J.P. Morgan Chase is working with Siemens to create a blockchain system for the latter company’s payments.
As the Financial Times reported Monday (Dec. 20), the two companies say this system is a first-of-its-kind application. Siemens says it needs the upgraded automation to process a rising number of payments it expects as payment methods like pay-per-use gain popularity.
“If the business would stay the same as it is today, I would say we are fine regarding our treasury set-up. We can automate a bit and maybe we reduce costs and cash allocation,” Heiko Nix, head of cash management and payments at the German industrial firm, said in an interview with the FT.
“This is not the reason why we are doing this. The reason is that we are seeing a huge change due to the emerging digital business models, because we will no longer be able to forecast cash, for example.”
For now, the system – developed with Siemens with J.P. Morgan’s blockchain service Onyx – is used just for moving money between Siemens’ own accounts, in U.S. dollars, although there are plans to add euro transfers in 2022.
Naveen Mallela, global head of coin systems at Onyx, says the system takes programmable payments beyond uses such as direct debits.
“You want more flexible rules or flexible triggers, that is where the current infrastructure falls short,” Mallela said.
The story notes that this move is happening at a time when banks – HSBC and Wells Fargo among them – are stepping up their efforts to work blockchain technology into their infrastructures.
Read more: JPMorgan’s Onyx Opens Infrastructure To Disrupt Cross-Border Payments
PYMNTS spoke to Mallela earlier this year about the growing awareness among financial institutions of the need for industry collaboration to deal with cross-border payment friction.
“My conversations with most of the banks have [realized] that the industry needs shared platforms,” he said, adding that “it’s not about bank-specific products, it’s not about bank-specific platforms. It’s about shared, industry-wide platforms, and decentralized networks.”
