Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA) and Westpac – three of Australia’s ‘big four’ banks – are joining forces to trial a new bank guarantee platform that uses blockchain.

The three banks have partnered with IBM for the Lygon platform, with Westfield shopping centres operator Scentre Group the fifth founding member of the initiative.
 
Bank guarantees have historically been issued manually and been paper-based. The partners for the pilot believe that digitising the process lessens the potential of both fraud and error for all parties involved, while increasing the speed of execution.

Reports suggest that the Lygon platform can reduce the time taken to issue a bank guarantee from as much as a month to on or near the same day. The platform could potentially benefit many sectors and to reduce the risk of fraud across billions of dollars guaranteed by the banks.

“This new, digital process increases transparency and security through the use of blockchain technology while maintaining the privacy required in such a business process,” stated IBM.

Eight-week pilot

Lygon leverages IBM’s blockchain platform, which is built on top of Hyperledger Fabric, an open source blockchain project from the Linux Foundation. The Lygon platform will be operated by Lygon 1B Pty Ltd, a company jointly owned by the five founding members.

The pilot will run for eight weeks with live data and transactions for a test group of Westfield property leasing customers have just got underfway. In phases, the group plans to expand the range of digitised bank guarantees that Lygon supports across other industries, as well as offering its services to other customers in the retail property sector.

“This is a unique and transformational platform that enables the complete digitisation of bank guarantees,” said ANZ Banking Services leader Nigel Dobson. “We are proud to have developed this platform in Australia and see truly beneficial outcomes for small-to-medium sized businesses in particular

“Retailers of all sizes with physical outlets will experience radically improved bank guarantee cycle times. Additionally, retail landlords will benefit from managing their outstanding guarantees in a secure, transparent, and auditable manner.”

Open banking era

The platform pilot comes as Australia’s open banking era officially gets underway this week, with the country’s four major banks offering data on a variety of products as part of the regime’s roll-out.

ANZ, CBA, Westpac and National Australia Bank (NBA) had a deadline of July 1 to make product data available on all credit and debit card, deposit and transaction accounts with more products to follow.

Last December, Australia’s federal government announced a phased approach and timeline for the introduction of open banking, starting with the release of generic product data from this month.

The government’s timeline proposes that customers have the option to share their banking data with trusted third parties from February 2020. This should enable them to more fully control their data and enable greater transparency and competition throughout the industry.

Westpac’s chief data and strategy officer, Jamie Twiss, commented: “Westpac is focusing on creating a trusted open banking regime that is secure, flexible and easy to use for all Australians.

“The pilot program will lay initial foundations to test the performance, reliability and security of the system before any personal consumer data is shared. It will also give software developers and fintechs a network of financial institution’s data to build and improve financial services.”

While Australia’s open banking regime bears several similarities to that of the UK, it applies to all of the country’s authorised deposit-taking institutions rather than just the biggest nine.