IBM Launches Blockchain Platform Aimed to Transform Bank Guarantees

IBM has launched a pilot program with a new digital platform using blockchain technology with the purpose of transforming the way businesses obtain and manage bank guarantees required for a retail property lease. The launch could change the landscape of the global development of blockchain solutions. 

Four banks have signed on for the pilot, mostly in Australia, as a test ground. Bank guarantees have traditionally been paper based and have been processed manually.

The participants are hoping that digitizing the process will actually reduce the risk of fraud but will more likely first decrease the risk of errors and dramatically change the speed of the process, giving each of the banks a competitive edge. IBM claims the speed will likely go from about one month, to 24 hours. Given the speed in which personal loans are now pushed through electronically, it is likely that this is not out of reach. 

ANZ Bank is one of the banks that are moving forward with the pilot. Nigel Dobson of ANZ said, “This is a unique and transformational platform that enables the complete digitization of bank guarantees. 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. We look forward to working with our customers over the coming weeks. While the live platform will benefit retailers with rental bonds, we see the platform eventually supporting all types of bank guarantees and therefore benefiting the wider community.”

While the pilot will only run for the next two months, the product Lygon will likely expand the range of digitized bank guarantees globally including clients in the retail real estate sector. Lygon is operated by the five founding members, which include IBM and four banks that are part of the pilot.  

It is an example of how a fintech company, albeit one that is a lot more than a fintech company, is seeking out banks for joint ventures that benefit all parties.