Over the weekend, Australian blockchain bank guarantee platform Lygon Ark was officially launched. The initiative results from a three-year collaboration between ANZ, Commonwealth Bank, Westpac banks, property company SCENTRE and IBM resulting on incorporating a company five months ago.
Lygon’s system doesn’t simply digitize the guarantees. It does so without the need to trust a central party.
The fact that guarantees are paper-based makes them painful. They are subject to fraud and spoilage. They’re expensive, time consuming because they often require someone to visit a bank in person, difficult to amend and have some environmental impact. On that point, it is estimated that in Australia, during any year, over four million pieces of paper are used in bank guarantees supported by 80,000 courier deliveries and a million transport journeys.
“A team that’s required to install some air conditioning in a new office, for example, they have to provide a guarantee,” said Lygon CEO Justin Amos. “If they have to run around trying to get that guarantee and there’s delays in getting that guarantee, it impacts their ability to earn.”
He continued, “From our analysis, we think with the totality of guarantees in Australia, over six million business days or trading days get saved by going to digital. And that’s a conservative estimate.”
During the product’s launch, Lygon completed the first guarantee on the platform by issuing it to the SCENTRE group. Although all parties were ready to approve the guarantee, and KYC was already complete, the whole process took a matter of minutes from start to finish.
The user interface of the solution is essentially a workflow process. The guarantor logs on to Lygon’s platform and fills out a guarantee request form. After the applicant completes the request, a request for approval is sent to the beneficiary party via SMS or email. Once approved, the final step is for the bank to issue the guarantee. If all the parties have cleared the Know Your Customer (KYC) requirements, the bank then approves the guarantee and it becomes a valid digital guarantee on Lygon’s platform, visible to all three parties. In addition, the guarantee can be amended, canceled or used as a template.
Lygon’s system is based on Hyperledger Fabric.
Meanwhile, in the last quarter of 2020, Russian bank VTB issued bank guarantees on Ethereum blockchain variant Masterchain. And in partnership with IBM, Thailand’s Blockchain Community Initiative made their electronic letter of guarantee platform available to all businesses and has processed more than $300 million to date. Moreover, thirty Italian banks and organizations formed a consortium to leverage blockchain to fight fraudulent guarantees.