United States largest and worlds 6th largest bank, JP Morgan Chase, is now putting its Inter-bank Information Network (IIN) over blockchain technology. The U.S. financial giant is aiming to improve the number of successful global transactions by reducing the count of global payments rejection due to errors.
Jamie Dimon, the CEO of JP Morgan has been a strong bitcoin antagonist and on numerous occasions, undermined bitcoin’s potential and even called it a ‘fraud’. Bitcoin challenges the authority, it challenges the financial institutions that have pertained to for so long. The recent news of JP Morgan further incorporating blockchain, the very technology behind bitcoin, didn’t raise many eyebrows as compared to when the bank launched its own stable coin, JPM coin, backed by USD, a couple of months ago.
In 2017, JPM collaborated with Royal Bank of Canada, Australia and New Zealand Banking Group Limited to launch IIN, to speed up the global payments with better security. Global payments are complex in nature, since their processing requires multiple verification on several points. According to Emma Loftus, Head of Global Payments and FX, J.P. Morgan Treasury Services, blockchain technology proved to be very helpful in reducing substantial time and cost. She said:
IIN will enhance the client experience, decreasing the amount of time – from weeks to hours – and costs associated with resolving payment delays… Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks.
Now, JPM is taking IIN to another level by adding new features to it. JPM’s head of global clearing, John Hunter says that with the addition of the latest feature, the track of the payment can be immediately verified. This means that if the payment is heading to a valid point or not, can be instantaneously determined. Hunter clarified that at present, payments take several days before getting rejected due to errors such as wrong bank account numbers or addresses. While mentioning that the new feature will be launched by fall, he outlined the flaws with the current processing speeds and stated:
Banks straight through processing rates are in the mid-80s to mid-90s. It’s that gap — the 5 to 20 percent of payments — that have to be assessed by operations where we’re trying to alleviate some of that pain.
At the moment, IIN that is built on Ethereum-based platform, Quorum, comprises of more than 220 banking members. As of now, the platform for both international and domestic payments is free of cost but in the future there may be subscriptions for using IIN.
Though it was the very first bank to launch a crypto token, the reality differs considerably ever since JPM launched its coin, without installing the aspect of decentralization. JPM made use of the blockchain for transferring and recording transactions only. Cryptocurrencies took the world by storm because of their decentralized nature, making them not governed by any centralized authority. Moreover, this sets them apart from fiat which is manipulated and impacted by financial institutions and governments. JPM Coin, was largely criticized by many experts because it lacks basic trait of decentralization.
Lizzie Parmentar, consultant for Pelicoin in the Middle East, previously shed light on the sly and cunning practices of financial institutions. He explained what were these institutions up to while talking to BlockPublisher. Revealing intentions of these institutes, he said:
Use of JPM Coin requires approval from JP Morgan, making it just a new form of digital currency backed by a traditional institution. Although financial institutions are developing blockchain-based digital tokens, they will likely remain reluctant to open up to truly decentralized currencies.
With IIN, JPM is attempting to step up with other services enabling cross-border payments like TransferWise and xCurrent. In this regard, blockchain has so far convinced JPM of being helpful and applicable. It is interesting to note that the banks are limiting the use of blockchain for their own purposes when the technology can do a lot more. It would be of interest to see how long these financial institutions hold blockchain and decentralized cryptocurrencies back to protect their commanding power and control over global financial system.