Bitcoin, Blockchain and the Future of Payments€¦ · 1 l Leilani Doyle SVP Product Management...
Transcript of Bitcoin, Blockchain and the Future of Payments€¦ · 1 l Leilani Doyle SVP Product Management...
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Leilani Doyle SVP Product Management
April 2016
Bitcoin, Blockchain and the Future of Payments
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WHAT EXPERTS SAY “A world with different and new money will be a different and new world. We are headed there more rapidly than most suppose. The lives of citizens and central bankers alike will be profoundly altered... ”
—Lawrence H. Summers, President Emeritus of Harvard University, former Secretary of the United States Department of the Treasury 2012�
Source: Breaking Banks by Brett King and Amazon Review of The End of Money by David Wolman
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§ A form of electronic currency
§ Social in nature and no one controls it
§ Bitcoins are “mined” by solving increasingly complex mathematical problems
§ Transfers can be made without a third party
What is bitcoin?
https://bitcoin.org/en/bitcoin-paper
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Key Players § Satoshi Nakamoto
• Could be Craig Steven Wright, Michael Clear, Martii Malmi, Jed McCaleb
§ Miners – mint bitcoins by solving increasingly complex mathematical equations
§ Blockchain – public ledger of all bitcoin transactions requiring distributed consensus
§ Addresses – bitcoins are transferred from address to address
§ Private Keys – sign individual transfers
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§ No foreign exchange fees or complexity § Push payment by design – no cardholder
data § Connects payment
directly with the receivable/purchase
Benefits of Using Bitcoin
https://www.youtube.com/watch?v=BrRXP1tp6Kw
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• 1% effective processing fee
• Dell and Overstock offer
discounts for bitcoin purchases
Consumers and merchants recognize the benefits of using bitcoin!
• Personal information is not required for transactions
• No additional PCI
concerns
• 2-click transaction process
• Eliminates chargebacks
and false positive rejections
• Online tipping is possible through microtransactions
• Cross-border transactions
are faster and cheaper
Cost savings! Security! Convenience! New uses!
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http://www.coindesk.com/deloitte-blockchain-ach-2025/
Blockchain News
http://www.finextra.com/news/fullstory.aspx?newsitemid=28356
http://www.coindesk.com/deloitte-blockchain-ach-2025/
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• Public vs Private blockchains ( or distributed ledgers )
• Planning/testing phase • Cross border payments (Ripple Labs) • Securities trading (SEC approved plan, Japan
and IBM) • Real time payments • Nasdaq and Estonia eResidency for
stock voting
Proof of Concepts
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Bank of America has filed 15 patents related to Blockchain use and has another 20 in the works
Blockchain Patents
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FUTURE OF PAYMENTS
• Greater Transparency• Faster• International• Data Rich• Accessible to all (Ubiquitous)• Less Expensive Transactions• More Opportunity for Value-Added Services• Lower Individual and Systemic Risk• More Secure
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TCH is building an industrial strength clearing and settlement system to support Real-Time Payments for the US § The system is designed to ensure that payments are not only faster, but safer too, consistent
with the CFPB’s consumer protection principles and the criteria set forth by the Federal Reserve Faster Payments Task Force
§ This system will allow consumers and businesses to send and receive payments instantly, directly from their accounts at financial institutions
§ This system will also support the sending and receiving of data and non-payment messages to support the development of innovative products and services by financial institutions
TCH’s Real-Time Payments system will be available to all US financial institutions § All US financial institutions will have access to TCH real-time payments § TCH’s goal is to achieve ubiquity rapidly; we are working with partner organizations to achieve
that goal
TCH Real-time Payments architecture is modular for adaptability to changing needs The system’s modular architecture allows TCH and participating FIs to leverage best-of-breed technology for routing directories, anti-fraud, AML, network connectivity, security, settlement and value-added services
The Clearing House’s Real-Time Payments Initiative
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https://www.theclearinghouse.org/payments/real-time-payments
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§ Confirmation of Payment – Immediate notification of successful transfer to end users, providing certainty for both senders and receivers
§ No Returns – receivers have certainty of good funds
§ Request for Payment – delivered through the payment system to support receivables products such as e-invoicing and e-billing, while reducing remittance errors
§ Fulfillment Messaging – Ability to provide confirmation by the receiver that they have received funds, combined with fulfillment information (e.g. “invoice paid” or “goods shipped, tracking info http//UPS.COM/293jdxG55228ww”)
§ Complete Payables/Receivables Messaging – Ability to link multiple messages associated with the same transactions (e.g. request for payment, confirmation, separate remittance) through a common reference
§ Consistent User Experience – robust rules that establish requirements for availability of funds, timeliness of notification, delivery of non-payment messages (request for payment, receiver confirmation, separate remittance) and other elements that support independent development of value-added products by banks
§ Global Ready – ISO 20022 is a global standard that immediately simplifies processes for multi-national banks and companies, and will support cross-border payments in the near future
Real-time payments provide particular value for business payment applications
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TCH Confidential
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§ Faster Payments Services (FPS) offers 24/7 real-time credit transfers to virtually any UK account. FPS is the most mature national real-time payment network, launched in 2008 and now processing 1 billion transactions per year.
§ Legacy Payments and real-time payments co-exist – after 7 years, FPS has grown to ~20% of BACS (conventional ACH) volume
§ Usage is driven by more than just low-value P2P transfers – average transaction value is £821 and nearly half of FPS transactions are scheduled or deferred payments to or from businesses
§ Real-time payments require enhanced online banking security – The UK saw a significant rise in retail online banking fraud following the introduction of FPS
Lessons learned from UK Faster Payments Service
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£845.48
£294.43
£1,809.79
Single Immediate Payments
Standing Orders Future Dated/Bulk
UK Faster Payments Service 2014 Average Value
Single Immediate Payments
56%
Standing Orders
30%
Future Dated/Bulk
14%
UK Faster Payments Service 2014 Payments Volumes
FPS Avg. £820.94