US bank JP Morgan Chase has filed for a patent in the US to develop a payment system using “virtual cash”, similar to the emerging online currency, bitcoin.
The application contains no reference to bitcoin or any other existing crypto-currency, except for a claim that the work would represent a “new paradigm for effectuating electronic payments”.
The lengthy patent application was filed in early August but made publicly available only at the end of November; it describes a “method and system for processing Internet payments using the electronic funds transfer network.”
“The method has further, broader applicability by providing the ability for anyone with an account at an institution to transfer funds to anyone else who also has an account at the same or a different institution. The pay anyone feature of the present invention allows parties to electronically transmit funds instantaneously without the expense of today’s wiring fees,” says the application.
The application instead pits the proposed electronic funds transfer system against the traditional credit card and “rival” Internet payment systems.
“While new Internet payment mechanisms have been rapidly emerging, consumers and merchants have been happily conducting a growing volume of commerce using basic credit card functionality. 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,” the application reads.
The bank new payment system also promises to lower the cost of doing business online for the merchant, slashing the fees that are currently charged by banks to process credit card transactions.
As the Telegraph writes, the JP Morgan Chase’s system seems to differ on bitcoin – which is a peer-to-peer service that was designed in part to avoid the need for a central controlling institution – in that wallets would be stored on a “host web server”, presumably under the control of JPMorgan.
Analysts say the move comes as banks, credit card companies and online payments firms such as PayPal are trying to gain dominance as people make more of their financial transactions online, says BBC News.
Last week, Bank of America released a surprisingly upbeat report on Bitcoin, essentially proclaiming it the next big thing. Advocates describe Bitcoin as the foundation stone of a Utopian economy: no borders, no change fees, no closing hours, and no one to tell you what you can and can’t do with your money.
Bitcoin commentator Brian Cohen said on the Let’s Talk Bitcoin site: “While it remains to be seen if this technology is a ‘bitcoin killer’, other players such as eBay/PayPal 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.”
JP Morgan’s patent application comes after China banned its banks from handling transactions involving Bitcoins. China said Bitcoin was not backed by any nation or central authority.
Since October the price for Bitcoin has more than trebled in value. It saw a rise in value in November, when a US Senate committee hearing was told virtual currencies were a “legitimate financial service”, with the same pros and cons as other online payment systems.