NEW YORK (Reuters) - New York-based software company R3 CEV has partnered with Britain’s financial watchdog and two large banks to develop a blockchain-based application to improve the regulatory reporting of mortgage transactions.

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

R3 said on Tuesday that it had developed a prototype of the system together with the Financial Conduct Authority, the Royal Bank of Scotland Group Plc RBS.L and another global bank which did not wish to be named.

The system, which was built using R3’s blockchain called Corda, enables banks to generate automated delivery receipts for the regulator each time a mortgage is booked. The organizations hope that it can reduce the cost of the process and the risk of error.

R3 leads a consortium of about 80 financial institutions aimed at building blockchain based technology for the finance industry. Thomson Reuters TRI.TO, the parent of Reuters News, is a member of the consortium.

Blockchain, which first came to prominence as the system underpinning crypto currency bitcoin, is a shared record of data maintained by a network of computers on the internet that can be accessed by all authorized parties. Financial institutions have been investing in its development in the hopes that it can help reduce their back office costs and complexity.

Proponents of the technology suggest that it is ideally suited for simplifying record-keeping.

The FCA prototype “can give the regulator a new tool capable of overseeing mortgage activity much more quickly and efficiently than before whilst greatly reducing data inconsistencies,” Richard Crook, head of emerging technology at RBS, said in a statement.

It could also reduce the amount of work required by the regulator when processing reports that are typically sent in variety of formats, Steve Hey man, a project lead at R3, said in an interview.

Participants in the project will continue to work toward a live testing phase, which is expected to involve other lenders and regulatory bodies, R3 said.

Regulators across the world are looking to increase their use of innovative financial technology to become more efficient. The FCA has been leading the way globally on this initiative, having launched a dedicated division almost three years ago.

Launched in 2015, R3 raised $107 million in May from companies including Bank of America Corp BAC.N, SBI Holdings Inc, HSBC Holdings Plc HSBA.L, Intel Corp INTC.O and Temasek Holdings.