First-to-market blockchain-based platform Lygon has announced on Tuesday it has “minted its first industry standardised digital bank guarantee, representing a significant breakthrough for blockchain-based companies globally”, with Lygon a joint venture between ANZ, Westpac, Commonwealth Bank, Scentre Group and IBM.
Minting, a piece of blockchain terminology, is “the computer process of validating information, creating a new block and recording that information into the blockchain”. ANZ acted as the issuer of the guarantee and Scentre Group the beneficiary.
A bank guarantee 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. While it can help to secure leases, projects or property, the process can often take weeks.
The demonstration today using Lygon is intended to fast track the bank guarantee process, eliminate costly paper trails and reduce fraud.
Lygon’s CEO, Justin Amos, said Lygon’s successful digitisation of the bank guarantee was an important milestone for Australian fintechs, and the company’s core technology can apply to other types of financial instruments, as well as providing opportunities in other markets and jurisdictions globally.
“We have seen through this issuance today that the technology and legal frameworks are ready for digital guarantees,” Amos said. “Over the next few weeks, ANZ and other issuer banks will finalise their readiness at their own speed to utilise the platform. This will provide a clear pathway for applicants and beneficiaries to request the issuance of digital bank guarantees.”
Amos also noted that Lygon “reduces the risk of fraud and handling errors, providing significant benefits to all parties using the service at a time when there is a heightened focus on digital security for businesses of all sizes and scale.”
“Lygon is paperless, transparent, accessible, and standardised, removing the inefficiencies, costs, and risks associated with a paper-based system. The ability to reduce the risk of fraud and handling errors is a major advantage to Lygon, particularly given the heightened focus on digital security for businesses of all sizes and scale these days,” Amos continued. “In the case of a tenancy agreement, banks can maintain database ledgers of all digital guarantees in existence, with access to a full and auditable history of every transaction ever made; landlords are not at risk of losing or holding invalid guarantees; and retailers as well as other tenants have a simplified and fast system for providing security and accessing premises sooner.”
“Lygon has condensed a four-week process and multiple trips to the bank to as little as one day—benefiting all parties involved in the tenancy agreement process,” Amos concluded.
Amos added the launch bolstered Australia’s reputation as an “incubator for trailblazing fintech companies.”
“Our core technology can be applied to other types of payment guarantees and financial instruments, such as performance bonds, offering a wide range of opportunities to pursue as we expand Lygon’s reach and service offering,” Amos said.
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