Distributed Ledger Cross-Border Payment Settlement
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Solution Overview
Problem
Current cross-border payment systems are slow, expensive, and risky due to reliance on correspondent banking, messaging networks, and clearing intermediaries, leading to delayed transactions, high reconciliation costs, and counterparty risks.
Innovation Solution
Implementing a distributed ledger system for network payments that allows payment originators and beneficiaries to post and validate transactions on a peer-to-peer network, enabling real-time settlement and reducing reliance on intermediaries through cryptography and digital signatures.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If correspondent banking and clearing intermediaries are used for cross-border payments, then transaction security and validation are improved, but transaction speed and settlement time deteriorate
Solution Approach 1:
The patent extracts and eliminates the intermediary clearing houses and correspondent banking layers from the payment flow. By using a distributed ledger where banks post and validate transactions directly peer-to-peer, the system removes the speed-limiting intermediaries while maintaining security through cryptographic validation and consensus mechanisms.
Solution Approach 2:
The distributed ledger itself acts as a new intermediary that enables direct peer-to-peer transactions between banks. This mediator provides the security and validation functions previously performed by clearing houses, but does so in real-time without the delays of traditional correspondent banking networks.
2Reliability
If multiple clearing intermediaries and messaging networks are involved, then transaction validation and security are improved, but transaction cost and reconciliation expenses worsen
Solution Approach 1:
The patent merges the validation, security, and reconciliation functions into a single distributed ledger system. All participating banks validate transactions collectively through consensus mechanisms, eliminating the need for separate reconciliation processes and reducing duplicative validation efforts across multiple intermediaries.
Solution Approach 2:
The distributed ledger provides real-time feedback to all participants about transaction status and ledger state. This immediate feedback eliminates the need for periodic reconciliation and allows banks to verify transactions as they occur, reducing the computational and operational resources needed for post-processing reconciliation.
3Loss of information
If traditional correspondent banking networks are used, then payment tracking and transparency are improved, but settlement time and fund availability worsen
Solution Approach 1:
The distributed ledger enables continuous real-time tracking and settlement of payments without interruption or delay. Transactions are posted, validated, and settled in a continuous stream on the peer-to-peer network, eliminating the batch processing and waiting periods inherent in traditional correspondent banking systems.
Solution Approach 2:
The patent replaces the mechanical, multi-step messaging and clearing process with a cryptographic system based on digital signatures and consensus validation. This substitution enables instantaneous settlement and tracking while maintaining complete transparency through the shared distributed ledger visible to all participants.
4Reliability
If centralized clearing houses and trusted third parties are used, then transaction security and agreement on ledger state are improved, but system complexity and intermediary dependencies worsen
Solution Approach 1:
The patent segments the centralized clearing house function into distributed nodes across multiple participating banks. Each bank operates its own node on the peer-to-peer network, validating transactions independently through cryptographic proof rather than relying on a single centralized authority. This segmentation reduces dependency on complex intermediary structures while maintaining security through distributed consensus.
Data Source
AI summary
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.