‘Lygon‘, a blockchain start-up created as a joint venture between three of Australia’s ‘Big Four’ banks, IBM, and retail conglomerate the Scentre Group, has secured an additional A$12.75 million in its latest round of funding.
Lygon, the creator of the world’s first digital bank guarantee, was founded after its corporate partners realised they needed to collaborate to solve a problem that has caused significant inefficiencies over decades: 200-year-old paper bank-based guarantees.
Process Reduced From a Month to a Day
Guarantees are common commercial contracts in which banks vouch that a customer is able to repay a debt, and they are still regularly used in the commercial property industry. Lygon suggests that it has turned the “paper-based, slow and costly” process into digital form and can thus reduce the time it takes to issue a bank guarantee from one month to one day.
According to Lygon chairman Nigel Dobson, “The commercialisation of the Lygon platform represents a significant milestone for blockchain technology in Australia and globally.” He added:
We’ve gone from a proof-of-concept to a newly incorporated company and commercially available platform in two years – at a time when the demand for digital has never been stronger.Nigel Dobson, chairman, Lygon
Traditional Guarantees Eat Up 80,000 Courier Deliveries and Four Tonnes of Paper Annually
The paper-based nature of guarantees slows down processing, causing logistical problems for companies such as Scentre, and Lygon has estimated that bank guarantees currently require 80,000 courier deliveries each year and use four tonnes of paper.
Based on IBM’s Hyperledger technology, the Lygon innovation will allow ANZ, Westpac and the Commonwealth Bank to store their instruments on one platform that can be accessed by multiple users.
Lygon’s Capital Pushes It into New Sectors
Lygon originally set out to raise A$10 million, but chief executive Justin Amos said it increased the capital target due to higher than expected demand from backers. The extra funding will be used to hire more staff (at least 30 more this year), fund research and development work, and push into new industries such as insurance and environmental, social and governance.
Lygon is also working on digitising rehabilitation bonds, commonly used in the mining sector and designed to ensure government has funds to restore a mine, exploration site or quarry if an operator fails.
According to Amos, “We have a built, fit-for-purpose bank guarantee platform, but our customers are coming to us and saying they want us to do more.” He added:
[The Lygon innovation is] a game-changer from a customer experience perspective. In terms of [traditional] bank guarantees, they were paper-based systems that are not good for anyone. They’re expensive, prone to delay, and there is operational fraud everywhere.Justin Amos, CEO, Lygon
Australian Banking Industry Needs to Back Blockchain
As interest in cryptocurrencies and blockchain technology surges in Australia and the world over, the crypto community fears that outdated regulations may prevent businesses and investors from getting involved. Recently, the Australian Prudential Authority revealed it was in the final stages of drafting a letter to the country’s financial institutions that will outline its expectations for the future of digital assets.
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