JPMorgan Applies for a Patent for Network Payments on the Blockchain
Use of distributed ledgers for interbank payments such as financial exchange settlement and reconciliation
JPMorgan Chase filed an application for a patent on the use of distributed ledgers for interbank payments. As the filing depicts, this was done with the aim to support financial exchange settlements and reconciliation of financial transactions.
On 3rd May 2018, the U.S. Patent and Trademark Office published the patent application, which was initially submitted by the company in October 2017. In this patent application JPMorgan introduced a framework to track payments to and from banking systems via a peer-to-peer network. As the bank shows, the use of this technology would give “a unique system for recording transactions and storing data”.
Private or public ledger distribution network of data through replication is an added advantage as described in the filing.
Process in the Patent Application by JPMorgan
JPMorgan explained the process in the following manner;
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.
According to the bank, the blockchain solution on current systems will support low cost real-time bank settlements in an efficient way.
The application states the following;
“For a cross-border payment to be made from a payment organization to a payment beneficiary, a number of messages must be sent between the banks and clearing houses involved in processing the transaction. This often results in a slow transaction, as there may be delays in service due to correspondent banking, messaging networks, and clearing intermediaries in the payment flow.”
It could be expected for JPMorgan to apply for a patent on its blockchain-related work connected to interbank payments. Several days earlier before filing the patent application, the bank launched the Interbank Payments Platform service on Ethereum-branched Quorum Blockchain.
The JPMorgan Treasury Services head of global payments and foreign exchange, Emma Loftus expressed her current view;
Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks.