Safe Cash is cozying up to banks by portraying itself as an alternative to two very different corners of financial services—the established Swift bank transfer network and bitcoin, arguably the most well-known virtual currency.

The San Francisco-based company, which uses blockchain technology to power its cash-based payments service, contends it can handle 25,000 payments per second—or thousands more than the bitcoin network, and its uses "tokens" in place of dollars to address risks that have kept most banks from using virtual currency technology to process payments.

"Banks still keep the money, and anti-money laundering and know your customer compliance remains the same," said Chris Kintze, CEO of Safe Cash, adding the company is engineering its software to process 100,000 payments per second by the end of the year. "We change out the plumbing."

The blockchain is the distributed ledger system that bitcoin and other virtual currencies use to publish and verify transactions. Increasingly, companies are working to find uses for blockchain technology without forcing banks to rely on bitcoin.

Bank customers use Safe Cash's software to make deposits in exchange for tokens. The funds remain on the bank's balance sheet, and the tokens circulate among businesses and consumers via a blockchain. Safe Cash, which is in in pilot in Europe, envisions use cases such as person-to-person, business-to-business, business-to-consumer, as well as remittances, social payments, donations and recurring bills.

"Tokens can provide full funds quickly," Kintze said. "And you can solve the problems of ensuring a 'certain settlement' and do it fast."

Since the cash remains with the banks, the tokens protect payments similar to an e-commerce transaction—the token is a stand-in that allows transactions to flow between parties without exposing sensitive cargo.

The company's model avoids the uncertain regulatory environment that surrounds bitcoin because it does not use an intermediate coin or the third-party "miners" to add the transactions to a public ledger. This uncertainty has kept banks from adopting virtual currency as a transaction mode, though banks are attracted to the IT savings that the blockchain provides.

Safe Cash's token-based model also serves as an alternative the Swift network, Kintze said.

"ACH and Swift are 50-year-old technologies that move trillions of dollars every day," Kintze said, adding Safe Cash's model removes the need for correspondent banks for international transactions, a common strategy that blockchain payment startups use to attract banks. "But today we're seeing the end of paper money, the end of cash, where people will see the benefit of taking money and moving it electronically has simply as handing a dollar bill from one person to another."

There are also other use cases for banks that Safe Cash could empower, according to Christophe Uzureau, a research vice president for Gartner Banking and Investment Services Global Research.

"What could be interesting to explore for Safe Cash with banks is how the banks could make reward programs more flexible," Uzureau said, adding the tokenization could enable consumers to pool rewards and use them with more flexibility. "For banks this could be an interesting capability to support their digital wallet and digital banking solutions."

Banks are developing ways to use blockchains in a compliant and interoperable way, and that has attracted technology startups that want to offer banks the benefits of the distributed leger without the risk associated with virtual currencies. Banks are also warming to "permissioned" blockchains, which provide a network of trusted participants a way to clear transactions such as payments and securities.

But the use of blockchain technology as an alternative to Swift would be a hard sell, according to Uzureau.

"It's important to stress that Swift is more than a network, it's also a community where banks have some level of control and where trust perceptions greatly matter," Uzureau said.

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