Visa will use blockchain developer BTL's Interbit platform to test how blockchain-based settlements can be used for transfers between banks, Hendrik Kleinsmiede, co-founder of Visa Europe’s innovation hub Visa Europe Collab, said in a blog post.
Blockchain distributed ledger technology is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it can be likened to a type of database that, using cryptography, can be operated as a digital public ledger for recording information, such as the transfer of assets between two or more parties.
A small number of European banks has been invited to join the project. These will be able to connect to the network and send funds to one another across multiple currencies, Kleinsmiede said.
"We’ll work closely together on the development and implementation of the proof of concept, ensuring that all participants come away with new knowledge and insight into the role that the blockchain could play in interbank settlements in the future," he said.
"For me the opportunity is a fascinating and potentially very beneficial one. Through the use of smart contracts and blockchains I believe we can create a fast, compliant and low-cost interbank payment and settlement service, with embedded regional compliance," Kleinsmiede said.
Deutsche Bank, Santander, BNY Melon and broker ICAP announced last week that they have joined forces to develop a digital coin for making payments and settling transactions in financial trades.
A separate group of banks announced earlier this month that blockchain can be used to replace paper-based letters of credit in trade finance transactions. The Bank of America Merrill Lynch, HSBC and the Infocomm Development Authority of Singapore (IDA) used open source Hyperledger software to create an app that replaces the paper-based transaction.