There are seemingly many new ways to make payments today. Have you ever wondered when you buy a cup of coffee, “Does it matter if I pay with a smartphone app?” Or, if you are a global company looking to send money overseas, have you asked, “Does it matter if my bank uses a blockchain or distributed ledger solution to connect with the beneficiary’s bank?”
I am excited to share a new article, “Does It Matter How I Pay?,” that I recently co-authored with Alaina Gimbert, Senior Vice President and Associate General Counsel at The Clearinghouse, and Joseph Torregrossa, Assistant Vice President and Counsel at the Federal Reserve Bank of New York, published in the American Bar Association’s publication, Business Law Today.
Today, new apps for smart phones, new peer-to-peer payment networks, and new blockchain and ledger systems offer to meet the needs of consumers and businesses in ways that legacy payment methods do not. Our article discusses how payment laws and consumer protections apply — or do not apply — to some of the new ways to pay.
In considering whether emerging payment methods fundamentally differ from legacy payment systems, we highlight:
It does matter how you pay; however, the part that matters—from a legal perspective—is not the means of initiation (i.e., payment via mobile app) or infrastructure (i.e., blockchain), but rather who is providing the payment service to the payor and payee and the characteristics of the payment service.
For example, is the payment service being provided by a bank or by a nonbank payment service provider? Characteristics of the payment method like this one matter because, taken together, they determine the legal framework that applies to the payment — and that ultimately determines the rights and responsibilities of consumers and businesses when they make and receive payments.
At Ripple, we recognize it can take time to understand and trust new technologies. I am proud of our role in contributing to the broader financial community’s knowledge of blockchain technology, as well as the confidence we have built with our growing global network.
To learn more about Ripple, please contact us.
 The views expressed in the article are the authors’ own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.