The Democratization of Payments: Using a Federated Ledger To Deliver Real-Time, Cross-Border Payments To All

  • Eric Hazard, Managing Director at Cognito

  • 27.09.2016 11:15 am
  • payments , real-time payments , federated ledger , paycommerce , faster payments , instant payments , Eric Hazard is the managing director at Cognito's New York where he advises financial companies on best practices in communications across traditional and social media.

The concept of instant payments is well-known throughout the financial industry. Counterparties wish to settle transactions in as close to real-time as possible and the exchanging of payments data is critical to ensure the completion of the deal. Despite the universal appeal of instant payments, it has been difficult to achieve on a global scale, owning to dispirited regulatory regimes, compliance processes and time zones.

To this point, achieving real-time, instant payments on a global scale has remained a desirable, if elusive, goal. As an article in Global Finance said in November: “The ultimate goal, as ever, is to have a system that supports real-time, global payments. Getting there, though, will take some time—and possibly some big changes on the settlement side.”

Recognizing the market demand for an industry solution, PayCommerce announced at Sibos the launch of the company’s instant cross-border payment, clearing and integrated settlement program for global banks.  For the first time, banks have access to a global network providing real-time settlement across currencies and payment types.

PayCommerce’s instant payments network is built on an open network that unites faster payment initiatives from different regions and nations allowing for the democratization of payments across borders. The program takes the next step in instant payments by uniting dispirited regional and country systems onto PayCommerce’s bank consortium model which is interoperable with other global systems and networks to maintain ledger balances across all parties.

"You can't achieve instant cross-border payments on a mass scale without real-time clearing using a consortium banking model,” says Abdul Naushad, PayCommerce CEO and Founder. “That is why we’re so excited about the launch of our network, which brings real-time, global payments on an open network to the industry for the first time.”

PayCommerce announced the launch of the pilot program to deliver instant payments between the US and India then extended to UK to India later in the fourth quarter. In 2017, the firm plans to rollout additional originating and receiving countries including Mexico, other GCC countries and South Africa; followed by Australia in 2018.

Powering the real-time, global instant payment network is PayCommerce’s banking consortium of more than 130 banks, which is built on the company’s federated ledger. Using the foundation of blockchain, PayCommerce’s federated ledger is a hybrid integrating both distributed and centralized ledgers. This model enables faster payments across networks, combing the foundation of blockchain technology with PayCommerce’s messaging platform. The federation of compliance and  business rules combined with the consortium model. By leveraging the blockchain foundation, PayCommerce ensures is compliant and accommodates business rules in a heterogeneous network environment.

The federated ledger acts as a super node that serves as an integration point across networks. PayCommerce’s network compliments blockchain’s distributed ledger to close the gaps between a traditional centralized model and the next generation of technology.

In this way, PayCommerce’s federated ledger complements distributed ledgers by filling in gaps such as interoperability among dispirited ledgers, synchronization, policy management including time lag that may vary between different regions and banks.

“The distributed ledger model was not structured to accommodate regulatory controls across regions and transparency,” explains Naushad. “In a payments ecosystem there needs to be certain centralized criteria, especially in cross-border when it comes to regional, legal and regulatory compliance.  PayCommerce’s federated ledger combines the data packet verification of the distributed ledger with our consortium model to provide real-time, cross-border payments for the first time.”

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