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BTMU, Hitachi test new check processing system in Singapore

TOKYO -- Bank of Tokyo-Mitsubishi UFJ and Hitachi are developing a system for processing electronic check payments based on the blockchain concept behind the bitcoin digital currency.

The effort, taking place in Singapore, marks the first overseas venture by such leading names in Japanese banking or industry in the emerging field of financial technology. It is a field where Japan's banks have made a slow start.

The Mitsubishi UFJ Financial Group unit and Hitachi have already built a prototype that they plan to use in full-fledged trials beginning as soon as Monday. They aim to have the system working by 2018 at the earliest.

The partners envision the system being used broadly by local businesses and banks, with possible applications beyond check payments.

For Hitachi, success could mean future system development orders. BTMU seeks the business advantages in Asia that a bigger presence in fintech could confer.

Blockchain technology provides a faster, cheaper way to process payments and other transactions. Handwritten checks typically take about two days to clear by conventional means. With the new system, payments would go through instantly and with far less risk of fraud.

Finance-industry watchers say Japanese banks lag behind Western rivals in the pursuit of such innovations. But BTMU is not standing still. Its recent moves include starting development of a proprietary blockchain-based payment system called MUFG coin.

The Japanese bank is also looking at fintech in the context of Asian emerging markets, whose latent demand for such solutions is far higher than in developed Japan. In Singapore, 60% of payments are done by check.

Asia offers not only growth potential but also geographic proximity for Japanese banks and technology companies, many of which already operate there. Hitachi is already deeply involved with Singapore's financial sector. BTMU and others see the city-state as a base for building out Asian financial infrastructure.

Keen on becoming a more advanced hub for financial services, Singapore has been opening the door to innovation. It offers a "regulatory sandbox" for fintech experiments, allowing developers to test new solutions within a relaxed framework of regulations. BTMU and Hitachi will take advantage of this initiative for their system trials.

(Nikkei)

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