Banks trial blockchain solution to speed up guarantee process

NZ and Westpac have teamed up with IBM and Westfield shopping centre owner Scentre Group to bring the bank guarantee process up to speed using blockchain technology.

The trial, powered by IBM’s Hyperledger Fabric platform, replaces the paper-based bank guarantee process used for commercial property leasing with a digital ledger that becomes the central source of information for all parties.

Distributed ledger technology underpins blockchain, with ANZ’s general manager of digital banking, Nigel Dobson, saying the trial showcases how the technology can be used to develop business solutions.

“Whether it’s crypto currencies or other public applications of blockchain, so far they have not been business grade,” Mr Dobson said. “This proof of concept trial has allowed us to think about how the technology can be used to change onerous reconciliation processes.

“It’s easy for us to issue documents, but in this case it’s the landlords and the tenants that face the real challenge of trying to make sure a physical document is verified and held securely. A large number of these documents have been found to be fraudulent in the past.”

It’s a challenge Scentre is familiar with, and CFO Mark Bloom said the process for issuing, tracking and claiming on guarantees has been long overdue. “With approximately 11,500 retailers across Australia and New Zealand, many of which use guarantees to support rental obligations, manual tracking of guarantees has been a cumbersome process,” he added.

Mr Dobson and Westpac’s GM of corporate and institutional banking, Andrew McDonald, both said that the outcome-driven approach has been particularly useful in developing the situation.

“We have been keen to avoid the hype surrounding blockchain and distributed ledger technologies, and instead focused on practical and deliverable use cases,’ Mr Dobson said.

According to Mr McDonald, the first step of the trial was to see if distributed ledger technology was the right solution for the problem.

“Blockchain enthusiasts often go looking to apply the technology to any problem, but we did ask ourselves at the start whether we absolutely needed to use it.”

“While other technologies could do some of the job distributed ledgers ticked all the boxes for us,” he added.

The next step will see the banks and IBM build a shared solution in collaboration with other organisations invited to participate in a larger pilot.

“Starting this conversation will be the important thing as we look to set up the foundations and the ground rules on how the blockchain is used,” Mr McDonald said.