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Lygon, a joint venture between IBM, ANZ, Westpac and Commonwealth banks, and Scentre Group, a shopping centre operator, has completed the first-ever digital bank guarantee. A report unveiled this news on February 10, noting that the organizations executed this deal on Lygon’s blockchain platform. Reportedly, these organizations unlocked this achievement after running a pilot on the technology since mid-2019.
According to the report, the venture seeks to digitize the antiquated paper-based bank guarantee process, which has been around for more than 200 years. Explaining why this change was necessary, Lygon noted that validating bank guarantees in the paper-based system takes a long time, ranging from a few days to months. This is because the process relies on humans to cross-check information manually.
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However, by digitising this process, Lygon has demonstrated that it can reduce the verification time to less than 24 hours. Per the publication, AZN issued the guarantee, which acts as a promise from a lending institution to match any debt that may result from a company failing to meet payments to a third party. On the other hand, Scentre Group was the beneficiary.
Out with the old, in with the new
According to Lygon’s CEO, Justin Amos, Lygon is paperless, transparent, accessible, and standardised. As such, the platform eliminates the inefficiencies, costs, and risks associated with a paper-based system. He added that this is the first time blockchain technology has been used for a commercial banking product in Australia.
Amos went on to disclose that AZN, among other issuer banks, would complete the necessary processes to integrate the platform. In so doing, he believes that the banks will have created a gateway for applicants and beneficiaries to request bank guarantees digitally. As a result, they will contribute to strengthening Australia’s reputation as an incubator for innovative FinTech firms.