Saturday, July 12, 2014

Indian Tribal Organizations as a Model for a Modern Payment System

I chose generic Indian Tribal Organizations as a model small value gross real time payment system (SGRTP) for several reasons namely:

  • Relatively Small payment hubs interspersed with large Cash Pools
  • Sufficient trust likely among disparate organizations (might just be my imagination)
  • I do not know how they actually work or their actual connectivity and have never advised them professionally
  • Presumed Access to sufficient technology to make it work
  • Currently providing access to goods and services using card clearing and deferred net settling (presumed on my part but I have used a card on a reservation)
  •  Sufficient ubiquity for the purposes of the design

Diagram 18 shows the concept.

Diagram 18 Concept for an ITO SVGRTP

Diagram 18 depicts two Indian Casino Payment hubs linked by a novus vovus (on-us, on-you) payment account. The accounts are database structures and updated in real time (show the exact position of the funds from the separate casinos). The retailer database contains numbers that represents a retailer account for any or all members of the tribal organization that want a number. The number is associated with an account housed in the casinos with the novus vovus structure. On a daily basis the following events occur within the SVGRTP system:

  • Worldwide issuance of virtual currency by consumer purchase
  • Worldwide redemption of virtual currency by personal electronic device or retail operations
  • Worldwide validation or cancelation of virtual currency in circulation

Retailers offer goods and services from the internet or from brick and mortar institutions. Retailer will promote use of virtual currency because Regulation E would not govern the funds and there are no charge backs, payment system fees, or surcharges.  Purchases appear as credits in the casino account structure. Retailers use their accounts to push funds to other entities as they see fit and as demand increases for retailer numbers outside of tribal organizations.  The computer structure exists in each casino; payments update accounts in real time; proper redundancy for connecting networks and account hardware minimizes operational risks. Consumers store coins securely on any personal electronic device and can revoke them if stolen or accidentally destroyed.

The resulting increasing concentration of funds will allow the growth of retail payment services and profits can come from conventional retail banking operations (making loans and accepting deposits) and not from the fees of their retailers. The growth of retail operations increases funds for other financial operations while charging fees restricts the growth. 

Next Blog: Do Payment hubs require financial institutions to function?

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