Nine global banks have announced a partnership to explore the use of distributed/shared ledger technologies such as blockchain for the financial markets. Along with developing commercial applications, the project aims to establish consistent standards and protocols across the financial industry to facilitate broader adoption.

The financial company R3 leads the partnership that comprises Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, JP Morgan, State Street, Royal Bank of Scotland and UBS. According to a R3 statement, more banks are expected to join the group in the coming weeks.

“This partnership signals a significant commitment by the banks to collaboratively evaluate and apply this emerging technology to the global financial system,” comments David Rutter, R3’s CEO. “Our bank partners recognise the promise of distributed ledger technologies and their potential to transform financial market technology platforms where standards must be secure, scalable and adaptable.”

Blockchain is a distributed ledger recording immutable and verifiable transfers of digital assets. It is is distributed because the verification occurs by consensus of the majority of the participants in the system. While the original blockchain is the public one underpinning bitcoin transactions, emerging start-ups are developing different blockchains. These technologies are widely expected to offer cost-saving opportunities for banks. Santander Innoventures co-authored a paper with Oliver Wyman and Anthemis Group, suggesting that the distributed ledger technology could cut banks’ costs related to cross-border payments, securities trading and regulatory compliance by between US$15bn and US$20bn per year by 2022.

The R3-led partnerships shows that banks’ attitude towards fintech has shifted from indifference to co-operation, both with other banks and with non-banking partners. “The collaborative model we’ve established with R3 and the other banks is a very effective way to deliver robust shared ledger solutions to the financial services sector,” says Kevin Hanley, director of design at Royal Bank of Scotland. “Right now you’re seeing significant money and time being spent on exploration of these technologies in a fractured way that lacks the strategic, co-ordinated vision so critical to timely success. The R3 model is changing the game.”

Akif Khan, chief commercial officer at Bitnet, a digital commerce platform, agrees: “Twelve months ago, the majority of our banks commonly distanced themselves from digital currencies due to common misconceptions of mistrust; this perception seems to be slowly changing, creating a vital movement that is interesting to see. With these nine heavyweights among the first to test blockchain technology, I wouldn’t be surprised to see more banks and industries exploring the benefits of emerging technologies such as the blockchain and finally understanding the positive impact it can have for a business as a whole.”

This kind of collaboration will help reach critical mass in the use of the technology. Speaking at EuroFinance Copenhagen, Patrick Griffin, executive vice-president of Ripple Lab explained that this could happen as soon as 2016. “For the last two or three years there’s been a round of proof of concepts going into pilot, and now we’re seeing the first round of commercial implementation,” he told delegates.

According to him, the technology can be integrated behind compliance and other processes so as not to interfere with regulatory requirements. He also believes that it is the role of banks to understand the technology, while corporate treasurers should be presented with its operational benefits. Griffin however warned against developing private blockchains, as this would only result in more fragmentation, which is what the technology is trying to solve. “The objective here is liquidity, and the way to bring down costs is to create a unified system that nobody owns. A common sense of standards and protocols is what is needed,” he said.