19 Oct 2018
Bank guarantees are the grease which run financial systems. And plenty of them could pre-date the industrial revolution. Now the Lygon project has the scope to shift the guarantee into a new era.
One of the first distributed-ledger technology (DLT) based solutions in the financial services industry, aimed at simplifying the process around bank guarantees, Lygon is currently in pilot with a group of retail property customers.
"For customers, the process around traditional bank guarantees can sometimes be an unwieldly burden. Lygon solves that problem.”
But Hari Janakiraman, the creator of the concept and Head of Trade Product, Institutional at ANZ, says the technology has the potential to scale to other markets, industries - even countries.
“Bank guarantees… are essentially the grease which runs the economy,” he says podcast. “In any type of commercial transaction, you will find guarantees.”
“The application [of Lygon] is worldwide and we already have received significant interest from parties outside of Australia… from the US, China and Israel, because they all face the same problem and guarantees are the same wherever you go.”
Hari was speaking with me on podcast ahead of the Sibos 2019 financial services conference in London, where the future of Lygon and similar DLT solutions are expected to figure prominently in discussions.
You can listen to the full podcast below.
Although conceptualised at ANZ, Lygon is joint venture project between this bank, CBA and Westpac, as well as tech behemoth IBM and retail infrastructure giant Scentre Group. The technology and agreement which supports it is significant given the goals it hopes to achieve could never have been met by any one participant on its own.
As I say on the podcast, the current customer experience with bank guarantees is one characterised by very physical and logistical components. Thanks to Lygon – now in commercial property leasing and potentially elsewhere in the future - the entire process will occur in a completely digital manner.
The Sibos financial services conference is here again.
Kicking off on September 23, one of the world's premiere international finance conferences will attract the most-innovative minds in the sector, setting the agenda for 2020 and offering insight into the trends and development which will shape the future of the industry.
In the lead up to and during the event ANZ Institutional will offer an insight into those themes, giving you a sneak peek at the ideas set to dominate the conference from ANZ’s industry experts and attendees themselves.
Hari says the immediate feedback from the Lygon pilot has been overwhelmingly positive.
“In my almost 20 years of experience in banking I have not had many cases where I have shown a product to a customer and the customer says, ‘Yes, I will have it”,” he says. “Every customer who we have taken the platform to says ‘yes, this is great’.”
For customers, the process around traditional bank guarantees can sometimes be an unwieldy burden. Lygon solves that problem.
“Bank guarantees are a really simple product but it's a product which has not changed for a very long time,” Hari says. “It is paper based and it's very manual.”
“It's a problem for our customers in terms of managing these instruments. And it creates operational inefficiencies for the banks, like ANZ, who issued the instruments.”
For us, digitisation is the ultimate solution.
“And by digitisation we are not talking about taking a piece of paper converting that into a PDF document,” Hari says. “We are talking about completely reimagining guarantees.”
For me, the biggest winners of Lygon radically transforming the cost and speed of processing are firstly bank shareholders and secondly – and most importantly – customers, because they can get these instruments faster in a way that increases trust.
And when trust is increased in these processes the whole economy ultimately benefits.
Adam Grant is Head of Trade and Supply Chain at ANZ
This article was originally published on ANZ’s Institutional website
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
19 Oct 2018
12 Jan 2018