By JP Morgan has secured 75 new banks internationally, to ensure the seamless and faster Interbank settlements, whilst trialing the blockchain payments technology.
Two of JP Morgan’s partners include Royal Bank of Canada and the New Zealand Banking Group Limited. According to the Financial Times, this positions JP Morgan, together with the Royal Bank of Canada, and the Australia and New Zealand Banking Group (ANZ), as direct rivals to R3.
The blockchain experiment was initiated by JP Morgan in October 2017, in an effort to minimize the participants needed to verify transactions as well as the friction typically involved in a global payments transaction. Blockchain technology can be used to reduce the time taken for multiple layers of communication which takes place, to verify and process a transaction quickly. The system will enable the speedy receipt of beneficiaries’ funds with fewer steps and enhanced security.
Quorum was used to develop the blockchain. Quorum is an Ethereum-based private blockchain, which was developed by JP Morgan in collaboration with development studio ETHLab. It is said to facilitate hundreds of transactions per second, whilst upholding privacy, through enabling validation exclusively by parties to the contract.
JP Morgan processes approximately $5 trillion in payments every day for clients in more than 100 countries. The need for blockchain, machine learning and robotics are evident in the optimization of client service delivery.
JP Morgan’s blockchain development took place nearly two years ago to the day, as was reported by CCN. JP Morgan, the largest bank in the US has resigned from the banking centric blockchain R3, to allocate resources to the development of their own blockchain.
JP Morgan is responsible for the signing of private transactions, whilst they blockchain creation and validation model and the custom consensus rules have been delegated to another partner.
JP Morgan and its partners aim to assess the possibility of using a common ledger accessible by all participating banks to simplify the transaction process. This will aid in reducing the number of participants required in a simple cross-border payment chain.
The global cooperation through banking partnerships provides the opportunity for people to make and receive international payments via three or four middlemen firms. It is clear that blockchain technology would enable instant communication and dispute resolution.
Due to the blockchain solution focusing primarily on the payments industry, multiple traditional banks fear the disruption from fintech start-ups.
Jason Goldberg, JP Morgan banks analyst told Fin-tech that “Payment is one of the segments banks worry about most about in terms of ceding to non-bank competition. Blockchain is a way to keep more of that [business] in-house.”
The Fintech report also noted that the Interbank Information Network enables peer-to-peer financial messaging, which makes it a rival to the most common means of international payments, operated by SWIFT.
It has been projected that the network is expected to process about 14,500 USD-denominated payments daily, across almost 80 banks. The intention is also to include currencies which are not the US$, in the near future.
What do you think about JP Morgan’s intended use of the private blockchain? What are your thoughts on JP Morgan’s disengagement from R3? Let us know in the comments below!
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