If you can't beat 'em, join 'em, copy 'em, and then beat 'em. While everyone's attention has been glued to Bitcoin (and its various smaller and less viable for now alternative digital currencies), JPMorgan has submitted a patent [4]which appears to set the scene for a competing centralized network to Bitcoin. As LetsTalkBitcoin noted first [5], the "Method and system for processing internet payments using the electronic funds transfer network," states that Chase's technology is a "new paradigm." Moreover that it permits the creation of "virtual cash" (also referred to as "web cash") with a "real-time digital exchange of value."
Imagine paying for some product in a transaction directly with the seller that doesn’t include a costly third-party fee or the revelation of a personal account number — the current components that comprise credit card and debit card purchases. Imagine this system with a “real-time digital exchange of value.” And imagine that you can archive all the transactions in a personal digital wallet, with its own “Internet Pay Anyone (IPA)” account and inherent safeguards built-in, something that you could call “Virtual Private Lockbox (VPL),” according to JPMorgan’s patent.
If this “web cash” system — as JPMorgan Chase calls it — seems familiar, it should. It smacks of the peer-to-peer transactions of bitcoins and other cryptocurrencies that increasingly are making the world’s biggest banks uneasy about the future of e-commerce.
The patent, first revealed by LetsTalkBitcoin.com [7], is a fascinating look into JPMorgan’s veiled outlook on the evolving but growing bitcoin universe, and other more widely-accepted payment systems.
JPMorgan’s proposed system offers another eerily familiar component, which seemingly mimics “blockchain,” a publicly available, permanent ledger of bitcoin transactions.
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Without naming the virtual currency or any competing payments system by name, the bank takes a swipe at the crytocurrency model.
“None of the emerging efforts to date have gotten more than a toehold in the market place and momentum continues to build in favor of credit cards,” according to Chase’s patent application published by The United States Patent and Trademark Office (USPTO). It was filed August 5th, 2013.
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JPMorgan Chase sees “a new marketplace” emerging for “low dollar, high volume, real-time payments with payment surety for both consumers and producers.”
As LetsTalkBitcoin.com points out, “Bitcoin has also been ballyhooed for it use with micro-payments and payments under ten dollars due to its zero to negligible fee structure.”
JPMorgan Chase: “The present invention further enables small dollar financial transactions, allows for the creation of ‘web cash’ as well as provides facilities for customer service and record-keeping.”
While naming protocols for these vitual currencies is uncertain, we can't help but think "Dimons" would be appropriate as the web cash becomes increasingly more trusted.
LetsTalkBitcoin discusses how JPMorgan's proposed system works [5]:
Under The Hood: Internet Pay Anyone
“…The structural components to the system of the present invention include:
a Payment Portal Processor; a digital Wallet;
an Internet Pay Anyone (IPA) Account;
a Virtual Private Lockbox (VPL);
an Account Reporter;
the existing EFT networks;
and a cash card.
“…The Payment Portal Processor (PPP) is a software application that augments any Internet browser with e-commerce capability. The PPP software sits in front of and provides a secure portal for accessing (finking to) the user’s. Demand Deposit Accounts (DDA) and IPA accounts. The PPP enables the user to push electronic credits from its DDA and IPA accounts to any other accounts through the EFT network…”
“…The {technology} …includes freely publishing the payment address and making it available to users of an internet portal or search engine…”
“…Currently, all Internet transactions use “pull” technology in which a merchant must receive the consumer’s account number (and in some cases PIN number) in order to complete a payment. The payment methods of the present invention conversely use “push” technology in which users (consumers or businesses) push an EFT credit from their IPA or DDA accounts to a merchant’s account, without having to provide their own sensitive account information…”
A New Paradigm
“…The present invention represents a new paradigm for effectuating electronic payments that leverages existing platforms, conventional payment infrastructures and currently available web-based technology to enable e-commerce in both the virtual and physical marketplace. The concept provides a safe, sound, and secure method that allows users (consumers) to shop on the Internet, pay bills, and pay anyone virtually anywhere, all without the consumer having to share account number information with the payee. Merchants receive immediate payment confirmation through the Electronic Funds Transfer (EFT) network so they can ship their product with confidence that the payment has already been received. The present invention further enables small dollar financial transactions, allows for the creation of “web cash” as well as provides facilities for customer service and record-keeping…”
and the implications:
I view this technology and patent application as an overwhelming good thing. Bitcoin is driving Innovation. It has been said that credit cards and the legacy banking system in use today was never meant for use over the internet. Chase’s updated Internet Pay Anyone technology appears to come head to head with Bitcoin.
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While it remains to be seen if this technology is a “Bitcoin Killer,” other players such as eBay/PayPal (which have been riding under Bitcoin’s coattails through marketing gimmicks) ought to pay close attention to this emerging technology. If Bitcoin does get a “toehold” in the marketplace, we just might see this technology activated. The Chase is on.
Finally, the patent application itself (source USPTO [4]):
[8]