After ANZ Bank, Commonwealth Bank of Australia (CBA) and Westpac joined forces in July 2019 to advance work on a blockchain-based bank guarantee platform, they announced the formation of Lygon with IBM and the Scentre Group shopping mall.
On Tuesday, Lygon announced that it would shape the industry’s first standardized guarantee for digital banks.
As the “first blockchain used for a commercial banking product in Australia”, the “national financial services infrastructure” went into operation at the weekend, during which a bank guarantee was successfully digitized.
The Lygon platform runs on the public IBM Cloud. It uses the IBM Blockchain Platform, which is based on Hyperledger Fabric, an open source blockchain project by the Linux Foundation.
It was designed by the group as a new piece of infrastructure to be “at the interface between finance and technology”.
At the launch on Tuesday, head of ANZ banking services and chairman of Lygon, Nigel Dobson, said the idea came from commercial property owners who were disappointed with an archaic process that banks had forced upon them.
“Gave them friction, gave them paper and worried them,” he said.
“The parties that are involved now … have a really long-lasting collaboration in solving an industry problem that is invisible and doesn’t shed much light … but it has definitely been a pain point and a friction point for many recipients.
“We also thought that the emerging blockchain technology that many of us were analyzing and evaluating at the time was actually the perfect technology, and that this was the perfect problem for that technology.”
Also Read: Blockchain: A Cheat Sheet (TechRepublic)
CEO Justin Amos said his company’s mission is to be the main market operator for digitized financial assets while reducing its environmental impact.
“The problem is with paper, we’ll fix it,” he said at the start.
“The core of today’s experience with bank guarantees stems from the physical nature of the guarantees themselves.
“The effects are being felt by all participants in the trade. Paper is slow, so we use email. Paper is expensive. It is estimated that there are over 1 million journeys carrying paper guarantees in Australia alone.”
He said the bank guarantee process uses 4 million pieces of paper a year.
He added that paper is often lost and easily tainted, betrayed and problematic to change. He also said over 80,000 courier deliveries support bank guarantees in a year.
“We shouldn’t underestimate the environmental impact of using paper,” he continued.
According to Amos, digitizing the bank guarantee is just the beginning for Lygon.
“Our core technology can be applied to other types of payment guarantees and financial instruments, such as performance bonds, and offers a wide range of opportunities to expand Lygon’s reach and service offering,” he said.
“The fact that we have a single, agreed-upon legal architecture that has been codified on our platform is a major breakthrough.
“Technology is one thing, the legal framework and architecture are completely different and require more effort to get there than technology has in recent years.”