ANZ needed to address a pain point experienced by large landlords and the 11,500 retailers across Australia and New Zealand that depend on bank guarantee in lieu of cash deposits or bonds. So, when a retailer wants to lease a property to open a store, the landlord requires an unconditional bank guarantee that says “You’re good for the rent.” Because the guarantee is a physical piece of paper, completing the transaction can take weeks. Then, landlords have to store and manage the documents, reconcile them manually against the leases and repeat the process when terms change. What’s more, if a tenant alters a document by mistake or fraudulently, the bank will not honor it. This puts the landlord out-of-pocket if the tenant fails to pay.
After realizing that a distributed ledger could transform the process, ANZ partners with a consortium to transform financial guarantees using IBM Blockchain. As a result, it took less than four months to complete the proof of concept, which allows a tenant to request a guarantee from an online platform. Drop-down menus let the landlord adjust the terms for tenant and bank to review. When all parties agree on the document, it is stored in the blockchain ledger in a transaction that is secure, immutable and transparent to all parties. Rent increases or other changes can be similarly negotiated online. Blockchain technology counters fraud by certifying that the document is valid. Landlords, instead of shuffling papers, can reconcile rents digitally. And they appreciate the standardized digital format. These advantages are so compelling that other banks and landlords are eager to take part.