Bank guarantees digitised through blockchain breakthrough

Following a successful pilot in 2019 that transformed the paper-based and inefficient bank guarantee process into a digital form, ANZ, the Commonwealth Bank of Australia, Westpac, IBM and Scentre Group have expanded Lygon, a successful blockchain platform. These financial guarantees are often required as part of a retail property lease, with early adopters now able to join and use the platform to save time and reduce fraud risks. Nigel Dobson, Lygon Chairman, said the commercialisation of the Lygon platform represents a milestone for blockchain technology in Australia and globally.

“We’ve gone from a proof of concept to a newly incorporated company and commercially available platform in two years — at a time when the demand for digital has never been stronger. In digitising a bank guarantee, we’ve essentially transformed a three-way contract. We’ve digitised the paperwork, the process and the legality behind it,” said Dobson.

The Lygon platform will be open to the general public, along with new features, in early 2021. Running on IBM’s public cloud, the platform is designed as a new piece of infrastructure at the crossroads between finance and technology. It looks to pain points across the business ecosystem that could not be solved by the participating organisations in isolation. Lygon completed a pilot in July 2019 with a test group of more than 20 Australian businesses. Since then, Lygon has successfully onboarded new applicants to the platform in less than 15 minutes and supported a number of other common bank guarantee processes, including amendments and cancellations.

“We were pleased to demonstrate a range of improvements to the bank guarantee process, including a significant reduction in the risk of fraud across billions of dollars guaranteed by the banks, decreasing the potential for errors and increasing the speed of execution,” said Dobson.

Men’s fashion and formal wear retailer MJ Bale was among the businesses that participated in the trial. Laura Li, Head of Finance at MJ Bale, noted that Lygon improved real-time management and visibility of status and life cycle changes, and provided reporting capability of the entire guarantee portfolio across multiple banks and major landlords.

“We are confident that Lygon will provide benefits to any company that uses bank guarantees as the costs, risks and delays associated with physical documents are eliminated,” said Li.

Menswear retailer Gazman also participated, with Simone Rutherford, Finance Manager at Gazman, reporting significant time savings and ease of use. “All interactions with the parties involved in a guarantee transaction, including agreement on the terms, are done electronically without any requirement for physical paper so guarantees can be issued and stored in a matter of minutes, saving a significant amount of time,” said Rutherford.

Following the commercial launch of Lygon, the next stage of development is to expand the range of its digitised bank guarantees, and to explore expansion into New Zealand and other international markets. These developments could enable the transformation of entire business processes for customers with operations in multiple countries and with cross-border guarantees that are more commonly used for trade.

“Now more than ever, customers want simplicity, an improved experience and greater security. Lygon’s inception and development is grounded in these needs, which extend beyond our existing customers to every industry,” said Dobson.

Image credit: ©stock.adobe.com/au/SasinParaksa