The Bank of Tokyo-Mitsubishi UFJ (BTMU) and IBM are teaming up to use blockchain technologies for the design, management and execution of contracts among business partners.
The two firms have inked a contract that will see them tap the Hyperledger Project's open-source platform to automate business transactions with each other on the IBM Cloud.
The partners have built a prototype of smart contracts on a blockchain that they say improves the efficiency and accountability of service level agreements in multi-party business interactions.
BTMU - Japan's largest bank - plans to begin using it to manage contracts within their business in fiscal year 2017. In addition, IBM and BTMU aim to manage agreements between the two companies with the system by the end of 2017.
To help improve efficiency, the two will monitor delivery and usage of equipment with a sensor that embeds information into the blockchain. This will then automate invoicing and payment processes between the two companies.
This is not BTMU's first foray into blockchain, the bank is working with Hitachi to test the technology's use for cheque issuance and has also invested in US Bitcoin exchange and virtual wallet operator Coinbase.
BTMU's Motoi Mitsuishi says: "Blockchain technology has the potential to change not only the financial world, but also other areas of the business world, leading to improved efficiency of the end-to-end business process."
IBM is also putting considerable resources into distributed ledger technology, recently opening a blockchain innovation centre in Singapore and working with several banks - including BTMU rival Mizuho - on various projects.
Bridget van Kralingen, SVP, IBM Industry Platforms, says: "Blockchain will reinvent complex multi-party and contract-based business models, especially in banking and financial services."