Australia’s bank guarantees embrace blockchain
Banks in Australia will soon be able to issue bank guarantees within a single day using the Lygon blockchain platform.
The Lygon platform, hosted on the IBM Public Cloud, has completed a successful pilot with ANZ, the Commonwealth Bank of Australia (CBA), Westpac and a consortium of 20 Australian businesses.
Currently, issuing paper bank guarantees can take up to a month. Bank guarantees act as a financial safety net provided by a lending institution, ensuring the lender’s exposure is covered if a debtor fails to meet their obligations.
These financial guarantees are essential for securing commercial leases on retail property. From this month, pilot users will have access to the platform to reduce processing times and decrease the risk of fraud.
A report published on 1 September revealed that the three Australian banks, together with retailers such as Scentre Group and IBM, are working to expand the Lygon platform for commercial use.
“Commercialising the Lygon platform represents a significant milestone for blockchain technology in Australia and internationally. By digitising a bank guarantee, we have effectively transformed a three‑party contract. We digitised the paperwork, the process and the legal framework behind it,” said Nigel Dobson, Chair of Lygon.
The pilot for the blockchain platform began in July 2019. Lygon says it processed new applicants in under 15 minutes and supported common bank guarantee operations such as amendments and cancellations.
Following the commercial launch, the team will move into the next development phase to broaden the range of digitised bank guarantees offered to customers. The blockchain platform is expected to be available to the wider market early next year.
Plans also include exploring expansion into New Zealand and other international markets.
This initiative is one example of how blockchain can improve banking and financial services. In the United Arab Emirates (UAE), UAE Trade Connect (UTC) detected $3.75 million in fraudulent transactions since its launch in June 2019, representing $435 million in potential losses prevented.
The UTC was implemented by eight UAE banks in partnership with Etisalat Digital, the local telecommunications provider. Participating banks include First Abu Dhabi Bank (FAB), RAKBANK, Emirates NBD, Commercial Bank of Dubai, National Bank of Fujairah, Mashreq Bank, ADIB and Commercial Bank International.