TOKYO -- Banks large and small in Japan will try out the technology underlying bitcoin for such services as money transfers under the auspices of a trade group.
The Japanese Bankers Association will build a platform by the end of fiscal 2017 for major and regional banks to run the blockchain tests together. The Financial Services Agency and the Bank of Japan will be positioned to offer regulatory advice. Amid the rise of financial technology, banks are looking for ways to lower costs and improve customer convenience.
Blockchain technology keeps a shared ledger on multiple computers. A large server or other special hardware is not required, meaning lower costs and faster processing.
Association members will form theme-based coalitions with other banks or companies and run the tests on the platform. The association will likely shoulder costs for running the system. Results will be reported back to the group to build sectorwide know-how.
Blockchain could slash costs for banks to a tenth or a twentieth of what they are now. Banks could then charge customers less in fees, creating new demand by encouraging small transfers.
In trade finance, tasks that now take a few days could be shortened to several minutes. The association will study blockchain's cost-cutting potential in trading of electronically recorded monetary claims.
Nearly 70% of banks are thinking about using blockchain technology, a survey last year by the association shows.
Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group have run tests for remittances within Japan. But regional banks, with their limited funds and expertise, have been hard-pressed to pursue such activities. The association hopes that the new framework will promote collaboration between large and regional banks.
Advice from the FSA and the BOJ on user protection and regulations is seen increasing the likelihood of these efforts bearing fruit.
The association operates the conventional interbank transfer system for financial institutions across Japan. This system offers high security but has also been blamed for high remittance fees.
(Nikkei)
