Banks, IBM and Scentre Group join forces to overhaul bank guarantees

"Once it was finally agreed upon, the guarantee would be held in a fireproof safe by the landlord."

Thousands of retailers around Australia, from single store operators to international brands, need bank guarantees to secure a lease over a retail tenancy.

While scanning the guarantees speeds up the paper-based process, landlords such as Scentre Group have still had to store physical versions of the documents from numerous banks.

Underpinning technology

The consortium was formed in 2018 after a successful proof-of-concept was completed in 2017, which resulted in Commonwealth Bank wanting to participate alongside ANZ and Westpac.

The blockchain platform underpinning Lygon has been built using the open-source Hyperledger Fabric blockchain framework, which provides a foundation for developing enterprise blockchain solutions, with the IBM Blockchain platform on top.

IBM blockchain Asia Pacific vice president Paul Hutchinson said the Lygon platform (which will be run by a joint venture company formed between the consortium members called Lygon 1B) had all the makings to be a success.

"The technology has become less of an experiment ... we're not in the ages of figuring out if the technology works [any more]," he said.

"The scalability from a technology perspective ... becomes connected to [whether or not it creates value for all participants].

"This was done with the banks, IBM and Scentre Group all thinking about the end customer ... [which] removes the primary friction to scalability, which is adoption."

IBM Australia and New Zealand head of blockchain Rupert Colchester said the digital supply chain blockchain project between IBM and shipping giant Maersk had similar characteristics and in 18 months there are more than 50 per cent of the world's containers running on it.

"The reality is adoption is the most important thing for most of these networks and it's hard to trigger in the early stages."

The new pilot will run for eight weeks with live data and transactions between a test group of retail property leasing customers. In subsequent phases, the platform will be expanded to also trial other guarantees such as environmental.

Scentre Group director of leasing and retail solutions John Papagiannis said each year it completed several thousand leases across its portfolio.

"The current paper-based process is a pain point for us and for our retail partners because of the time involved and the manual nature of the process, taking valuable time away from focusing on customers."

The commercial model for Lygon is still being determined, but the consortium hopes it will be able to be expanded offshore and other banks and property groups locally will be able to join the blockchain platform.