Five rural banks in the Philippines will conduct a pilot of a real-time retail payments system on a blockchain developed by Ethereum startup Consensys. In a move to further financial inclusion and bring some 35 million unbanked Filipinos into the financial system, the Union Bank of the Philippines (UnionBank) has picked five rural banks in Mindanao – the second largest island in the Philippines – for a blockchain pilot that will test real-time, cheaper retail payments. Dubbed ‘Project i2i’ – island-to-island, institution-to-institution, and individual-to-individual – Union Bank says the initiative is to connect rural banks to the country’s main financial network. For context, rural banks function as financial facilitators in areas that are out of reach from the country’s primary financial system. These banking institutions aren’t members of Bancnet, the country’s interbank network, nor do they belong to the Philippines Clearing House, negating them from issuing checks. According to the Bankgko Sentral ng Pilipinas, the central bank, 554 out of 1,634 cities and municipalities in the Philippines remain unbanked. Project i2i will help connect rural banks with the country’s primary banking network and put them on a level playing field, Union Bank says.”If you are a rural bank, you’re not connected to Bancnet and you’re not connected to SWIFT. In order for you to connect to them you have to spend on data center, cyber security infrastructure, so it’s very expensive,” Union Bank technology and operations chief Henry Aguda said revealing the bank had invested $3 million in Project i2i. He added:”With this [blockchain platform], they don’t have to spend anything. They just have to load the application i2i in their computers, tablets, or smartphones then they can transact bank-to-bank connected to blockchain.”The bank hopes to rope in over 100 banks from the country’s rural landscape before the turn of the year. “Hopefully, we could go above 100 [rural banks] before the end of this year … It depends on how fast the rural banks will adopt,”,Using Ethereum TechUnion Bank has partnered New York-based Ethereum collective and startup Consensys for the project which will kick off with five rural banks. They are Cantilan Bank, Inc. of Surigao del Sur, PR Savings Bank, City Savings Bank, FairBank, and Progressive Bank, a local news report confirmed, adding that the banks have received the central bank’s approval to participate in the pilot. Specifically, the platform tasked to support Project i2i is Consensys’ Kaleido, an enterprise-ready blockchain software as a service platform launched by Consensys in partnership with Amazon Web Services (AWS) earlier this month. The cloud software offering offers capabilities including integrated analytics, multiple protocol options and consensus mechanisms as well as linking private blockchain networks with the public ethereum blockchain. Being a part of the blockchain pilot could lead to faster bank-to-bank transfers with a dramatic reduction in fund transfer fees, hopes Tanya Hotchkiss, EVP at Cantilan Bank, one of the five chosen rural banks for the pilot. The executive hopes to see a dramatic reduction in fund transfer fees, down to a single Philippine peso from current rates of PHP50 to PHP150. Further, blockchain integration could reduce automatic reconciliation and bank verification in a relatively mere five minutes down from traditional manual processes that could take anywhere between a day to one month. Union Bank hopes to connect all 500-odd rural banks in the Philippines to the blockchain, CTO Aguda added. Featured image from Shutterstock