Four major banks have joined a trade finance initiative launched late last year by Switzerland-based UBS and tech giant IBM.

Bank of Montreal (BMO), CaixaBank, Commerzbank and Erste Group are now taking part in the project, which is being built on top of the open-source Hyperledger Fabric framework. The platform, dubbed Batavia, was first unveiled in September 2016 at the Sibos banking conference in Geneva.

The idea behind the project is to build a system through which international trade transactions can be carried out from start to finish. Instead of paper-based letters of credit, trade finance transactions would be executed through smart contracts – self-executing pieces of code that trigger when certain conditions are met, instead.

Speaking last year to CoinDesk, Beat Bannwart, UBS's head of product and market development for transaction banking, said that the primary intent was to link the parties involved over the course of a trade transaction more seamlessly.

"We looked at it from a transaction banking point of view, so we involved people from trade, from supply chain finance. But the aim was actually to combine all these different steps into one single solution, where the entire business flow is covered," he said at the time.

Those behind the Batavia project are aiming to start a test phase involving customers sometime early next year. Though it's not clear yet who those customers might be, IBM has previously worked with the government of Dubai and banks like Santander and Emirates NBD on research in the area.

UBS image via Shutterstock