Cryptocurrencies, the newest craze in currency and trade has been the focus for many investors over recent months. The virtual currency has even grabbed the attention of the financial giant JPMorgan Chase and the financial giant has filed a US patent application for a unique payment system that is completely computerized and resembles some aspects of Bitcoin. Like Bitcoin, JPMorgan’s dream system could make anonymous, electronic payments possible over the internet with no exchange of personal information or fees. The application brought to focus the little known battle that currently is being waged between bankers, investors, credit card companies, and other influential giants like Google, Apple and PayPal. They recognize the growing promise of virtual buying and selling and the growing popularity of online shopping. At the same time, traditional finance companies, banks, and institutions are trying to come to terms with the new trends and work to find ways to stay ahead of the curve. JPMorgan’s patent application states that their plan for the payment system would compete with debit and credit cards and could possibly become the preferred way to buy and sell things online.
How it Works
In the patent application, JPMorgan argues that even though credit cards and banks are the dominant form of payment options online today, there are many issues with these forms of payment that limit their usefulness and longevity. They argue that in five to ten years, people will be fully switched to an online virtual payment system and that their patent will help secure that future for the company. They suggest the internet way of business needs a form of cash exchange, something that is quick, cheap and simple without all the hassle of credit card numbers, names, addressed, pins and the like. What they propose is a way to make purchases anonymously and where the consumer’s Bitcoin balance is stored on their computer memory and where all of the online transactions are verified through a shared log. It is similar to a system used for Bitcoin and has led some to thing JPMorgan is looking at developing their own form of virtual currency or at the very least trying to secure their piece of the Bitcoin pie for when it really takes off.
However, the patent application does not make any mention whatsoever of Bitcoin. It does, however, mention that the reason for the interest in virtual transactions is that the current modern financial system is outdated. JPMorgan notes in the application for the patent that there are two trends making the old way of banking and exchanging money obsolete. One is that merchants now work directly with clients and the need for middle men and third-party systems is dying. The second trend they mentioned is that the majority of online transactions are for small amount of money and the high transaction fees are not worthwhile for these smaller purchases. The focus is now on low dollar, high volume, payments that quickly and easily pass from the consumer to the supplier. It is on these two premises that JPMorgan is seeking the patent for the payment system that caters to virtual currency like Bitcoin. As an ever growing number of people make their purchases online, financial businesses and institutions want to make sure they are not left behind. Bitcoin hit a milestone this year as being the most prominent virtual cash system. The price of shares in Bitcoin hit marks over $1,000 the day after Thanksgiving, which put it at more than a 9,000% gain for the year. It is numbers like these that move JPMorgan and others to look at how they can capitalize on this popular and potentially very profitable industry.
There is great potential for Bitcoin to be a widely accepted and recognized form of currency in the online and digital world. If companies like Amazon, eBay, and others warm up to virtual currency, the future for Bitcoin could be very bright indeed. No one is expecting to see Bitcoin options at checkout for eBay and Amazon next year, but in the very near future it could indeed be a possibility. The majority of those who are concerned about the virtual currency have concerns over Bitcoin’s dollar price and volatility. They argue that Bitcoin is too unstable and not secure enough to be a trusted form of currency. However, enough people seem to see the potential in virtual currency and JPMorgan is leading the charge.
JPMorgan is not blind to the risks and potential drawbacks to virtual currency but they acknowledged the disadvantages that are present in traditional credit card use in a virtual market where speed, security, and low costs are the name of the game. Possibly pointing to Bitcoin, JPMorgan mentioned in the patent application that their popularity of online shopping now allows vendors to sell directly to consumers without the need for third parties and middlemen. The patent application also pointed to the increasing competition among online manufacturers, who seek to keep prices low yet make enough to survive. The competition among online vendors forces many to find new ways of reducing payment processing costs and that is what JPMorgan hopes their new system will allow them to do.
Another feature of the patent proposed by JPMorgan is the security it can provide to online shoppers. Shoppers will be able to store virtual money in special accounts that are secured, much like Bitcoin is, through cryptography, which offers a high level of security and also helps by guaranteeing no breaches of security during the transaction. It basically lets buyers make purchases anonymously with no personal information exposed to hackers. However, it is this anonymity that earlier in October lead to the FBI shutting down The Silk Road, a website that specialized in illegal drugs. An FBI official said that they confiscated around 144,000 Bitcoins, worth of drugs, which is close to $28.5 million. However, despite some potential downsides, JPMorgan and many others see the good and believe that with work and the right foundation, virtual currency can indeed become the next big thing in online purchases.