(Bloomberg) -- Visa Inc., the world’s largest payments network, invited banks to participate in a pilot program that would use blockchain to send payments between the lenders.

Visa Europe Collab, the network’s London-based innovation hub, is partnering with BTL Group to explore applications for blockchain technology in financial services, Hendrik Kleinsmiede, a co-founder of the innovation hub, said in a blog post Thursday. The firms are reaching out to “a small number of European banks” to help test whether a blockchain-based solution can reduce costs, settlement times and credit risks associated with transfers between banks, according to the post.

“Through the use of smart contracts and blockchains, I believe we can create a fast, compliant and low-cost interbank payment and settlement service,” Kleinsmiede said in the post.

Proponents of blockchain, the software ledger that powers bitcoin, say it could dramatically streamline the process of sending payments around the globe and offers the ability to safely store transactions in an immutable database. More than 50 of the world’s biggest banks have joined a consortium known as R3, which helps design a financial-industry ledger and develops ways of using the technology. Other companies exploring blockchain include Digital Asset Holdings, Chain and Symbiont.

Payments between banks that span continents can take weeks and involve several intermediaries. In a blockchain network, those same payments could theoretically take minutes or maybe less.

The new initiative, which was previously reported by the Financial Times, gives Visa a stronger foothold in the evolving payments landscape, said Sandeep Kumar, managing director at technology consultant Synechron.

“When it comes to individual payments, several banks are revamping their payment systems to enable direct person-to-person payments, which could dis-intermediate players like Visa,” Kumar said in an e-mail. “This partnership program by Visa is a smart move” that will allow the network to maintain a central position in the payments market, he said.

--With assistance from Matthew Leising

Register or login for access to this item and much more

All Information Management content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access