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Chana Schoenberger (00:11):
Hi, I'm Chana Schoenberger. I'm the editor-in-chief of American Banker and I'm here at Payments Forum 2026 in San Francisco where all week we've been talking to payments leaders about what's going on in the payment space. I have with me here Umer Farooq, who is the global co-head of JP Morgan Payments. Welcome.
Umar Farooq (00:27):
Thank you very much for having me.
Chana Schoenberger (00:29):
So last year you moved JPMD to Coinbase's base blockchain. How does this change the risk equation for the bank?
Umar Farooq (00:36):
So one of the tenets, core tenets of ... So Connexus is our blockchain business, which builds all this infrastructure. One of the core tenets was we want to not change too many risks. So if you look at bank, there's obviously liquidity risk, there's credit risk, there's operating risk, there's compliance, there's a whole plethora of risks, which by the way we manage and our regulators make sure we manage. What changes is the operating risk. So I always sort of talk about it as a, if you had deposits on a mainframe, which is where most banks used to have their deposit systems and suddenly now you go to cloud, Amazon and Microsoft, Google, whichever, you go to some cloud platform that doesn't make the deposit a cloud deposit. It's still a deposit account, but the operating risk has changed a litle bit because in a cloud environment versus an on- prem mainframe environment.
(01:28):
Similarly, when you think about going to public blockchain, we believe that change is the operating risk. And so you have to have a different approach to the operational risk when the ledger does not belong to you, the core ledger, it's actually public. But that's what we've spent a ton of time. These are the problems you really solve. So I think people always look at JPMD being issued and they think that's really cool. The hard work is actually making sure we understand how the operating risk be managed, how the cyber risk would be managed, and then how does it plug into the core systems.
Chana Schoenberger (02:01):
Okay. Okay. To continue on the digital asset vein, how are your clients using smart contracts for payments now and what will they be doing in the future?
Umar Farooq (02:11):
So clients are using it mostly to trigger payments based on certain conditions. So those conditions could be predefined conditions by them. So we have some clients very big in the mortgage space. When they get large amounts of money in, they have to split that money into what goes into tax or escrow or other things. And so in the past they would get this payment, they would have a bunch of people in their internal shop doing the math and spreading it off. Now a lot of those things are coded as programmability in our co-programmable language in the middle. So the money just gets split off and gets sent to wherever it has to be sent. Other clients are actually using this to do movement across currencies. So they might be triggered based on, "Hey, do I have enough euros in London or do I have enough dollars in such and such account?" And then they change it.
(02:55):
So that's been the use generally so far. It's been actually, I would say one of the limitations a little bit is the imagination of what do you want to solve and the legals around it as in if you build the wrong rule as a client, you are also liable for the wrong rule. And I think that actually makes people really take a step back. And that's why I think these things sound really good. But whenever we talk to large clients, they usually start by saying, "I don't know if this thing is really interesting." And then usually, especially if their revenue side people are in the room within an hour, they will have half a dozen use cases that they've just never thought could be done with payments. And that's how we usually go into it, but it's a very flexible system. So you can program it to be triggered on any piece of information coming from within JPMorgan or if a client is willing to take the liability from outside of JP Mobile.
Chana Schoenberger (03:51):
Wow. That's a big if though, right?