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Open Access Blockchain Platform for Real-Time Payments: A Less Costly and More Secure Alternative to ACH

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This paper examines the historical development of banking and automated clearing house legacy systems and offers blockchain platform for real-time payments as an alternative. Institutions with legacy systems resist disruptive change unless there are demands by businesses and customers and an opportunity for new products at reduced costs and additional revenues. Although the Automated Clearing House (ACH) in the U. S. has phased in a twice-a-day clearing and settlement system, it is still behind real-time models in use in several other countries. ACH uses individual clearance and settlements for large payments and batches for smaller transactions. Using ACH data, this paper calculates the annual opportunity cost of using a real-time model such as blockchain versus ACH's discrete, twice-a-day clearance and settlement procedure. For 2016, the real-time protocol would have resulted in benefits for businesses and customers of $10 billion.
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Keywords: ACH; BLOCKCHAIN; FEDERAL RESERVE SYSTEM; PAYMENT SYSTEMS

Document Type: Research Article

Publication date: October 1, 2019

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  • Technology and Innovation, edited and published by the National Academy of Inventors, is a forum for presenting information encompassing the entire field of applied sciences, with a focus on transformative technology and academic innovation. Regular features of T&I include commentaries contributed by the United States Patent and Trademark Office (USPTO) and in-depth profiles of Fellows of the National Academy of Inventors in every issue.

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