January 4, 2014
Virtual currencies are leaving behind every other buzzword in the FinTech industry today, in terms of hype. And virtual currencies are moving beyond hype becoming more central than tangential with some big names behind it. Even the most familiar names have shown interest - JP Morgan Chase filed a patent application for its ‘Virtual Cash’ payment system and Amazon launched its Bitcoin-like virtual currency, Amazon Coin in US and UK. Now eBay, and its subsidiary PayPal, the big daddy of payments, seems to be joining the party by filing a patent application for its ‘Virtual Tokens’.
According to US Patent application 20130339188, published on December 19th 2013, A gift can be given from a user of a payment provider to a gift recipient. The application was submitted by eBay on June 18th, 2012. Mohamed Riaz Ebrahim and Ram Kavuri Tulasi from eBay’s Tamilnadu center were the inventors. Its looks like a good example set by Paypal with its global innovation engine.
The application is generally vague and broadly put in its language as all patent applications generally are, but there is a description of programmable money very similar to Bitcoin at its core. It states:
Systems and method are disclosed for giving gifts or payment instruments in the form of security or payment tokens…A gift or payment instrument can be given from a user of a payment provider, such as Paypal, Inc., to a gift recipient…The recipient can use the token to purchase a product using the payment provider. The purchase can be made from a brick and mortar store or an online store. The purchase can be made without requiring the user to create the user’s own payment provider account.
Basically, eBay proposes a system for exchanging and storing value that is independent of the current financial system. There would be no need for credit cards, bank accounts or state issued currency.
The patent filing states that the recipient can use the token to purchase a product using a checkout though the payment provider, but won't require creating the user's own payment provider account.
The use of security tokens in electronic commerce is known. Such a token can be used to authenticate a customer and to facilitate payment for a purchase. A customer possessing a token can be assumed to be authorized to make a purchase using a payment provider account for which the token was issued. After the purchase, money can be transferred from the payment provider account to an account of the merchant. During a purchase transaction, the customer can present the token to the merchant. The token can be presented either along with or in place of a password.
Some experts believe that the patent sounds like a move to Tokenization also being talked about by Visa. Tokenization is the talk of the town in Fintech industry. The application states that the tokens ‘can’ be used as a gift token but does not necessarily have to be.
The token can be a gift token. The token does not have to be a gift. For example, the token can be paid for by the recipient. Payment for the token can be made to the user, to the payment provider, or to any other person or entity. As a further example, the token can be a payment made by the user to the recipient, such as for goods received or services rendered. Generally, the token may be described as a payment token that allows the recipient to use the token to make a payment using the services of the payment provider issuing the token on behalf of the user.
In theory, these tokens could serve as a currency that can be utilized for making purchases outside of eBay and PayPal. This would make eBay’s virtual tokens a competitor to Bitcoin and Litecoin among an array of other virtual currencies.
David Marcus, President of PayPal recently stated that Bitcoin could revolutionize eCommerce. He envisions the acceptance of the virtual currency, but disclosed that PayPal had no plans to adopt Bitcoins due to its volatility and lack of regulatory infrastructure. Marcus says he infact owns some Bitcoins himself.