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ANZ, Commonwealth Bank, Westpac commercialize blockchain guarantees

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Today Australia’s three biggest banks announced the commercialization of their blockchain bank guarantee platform, LygonANZCommonwealth BankWestpac, IBM and shopping center firm SCENTRE have incorporated Lygon 1B as a standalone company to manage the project.

Because the guarantees are digitally signed and verified, the risk of fraud is significantly reduced. Additionally, there’s greater efficiency and a reduced risk of error.

“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 Lygon Chairman Nigel Dobson. 

Initially, the project focused on the bank guarantees required for property leases. Hence the involvement of SCENTRE and clothing retailers such as MJ Bale and Gazman participated in the pilot.

The project has been some time in the making. The group first spoke about it in 2017 and last July, they ran live pilots. The platform will open to the general public in early 2021. In the meantime, the range of guarantees will be extended and it will explore geographic expansion, including New Zealand.

“Lygon improves real-time management and visibility of status and lifecycle changes and provides 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 Laura Li, Head of Finance, MJ Bale. 

The five founders invested AUD 14.4 million ($10.7m) in the new venture with unequal shareholdings. Commonwealth Bank was a late joiner so it owns a smaller 15.8% stake. The largest investors are ANZ (26.2%), Westpac (25.2%), IBM (20.8%), leaving SCENTRE with 12%. The bigger investors also paid a premium price per share.

Meanwhile, Italy has been plagued by bank guarantee fraud. The central bank worked with 30 commercial banks to create a blockchain consortium to address the issue. And in Thailand at least 22 banks are collaborating to focus on letters of guarantee.