Blockchain letter of guarantee solutions

Speed the bank guarantee process by eliminating excessive paperwork and increasing visibility end to end

Malay man signing papers at a business meeting
Overview

Letter of guarantee: a process in need of change

A letter of guarantee is a  contract issued by a bank on behalf of one of their customers who has entered into a contract to buy goods or services from a supplier. The letter of guarantee lets the supplier know that they will receive payment, even if the bank customer defaults. To obtain a letter of guarantee, the customer will need to apply for it.

Blockchain technology can help to transform the letter of guarantee process by making it completely paperless, digitized, and transparent. This transparency helps eliminate fraud and forgery, since the blockchain network is secured by permissioned participants, including reputable financial institutions. This creates a highly secure network for document filing and retrieval, where each transaction is recorded in an immutable, auditable ledger — which is not owned by any central entity.


Benefits
The advantages of a letter of guarantee solution built on IBM Blockchain Reduce cycle time and costs From application to issuance, a standardized, blockchain-based network can compress this time from days or weeks, down to a single day. Having a “single source of truth” lowers the risk of disputes, reduces processing time, and improves reporting and tracking. Enhance security and prevent fraud Only authorized network participants can execute a letter of guarantee, which is encrypted, and an immutable record is stored on the blockchain. The record is auditable by all permissioned parties. Increase productivity and visibility Fully digitized workflows, with all key functions available online through a simple user interface, make it easy for applicants, beneficiaries and issuers to view, manage and report on their letters of guarantee.
Case studies
Building trust in bank guarantees with the Lygon platform Three of Australia’s largest banks and a large real estate and shopping center owner have worked with IBM to create Lygon, a first-of-a-kind blockchain platform to digitize and transform the bank guarantee process for both financial and performance guarantees. Lygon enables applicants, issuers and beneficiaries to obtain and manage legally binding guarantees. Among other benefits, the platform reduces issuance time from one month down to one day. Blog: Lygon powers all-digital letters of guarantee with blockchain
BCI simplifies letter of guarantee management with blockchain Twenty-two banks and nine large organizations have joined the Thailand Blockchain Community Initiative (BCI), using a blockchain network to issue and manage electronic letters of guarantee to businesses of all sizes. BCI helps reduce process complexity, simplify data verification, lower fraud, and boost efficiency. Some member companies already report seeing a 200% reduction in transaction costs. IBM News Room: BCI advances pilot to include businesses of all sizes

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