JPMorgan Chase Wants a Patent for Digital Payment System

JP Morgan Chase might be building a 'bitcoin killer' after its patent application for a digital payment system.

AccessTimeIconDec 10, 2013 at 2:30 p.m. UTC
Updated Sep 10, 2021 at 12:03 p.m. UTC

UPDATED on 11th December at 11:00 GMT

According to Business Insider, the recent filing is a renewal of a patent first filed in 1999, so this isn't actually a new creation by JP Morgan Chase at all.


JP Morgan Chase is building its own digital currency for use with digital 'wallets', it has been reported.

The banking giant filed a patent application relating to a “method and system for processing internet payments using the electronic funds transfer network”.

Let’s Talk Bitcoin claimed the patent application was actually filed on 5th August, and published 28th November. The application's abstract says:

“Embodiments of the invention include a method and system for conducting financial transactions over a payment network.

The method may include associating a payment address of an account with an account holder name, the account residing at a financial institution and the associated payment address of the account configured to allow withdrawals by the account holder only and to allow a plurality of deposits to be made at different times.

The method further includes freely publishing the payment address and making it available to users of an internet portal or search engine. The method further includes receiving data over a network identifying a deposit to be made to the account, assigning the deposit to the account using the payment address, and notifying the payer of the assignment.

At least one directory is used for associating the account holder with the payment address.”

Direct payment addresses, freely publishing such addresses for deposits over data networks… apart from the ‘account residing at a financial institution’ part, many might be familiar with a similar system already in widespread use.

In its lengthy application, JP Morgan Chase has avoided mentioning bitcoin at all, though it did allude to the fact that “new Internet payment mechanisms have been rapidly emerging”.

Of course, it could be referring to PayPal, or one of the many retail loyalty point systems attempting to become their own kind of currency. But the application also notes the drawbacks of these existing systems, such as the need to enter PINs, high processing fees, and shortage of consumer-to-consumer payment methods.

Before anyone says “prior art”, the application also mentions “prior art electronic Wallets”, but refers to software that stores existing account information rather than being self-contained.

Other highlights from the application include:

“A computer-implemented method of providing an anonymous payment from a mobile device to a payee device to enable an electronic payment between a payer and a payee without provision of an account number or name from the payer…”


“payment message including a transaction ID; transmitting the transaction ID to the payer, the transaction ID permitting the payer to initiate transmission of a payment amount; generating a payment authorization message from the payer, the payment authorization message including a payment amount to be tendered to the payee and the transaction ID, the transaction ID allowing identification of the payment, thereby enabling redemption of the payment amount after the payee receives the transaction ID.”

Is this anything for bitcoin users to be concerned about? Is Chase, as the headlines said, ‘building a Bitcoin Killer?’

It’s no secret that the Internet, and the world at large, needs better payment options. The legacy system of credit cards and international wire transfers is being shoehorned into the Internet like Cinderella’s ugly stepsister into a glass slipper, often with the same unattractive results.

PayPal introduced the world to the concept of easy trans-currency payments, but also to those of account freezes, verification processes and 3% flat transaction fees.

But supposing Chase decided to use the patent to build its own cryptocurrency, would users flock to it? The initial reaction to Chase’s patent application from bitcoin fans was to point out a centralized system controlled by a large financial institution is hardly what cryptocurrency users want.

What about everyone else? Maybe all large financial institutions need to do is offer something identical to bitcoin, but without all the volatility, black market fearmongering and exchange shutdowns. Large banks, despite actions and events over the past five years, are still seen by most as safe places to store wealth.

Banks have also tried repeatedly to lock customers and companies out of the financial system for using bitcoin (including Chase itself), and perhaps having their own competing digital currencies would give them extra incentive to do so.

Holding a patent could also enable Chase to slow down or even stifle development of services relating to other digital currencies.

For those who don't understand decentralization or its advantages, a controlling hand might even be seen as desirable. Neil Irwin of the Washington Post echoed this view with his 'Bitcoin Needs a Central Banker' article in November.

Everyone from alt-coin developers to large corporations will probably try to build a better bitcoin in the coming years, and some users will be looking for one. Whether they succeed could well depend on more than just innovative features.


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