Author: Mark Allaby, Managing Partner, Financial Services Sector, IBM Australia & New Zealand
When it comes to advancing blockchain’s real-world potential, Australia is amongst the pioneers leading the way. But interestingly, it’s not cutting-edge technology enterprises but collaborating financial institutions at the forefront.
This development was explored at our recent IBM’s Financial Services Executive Series – a platform for Australia and New Zealand’s top banking and insurance leaders to discuss topical issues in financial services.
At our latest forum, I was joined by Vice President of IBM Blockchain Asia Pacific, Paul Hutchison, and ANZ Banking Services Lead and Lygon Chairman, Nigel Dobson – two industry thought leaders and blockchain experts.
They explained that blockchain technology is no longer merely a theoretical tool, but a market-ready product that can drive real business value.
What is blockchain, and how does it work?
Simply put, blockchain – or distributed ledger technology – is a technology providing shared ledgers that facilitates the process of recording transactions and tracking assets. Each block of data within the chain is secured and immutable, so transactions cannot be altered once recorded.
Although initially developed for cryptocurrency, blockchain technology has since adapted to meet the myriad needs of businesses. More recently, it’s been implemented by corporations working together to solve common business challenges in the finance sector.
As these projects have demonstrated, the key to success in applying blockchain technology is collaboration. There’s arguably no greater proof of the power of joining forces than Lygon, which Hutchison describes as ‘one of the first enterprise-grade commercialised blockchain implementations anywhere in the world.’
Lygon – revolutionising bank guarantees
Earlier this year, IBM and Scentre Group, alongside ANZ, Westpac and Commonwealth Bank, launched Lygon – a first of its kind digital platform that uses blockchain technology to streamline the process of bank guarantees.
By digitising bank guarantees, which have historically been issued on paper, Lygon’s platform reduces the risk of fraud for all parties involved, lessens the potential for errors and vastly speeds up the process. ‘What used to take 25 business days can now take only 25 minutes,’ Dobson says.
Both Dobson and Hutchison attribute Lygon’s achievement to the symbiotic nature of the project. Each corporation within the consortium brought its own expertise of industry processes to bear on the collective IP Lygon developed. Through their combined knowledge and capabilities, Lygon navigated from proof of concept to a live platform that completely reimagines industry standards.
As Dobson notes, collaboration shouldn’t just stop at the inter-organisation level but span across internal departments within organisations too. In the case of Lygon, ‘major, publicly listed financial institutions were involved, so cooperation between individual legal departments and regulatory bodies was vital’, he explains.
Other secrets to success in blockchain projects
As well as collaboration, Hutchison also ascribes successful projects to identifying clear and measurable objectives to solve business challenges. Of the thousands of blockchain projects registered on GitHub in 2017, he estimates less than 10% are still in development. ‘I think these projects never made it to the next step because they either weren’t working on problems requiring blockchain or weren’t working on real problems that needed to be solved’, he says.
Listening to the customer is integral to identifying business challenges worth solving. ‘With Lygon, the issue was presented to us by our [ANZ] customers, which suggested a persistent problem with the format in which bank guarantees were issued’, Dobson recalls. By addressing the needs and opinions of their direct customers, Lygon completely transformed the user experience.
What comes next?
The financial services industry has certainly pioneered moving away from the hype of blockchain to prove its real-world potential. But in Dobson’s view, our current application of blockchain technology has only just scratched the surface.
Bank guarantees and other analogue documents that bring together parties in contracts, with financial institutions sitting in the middle, are not uncommon. So, Dobson anticipates a multitude of possible future applications of blockchain, not just in Australia and New Zealand but across the globe.
‘If Lygon is able to leverage its platform and go narrow but deep on the challenge of streamlining bank guarantees, it could well transform into a multi-billion-dollar unicorn’, Hutchison says.
If stakeholders continue to collaborate, listen to customers to identify business problems, and ensure blockchain is the appropriate technology for the challenge at hand, there’s no limit to blockchain’s future potential.
I thank Nigel and Paul for being part of our IBM Financial Services Executive Series and for sharing their insights and experiences with the group.
Click here to learn more about how IBM Blockchain can revolutionise your business.
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