JPMorgan Chase's Onyx unit has introduced programmable payments using cryptocurrency-style technology, aiming to attract business-to-business clients in the realm of payment automation. This feature, available for JPM Coin blockchain accounts, leverages smart contracts and distributed ledgers to automate payments under specific conditions. Naveen Mallela, head of JPMorgan coin systems, emphasizes the importance of adding programmability to electronic money, referring to it as the "holy grail."
The "if-this-then-that" interface enables clients to set transaction timing and regulations, providing flexibility in handling liquidity shortages and supply chain changes. Corporate users can define customized criteria for financing accounts or triggering equity investment payments after a margin call. Programmable payments move beyond traditional payment standards, allowing organizations to create and manage their transaction settings, offering more expressiveness than conventional standing orders.
James Wester, co-head of payments research at Javelin Strategy & Research, sees this development as a realization of blockchain's potential, particularly in enhancing treasury, liquidity, and cash management for businesses. In the context of a sizable bank offering such capabilities to its clients, the flexibility that blockchain technology offers is considered significant.
Naveen Mallela highlights that while JPMorgan is utilizing blockchain technology, it is not employing bitcoin for payments. He notes that cryptocurrencies are primarily used to hold value rather than for transactional purposes at scale, emphasizing the limitations of current central bank digital currencies and commercial bank money in this regard.
In a similar fashion, Siemens plans to optimize working capital and scale using the programmable payments feature, while FedEx and Cargill are expected to launch in the coming weeks. This move towards 24/7 processing and real-time transactions reflects the need for more flexible responses to changing conditions, according to Mallela.
B2B payments have become a focal point for banks and payment companies aiming to save businesses time and money. JPMorgan's initiative competes with other innovations in the market, such as Swift's collaboration with Visa and Wise to simplify online B2B payments and Revolut's launch of international B2B tagging.
Aaron Press, research director of worldwide payment strategies at IDC, suggests that JPMorgan's solution could reduce cross-border network and foreign exchange costs. He also says that there are other ways to set the same rules that do not depend on payment messages or tokens. For example, payment APIs with notifications that start other actions could be used with powerful AI modeling.
JPMorgan's introduction of programmable payments signifies a significant step forward in utilizing blockchain technology for enhancing the flexibility and efficiency of business transactions, with potential benefits for treasury, liquidity, and cash management.