Bank of England: How Our Modern Payment System Began at a Bar

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Hello, Wellington. Photo: Shutterstock

Last night, the Bank of England hosted a dinner where they announced their new RTGS initiative.

This RTGS system—real-time gross settlement—will be the system that underpins UK payments as the final database of record for all interbank transactions (think: credit/debit cards, mobile payments, Paypal, etc.).

To kick off the festivities, BoE Deputy Governor Minouche Shafik gave a speech, titled, ”A New Heart for a Changing Payments System.”

Notably, Shafik opened with a story about the Five Bells Tavern…

Sometime around 1770, just a few yards from where we are sitting tonight, two of the commercial banks’ so-called ‘Walk Clerks’ congregated at the Five Bells Tavern for lunch, weary after a morning spent visiting each of their competitors in the City of London. They reflected disconsolately on their increasingly impossible task of exchanging ever-rising numbers of paper cheques at each individual bank and settling ever-larger outstanding balances.

…and highlighted the tavern’s role as one of the origins for the modern clearing house…

The idea occurred to one of them that they might encourage all of their colleagues—for each bank had such Clerks—to join them for lunch at the Five Bells every day, where instead of their tiring morning tours they could carry out a much speedier, more reliable exchange of cheques. Thus a clearing system for the City of London was born, from which many of the UK’s modern payment systems descend.

A bit of Ripple trivia for you.

Prior to the public release of the Interledger Protocol white paper, the code name for ILP was, you guessed it, Five Bells. The goal of ILP, of course, is to enable payments across payment networks.

Today, Five Bells is the name of Ripple’s current implementation of ILP.

And so if you ever happen to walk by the desk of Ripple CTO Stefan Thomas, this is what you will see:

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Now for a bit of history.

Getting back to the Bank of England dinner, Danny Aranda—a director of business development at Ripple—was in attendance.

He managed to snap this great photo of the world’s first interbank clearing ledger, which dates back to 1878.

interbank-ledger

Wow!

Read BoE Deputy Governor Minouche Shafik’s full speech here.