said to be working on developing a blockchain-based system that trades debts internally.
During the launch of the Quorum-based platform, Emma Loftus, head of global payments and foreign exchange for JPMorgan Treasury Services, said: "Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks.”