Bank guarantees: jumping from paper to blockchain - Lygon modernizes the process with IBM Blockchain
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Lygon modernizes the process with IBM Blockchain 1 Bank guarantees: jumping from paper to blockchain Lygon modernizes the process by Caroline Poser with IBM Blockchain 4 minute read
Lygon modernizes the process with IBM Blockchain 2
T
he bank guarantee
is a pillar of financial
systems worldwide.
But the traditional process
of issuing a bank guarantee
is time consuming—and
managing it throughout its
lifecycle can be fraught with
challenges. That’s because,
until now, the typical bank
guarantee has been a paper-
based document.
A bank guarantee is an unconditional financial transactions across multiple issuing guarantees a tedious back-and-
promise made by a bank or an insurer industries to secure contracts. forth process.
to certify that the liabilities of a debtor
will be met. Prospective tenants often Today, some 11,500 retailers in The guarantee process is prone to fraud
use guarantees to secure commercial Australia and New Zealand rely on because paper documents are prone to
property leases instead of cash deposits paper guarantees that are created forgery. Additionally, it’s costly and it’s
or rental bonds. They are also used for through a manual workflow. This makes very hard to monitor. Landlords need
Lygon modernizes the process with IBM Blockchain 3
“ To better serve our to manage and store the guarantees,
usually in fireproof safes, and manually
customers, we wanted
reconcile them against property leases.
And banks lose sight of the document
the second it’s issued. For end
to deliver a guarantee customers, the process is cumbersome,
and each delay means they are not
solution that was open for business that much longer.
contemporary, digital Furthermore, whenever rates change
or a lease needs to be renewed, the
and that could be used
bank must issue a new guarantee,
negotiating each change in what can be
in a multi-bank setting.”
a painfully laborious process. Banks,
landlords and tenants didn’t want to
be passing paperwork back and forth
amongst themselves for weeks, and
Nigel Dobson, Banking Services Lead, Aus-
they demanded a workflow that made
tralia New Zealand Banking Group Limited;
Chairman, Lygon 1B Pvt Ltd. sense to all parties involved.
Nigel Dobson, Banking Services Lead
at the Australia New Zealand Banking
Group (ANZ) and Chairman of Lygon 1B,
Lygon modernizes the process with IBM Blockchain 4
a consortium of banks and technology
companies, says: “There was a genuine
need to digitize the archaic process by
11,500
which tenants, banks and landlords
negotiate bank guarantees. We brought Retailers relying
on paper
together three of Australia’s biggest
guarantees
banks together with a leading property
management company to address these
in Australia and New Zealand
problems and disrupt the industry.
1 day
“To better serve our customers, we
wanted to deliver a guarantee solution Time to create
that was contemporary, digital and that a guarantee
could be used in a multi-bank setting,”
continues Dobson.
reduced from 30 daysLygon modernizes the process with IBM Blockchain 5 From POC to live pilot In 2017, ANZ approached IBM® Research with a number of business processes it wanted to digitize, one of which was the process around bank guarantees. Together, the bank and the research team identified blockchain as a key component in a potential solution that could transform the guarantee lifecycle—including issuance, amendments, cancellations and any claims—for all organizations involved. “We decided that we’d do a proof-of- genuine and unique cross-industry use solution—the kind we believed IBM concept (POC) project to prove that case. This was it. would deliver.” we could digitize the bank guarantee process. Blockchain was something “Teaming with IBM was a very easy ANZ invited another bank, Westpac, that I’d been passionate about,” says decision. We had an enterprise use to join the POC. Scentre Group Dobson, “and we were looking for a case, and we needed a bank-grade Limited, a shopping center company
Lygon modernizes the process with IBM Blockchain 6
“ Teaming with
and a customer of both banks, also grade prototype using live data to
agreed to participate. Powered by create legally binding guarantees for
IBM was a very
the IBM Blockchain Platform on IBM retail property leasing.
Cloud®, the successful POC applied
blockchain’s security-rich, transparent Fast forward to June 2020, and
easy decision. We and immutable distributed ledger executives from the Lygon consortium
technology (DLT) to standardize and decided that the solution had
had an enterprise manage bank guarantees. commercial merit and engaged with
IBM Global Technology Services® to
use case, and we “One of the great strengths of provision and manage a production
blockchain in an enterprise setting is platform. Lygon is also counting on IBM
needed a bank- around reconciliation of information Security™ Services to help ensure that
between multiple parties. It’s not the platform—which will be delivered
grade solution— that we don’t trust these parties—we as a service—will be designed for high
just want to be sure that our systems availability and security.
the kind we can communicate perfectly with each
other,” says Dobson. “The commercialization of the Lygon
believed IBM platform represents a significant
In 2019, Commonwealth Bank of milestone for blockchain technology
would deliver.” Australia (CBA) joined ANZ, Westpac, in Australia and globally. We’ve
Scentre Group and a blockchain team gone from a proof of concept to a
from IBM Global Business Services® newly incorporated company and
Nigel Dobson, Banking Services Lead,
along with the IBM Research team to commercially available platform in two
Australia New Zealand Banking Group
form the consortium known as Lygon years—at a time when the demand for
Limited; Chairman, Lygon 1B Pty Ltd.
1B Pty Ltd. Together, the companies set digital has never been stronger,”
out to design and develop a production- says Dobson.Lygon modernizes the process with IBM Blockchain 7
Removing friction from
the guarantee lifecycle
With the Lygon platform, a tenant can
request a guarantee online, a landlord
can set the terms and then the tenant
and bank can review the guarantee. To
satisfy the need for a multilateral solution
with data sharing, reconciliation and
synchronization, the platform includes
DLT based on the Hyperledger Fabric
from The Linux Foundation. When all
parties agree on the document, it
will be stored in the DLT in a process can be completed in less than everything that’s going on, with the
standardized, trackable way that is one day. confidence that it’s fully compliant.
trusted by all parties.
“The friction we’ve removed from “It’s a win-win-win situation, which
This three-way conversation can happen the processes is extraordinary,” says is pretty rare. We were delighted that
completely digitally. There is no paper Dobson. “From the applicant’s point of we could actually improve and uplift
involved. Previously, the time it took to view, they’ve saved a month. From the the experience, the timeline and the
process a bank guarantee—starting with beneficiary’s point of view, they’ve got a outcomes for all three parties.”
the applicant asking for the guarantee digital instrument that they can manage
through to completion of the guarantee— for its entire lifecycle. And the issuer The solution will be generally available
took as many as 30 days. Today, the sits in the middle with the ability to see by the end of 2020 with the expectationLygon modernizes the process with IBM Blockchain 8
that Lygon will onboard a number of
guarantee issuers and beneficiaries.
“ We look at IBM as a
terrific partner, not only
Following this, the plan is to pursue
expansion into other markets and explore
developing additional capabilities in
support of related instruments and
business processes.
because of the way in
“Lygon was formed to bring a centuries-
which they dedicated
resources and really
old paper-based process into the 21st
century, enabling multiple parties to
collaborate in a straightforward way,”
Dobson says. “I believe we’ve created
a simple, elegant digital solution that’s
committed to the project
exactly what our customers need.
but also because they
were just as excited as we
“In digitizing a bank guarantee, we’ve
essentially transformed a three-way
were about solving the
contract. We’ve digitized the paperwork,
the process and the legality behind it.”
Dobson concludes: “We look at IBM as a
terrific partner, not only because of the
bank guarantee problem.”
way in which they dedicated resources
Nigel Dobson, Banking Services Lead, Australia New Zealand Banking
and really committed to the project but
Group Limited; Chairman, Lygon 1B Pty Ltd.
also because they were just as excited
as we were about solving the bank
guarantee problem.”Lygon modernizes the process with IBM Blockchain 9
Solution components
About Lygon 1B Pty Ltd.
• IBM® Blockchain Platform
Founded in 2019 in Melbourne, Victoria , Australia, Lygon • IBM Cloud®
is a consortium formed to digitize the bank guarantee • IBM Global Business Services®
process through its Lygon blockchain platform. Members • IBM Global Technology Services®
include Australia and New Zealand Banking Group Ltd. • IBM Research
(ANZ), Westpac Banking Corp., Commonwealth Bank of • IBM Security™ Services
Australia, Scentre Group Limited and IBM Australia.
© Copyright IBM Corporation 2020. IBM Corporation, IBM Hybrid Cloud, New Orchard Road, Armonk, NY 10504
Produced in the United States of America, November 2020.
IBM, the IBM logo, ibm.com, IBM Cloud, IBM Global Business Services, IBM Global Technology Services, and IBM Security are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other
product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml.
This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.
The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT
IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-
INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.
Statement of Good Security Practices: IT system security involves protecting systems and information through prevention, detection and response to improper access from within and outside your enterprise. Improper access can result
in information being altered, destroyed, misappropriated or misused or can result in damage to or misuse of your systems, including for use in attacks on others. No IT system or product should be considered completely secure and
no single product, service or security measure can be completely effective in preventing improper use or access. IBM systems, products and services are designed to be part of a lawful, comprehensive security approach, which will
necessarily involve additional operational procedures, and may require other systems, products or services to be most effective. IBM DOES NOT WARRANT THAT ANY SYSTEMS, PRODUCTS OR SERVICES ARE IMMUNE FROM, OR WILL
MAKE YOUR ENTERPRISE IMMUNE FROM, THE MALICIOUS OR ILLEGAL CONDUCT OF ANY PARTY.
66036266USEN-00You can also read
