Systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation

Systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation are disclosed. In one embodiment, a method for processing network payments using a distributed ledger may include: (1) a payment originator initiating a payment instruction to a payment beneficiary; (2) a payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer network; (3) the payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a peer-to-peer network; and (4) the payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention generally relates to systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation.

2. Description of the Related Art

Distributed ledgers, such as Blockchain, provide a unique system for recording transactions and storing data. In general, distributed ledgers hold a log of transactions (events) that may be replicated across a public or private distributed network. Cryptography and digital signatures may be used to determine valid parties and transactions such that all parties/observers agree on the order and state of the ledger in real-time without having to rely on a trusted third party to hold the true “golden copy.” The distributed ledger thus provides a practically immutable, verifiably true audit trail.

FIG. 1depicts a conventional system and method for cross-border payments processing. For a cross-border payment to be made from a payment organization to a payment beneficiary, a number of messages must be sent between the banks and clearing houses involved in processing the transaction. This often results in a slow transaction, as there are may be delays in service due to correspondent banking, messaging networks, and clearing intermediaries in the payment flow. The transaction may also be expensive, as there are duplicative reconciliation and reporting costs across participants and within banks to enable transparency and payment tracking. There is a restricted availability to the funds, as real-time settlement of payments is not possible. And, the transactions may be risky as there are counterparty and settlement risks associated with correspondent banking network.

SUMMARY OF THE INVENTION

Systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation are disclosed. In one embodiment, a method for processing network payments using a distributed ledger may include: (1) a payment originator initiating a payment instruction to a payment beneficiary; (2) a payment originator bank posting and committing the payment instruction to a distributed ledger on a peer-to-peer network; (3) the payment beneficiary bank posting and committing the payment instruction to the distributed ledger on a peer-to-peer network; and (4) the payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.

In one embodiment, the transaction may be a confirmed transaction or an in-flight transaction.

In one embodiment, the method may further include the payment originator bank validating and processing the payment through a payment originator bank internal system and debiting an originator account.

In one embodiment, the step of the payment beneficiary bank executing the payment to the payment beneficiary may include the payment beneficiary bank validating and processing the payment instruction through a payment beneficiary bank internal system and crediting a beneficiary account.

In one embodiment, the method may further include the payment originator bank posting and committing the payment instruction to an internal non-distributed ledger. In one embodiment, the distributed ledger may include an account structure that replicates an account structure on the internal non-distributed ledger. In one embodiment, the payment beneficiary bank may also commit the payment instruction to an internal non-distributed ledger.

In one embodiment, the distributed ledger and the internal non-distributed ledger may be synchronized.

In one embodiment, the payment transaction may be an inter-bank payment transaction, and the payment originator bank and payment beneficiary bank may not be associated with the same financial institution.

In one embodiment, the payment transaction may be conducted in a single currency. In another embodiment, the payment transaction may comprise a currency conversion. In one embodiment, the payment transaction is conducted in a single currency. In another embodiment, the payment transaction comprises a currency conversion.

According to another embodiment, a system for processing network payments using a distributed ledger may include a payment originator bank; a payment beneficiary bank; a peer-to-peer payment network, wherein the payment originator bank and the payment beneficiary bank are participant members of the peer-to-peer payments network; and a distributed ledger. The payment originator bank may validate and process a payment through a payment originator bank internal system and debits an originator account. The payment originator bank may post a payment instruction on a distributed ledger on the payment peer-to-peer network. The payment beneficiary bank may validate and process the payment instruction through a payment beneficiary bank internal system and credits a beneficiary account. The payment beneficiary bank may post a final transaction confirmation to the distributed ledger on the peer-to-peer network.

In one embodiment, the payment beneficiary bank may confirm the payment transaction comparing the payment transaction on the distributed ledger to the credit to the beneficiary account.

In one embodiment, the system may further include an internal non-distributed ledger for the payment originator bank, and the payment originator bank may post and commit the payment instruction to the internal non-distributed ledger.

In one embodiment, the distributed ledger may include an account structure that replicates an account structure on the internal non-distributed ledger. In one embodiment, the distributed ledger and the internal non-distributed ledger may be synchronized.

In one embodiment, the payment originator bank and the payment beneficiary bank may be associated with the same financial institution.

In one embodiment, the payment transaction may be an inter-bank payment transaction, and the payment originator bank and payment beneficiary bank may not be associated with the same financial institution.

In one embodiment, the payment transaction is conducted in a single currency. In another embodiment, the payment transaction comprises a currency conversion.

In one embodiment, the transaction may be an unconfirmed transaction.

DETAILED DESCRIPTION OF PREFERRED EMBODIMENTS

The following documents are hereby incorporated by reference in their entireties: U.S. patent application Ser. Nos. 62/340,295; 62/232,989; 62/316,841; 15/233,719; 15/234,263; 15/332,025; and 15/298,328.

Embodiments disclosed herein relate generally to systems and methods for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation. In one embodiment, a distributed ledger may be used for some or all of the following: intra-branch clearing for self-clearing currency; intra-branch clearing for third party nostro clearing currency; interbank clearing for self-clearing currency; interbank clearing with correspondent bank; cross-currency flows for high value; cross-currency flows for low value; processing window extension to 24×7 hours, 365 days; etc.

In one embodiment, the distributed ledger may store, in real-time or substantially in real-time, postings sourced from a payment processing system, a middleware communication application, or a traditional, non-distributed ledger.

If the non-distributed ledger is unavailable, the distributed ledger may initiate processing of payment or transaction requests from upstream systems, and hold these transactions as unconfirmed postings in the distributed ledger. Once the non-distributed ledger is available, the distributed ledger may forward and/or share all the posting requests to the non-distributed ledger so that the postings can be moved from an unconfirmed state to a confirmed state.

In one embodiment, the overall flow allows tracking of any network payments between financial institution entities on an end-to-end basis.

In one embodiment, the use of a distributed ledger provides the ability to confirm that all postings related to a network payment have been successful across the financial institution entities in one consolidated posting across multiple financial institution entities and branches, instead of in many separate instances.

In one embodiment, the distributed ledger may hold a consolidated view of postings for payments and/or transactions, such as network payments, and may further permit confirmation that the initial debit and final credit to the involved accounts were successfully processed.

In one embodiment, the distributed ledger may hold a consolidated view of postings for payments and/or transactions, such as network payments, across multiple financial institution entities and branches outside the operating hours of the non-distributed ledger.

In one embodiment, the distributed ledger may provide the consolidated view of postings for payments and/or transactions, such as network payments, across multiple financial institution entities and branches at the opening hours of the non-distributed ledger.

Referring toFIG. 2, a system for the application of distributed ledgers for financial exchange settlement and reconciliation is provided according to one embodiment. System200may include payment originator210, which may send a payment instruction to originator bank215to initiate a network payment to payment beneficiary260. In one embodiment, payment originator210and payment beneficiary260may be in the same country, holding accounts denominated in the same currency. In another embodiment, payment originator210and payment beneficiary260may be in different countries, holding accounts denominated in different currencies.

Payment originator bank215may be payment originator210's bank, and may serve as a source of funds. Payment beneficiary bank265may be payment beneficiary260's bank, and may receive the funds. In one embodiment, payment originator bank215and payment beneficiary bank265may be one single branch of the same financial institution. In another embodiment, they may be different branches of the same financial institution. In another embodiment, they may be different legal entities associated with the same financial institution (e.g., different countries associated with the same financial institution). In another embodiment, they may be associated with different financial institutions.

In one embodiment, payment originator bank215and payment beneficiary bank265may be correspondent banks, vendors, etc.

In one embodiment, originator bank215may processes payment originator210's network payment instruction through its payment processing system220to validate the transaction, which may then be posted to its middleware communication application230.

In one embodiment, originator bank215middleware communication application230may route postings of unconfirmed, or in-flight, network payments to both its traditional, non-distributed ledger240and to the peer-to-peer network245distributed ledger for unconfirmed transactions250.

In one embodiment, originator bank215middleware communication application230may route postings of confirmed, final network payments to both its traditional, non-distributed ledger240and to the peer-to-peer network245distributed ledger for confirmed transactions255.

In one embodiment, payment originator bank215and payment beneficiary265bank may be part of the same peer-to-peer network245and may communicate with distributed ledgers250and255. In one embodiment, distributed ledgers250and255may be Ethereum-based ledgers, Blockchain-based ledgers, or any other suitable protocol ledger, where distributed ledger250holds records of unconfirmed, or in-flight, network payments and distributed ledger255holds records of confirmed, final network payments.

In one embodiment, each of payment originator bank215, payment beneficiary265bank, and payment network245may maintain a copy of distributed ledgers250and255.

In one embodiment, beneficiary bank265may receive a network payment instruction posted by originator bank215to distributed ledger for unconfirmed transactions250. In one embodiment, beneficiary bank265may process the payment instruction through its payment processing system270to validate the transaction, which may then be posted to its middleware communication application280.

In one embodiment, beneficiary bank265middleware communication application280may route postings of unconfirmed, or in-flight, network payments to one or both of its traditional, non-distributed ledger290and to the peer-to-peer network245distributed ledger for unconfirmed transactions250.

In one embodiment, beneficiary bank265middleware communication application280may route postings of confirmed, final network payments to both its traditional, non-distributed ledger290and to the peer-to-peer network245distributed ledger for confirmed transactions255.

In one embodiment, distributed ledgers250and255may replicate account structures from traditional, non-distributed ledgers240and290.

Referring toFIG. 3, a method for the application of distributed ledgers for network payments as financial exchange settlement and reconciliation according to one embodiment. In step305, a payment originator may initiate a payment to a payment beneficiary using, for example, the payment originator's bank. The payment may be in the same currency or in a different currency, in the same country or in different countries.

In one embodiment, the payment originator bank and the payment beneficiary bank may be part of the same financial institution, may be different branches of the same financial institution, may be different legal entities associated with the same financial institution (e.g., different countries associated the same financial institution), or they may be associated with different financial institutions.

In step310, the payment originator bank may validate and process the payment through its internal applications.

In step315, the payment originator bank may post unconfirmed and final payments to its internal non-distributed ledger.

In step320, the payment originator bank may be a participant of a peer-to-peer network, and may post unconfirmed and final payments to distributed ledgers on this peer-to-peer network.

In one embodiment, the transaction may be first posted to the non-distributed ledger, and then the confirmed posting may be sent to the distributed ledger for processing.

In one embodiment, if a non-distributed ledger is not available, the transaction may be posted to the distributed ledger for processing. The distributed ledger may hold these postings as unconfirmed postings and respond to the payment network. The distributed ledger may continue to process transactions until the non-distributed ledger becomes available again, at which time it may forward all unconfirmed postings to the non-distributed ledger for processing.

In step325, the payment beneficiary bank may be a participant of the same peer-to-peer network, and may receive the payment instruction posted by the payment originator bank to the distributed ledgers on the peer-to-peer network.

In step330, the payment beneficiary bank may validate and process the payment instruction through its internal applications.

In step335, the beneficiary bank may post unconfirmed and final payments to its internal non-distributed ledger.

In step340, the beneficiary bank may post unconfirmed and final payments to distributed ledgers on the peer-to-peer network.

In one embodiment, both originator's and beneficiary bank's internal systems may send periodic data feeds to downstream systems for intraday reporting, regulatory reporting and general ledger update purposes, as part of, for example, steps310and330.

In step345, the distributed ledgers and non-distributed ledgers may be reconciled. This may be performed continuously, periodically, or on a demand basis. In one embodiment, the distributed ledger and non-distributed ledger may, in real-time or substantially in real-time, provide a report of all postings for a given a period seen for the parties, entities, branches, etc. in scope. The report may identify any exceptions or any unreconciled postings.

In one embodiment, the end state of the distributed ledger may be the primary book of records for payment transactions and settlements among different participants of the peer-to-peer network.

It should be recognized that although several embodiments have been disclosed, these embodiments are not exclusive and aspects of one embodiment may be applicable to other embodiments.

The processing machine used to implement the invention may utilize a suitable operating system. Thus, embodiments of the invention may include a processing machine running the iOS™ operating system, the OS X™ operating system, the Android™ operating system, the Microsoft Windows™ operating systems, the Unix™ operating system, the Linux™ operating system, the Xenix operating system, the IBM AIX™ operating system, the Hewlett-Packard UX™ operating system, the Novell Netware™ operating system, the Sun Microsystems Solaris™ operating system, the OS/2™ operating system, the BeOS™ operating system, the Macintosh operating system, the Apache operating system, an OpenStep™ operating system or another operating system or platform.