Bank of Tokyo Mitsubishi (BTMU) has partnered with Hitachi to develop a blockchain-based system for the issuing, transferring and collecting of electronic cheques for a more secure, less manual process. Both parties expect that the application of blockchain technology can go beyond payments and settlements into supply chain finance and other trade finance areas.

The proof-of-concept testing will use blockchain when digitising cheques. The testing should identify any issues with technology, security and operations. The aim is that eventually blockchain will speed up processing times and reduce manual input.

A representative for BTMU said it will “prevent the falsification of transaction records and enable faster settlements for financial institutions”.

Blockchain technology is expected to provide a faster, cheaper way to process payments and other transactions. Conventional cheques typically take about two days to clear. With the new system, payments would be processed instantly and, it is claimed, with far less risk of fraud.

“We will consider future applications for settlements and supply chain finance beyond the finance sector,” said BTMU.

Hitachi has been investing in blockchain technology for some time and is an existing member of the Hyperledger Project, a cross-industry collaboration looking at using blockchain ‘distributed ledger’ technology. It announced separately that they will open a research and development facility in Silicon Valley, exclusively focused on financial technology.

In a statement Hitachi said, “By establishing the Financial Innovation Laboratory in the Silicon Valley, Hitachi will accelerate research and development of blockchain technology, collaborative creation with customers, and development of solutions to support business innovation in financial institutions.”

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