Payment systems in the United States and architectures enabled by digital currencies

Abstract

A payment is a transfer of value from one party to another and cash is the simplest form of payment. However, the cost of cash transactions increases as the volume of transactions or distance between the parties involved increases. Various electronic payment systems have evolved over time to enable different types of transactions in the economy. Payment systems are now the backbone of the economy and trillions of dollars are exchanged on the payment system rails every year. Central banks, payment processors, payment gateways, credit card issuers and banks are just a few of the counterparties which enable payments across a multitude of counterparties for their specific needs. An extremely complex technological architecture enables these transactions. Central banks are now considering the issuance of digital currencies to increase efficiency in payments. Blockchain could potentially simplify payments systems and reduce market inefficiencies. It can provide a way for multiple counterparties to connect on the same platform and reduce the time for clearing and settlement. In this thesis, I study the technology and stakeholder needs to propose novel architectures that could be adopted for payments processing.