Metro Bank, SETL and Deloitte have completed a successful test of a new blockchain-based, contactless smartcard retail payment system.

In what is being hailed as a series of industry firsts, the pilot saw SETL provide a smartcard-enabled blockchain allowing digitised payments, Deloitte exercise its blockchain ID system Smart Identity, and Metro Bank host a connected client account.

In the initial test, 100 Metro Bank customers were issued with contactless smartcards and used them to make purchases from merchants equipped with contactless terminals. Consumer and merchant balances were updated in live-time with all balances held at Metro Bank.

Those customers who took part in the trial created their identity records on the Deloitte Smart Identity blockchain and had their key details certified by Deloitte. The certified details were then asserted to the SETL blockchain to set up user credentials – which is believed to be the first commercial inter-blockchain application demonstrating how portable, cryptographically secured identity could work in a real-world consumer environment.

The trio of companies said that the success of the trial offered the possibility of “significantly reducing the high costs for processing retail transactions” and opened the door to competition in merchant servicing to challenger banks. Instant settlement for the retailer and the possibility of charges being only a fraction of the credit and debit card schemes could drive its adoption, they noted.

Craig Donaldson, CEO at Metro Bank, said: “Retail payments have for too long been dominated by a few players to the detriment of customers. Given all the potential that blockchain has to offer, we hope that the success of today’s test will play a key role in moving us a step closer to providing a more efficient and flexible service for customers.”

Peter Randall, CEO of SETL, added: “We are extremely pleased to be working with Deloitte and Metro Bank on this ground-breaking project. This is not a proof of concept or a prototype; it will be a revenue generating implementation of distributed ledger technology.”

The service from SETL – which was developed as part of the new FCA sandbox initiative and is subject to regulatory approval – could launch as early as 2017.

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