The three banks involved are ANZ, Commonwealth Bank and Westpac and Lygon will be administered by Lygon 1B, a company jointly owned by the five founders.
A statement from ANZ said digitising the process of issuing bank guarantees would cut down the risk of fraud, errors and the speed of issue.
The Lygon platform is claimed to be able to cut down the time taken to issue a bank guarantee from up to a month to on or around the same day. It is also said to be increase transparency and security through the use of blockchain technology while maintaining the level of privacy required.
After this trial, the platform will be made available to the general pool of those who seek guarantees.
ANZ Banking Services lead Nigel Dobson said: "This is a unique and transformational platform that enables the complete digitisation of bank guarantees.
"We are proud to have developed this platform in Australia and see truly beneficial outcomes for small-to-medium sized businesses in particular. Retailers of all sizes with physical outlets will experience radically improved bank guarantee cycle times."
Michael Thorpe, managing director, Future Cities, Institutional Banking and Markets of Commonwealth Bank, said the CBA had a strong track record of collaborating to innovate through blockchain technology.
"This pilot is a collaborative industry approach to explore how we could use blockchain technology to revolutionise bank guarantees and make the process simpler, easier and more transparent for our business customers – simplifying document exchange, using real time monitoring and speeding up the issuing process," he said.
Paul Hutchison, vice-president, Blockchain, Asia Pacific, IBM, said: “Leveraging the IBM Blockchain Platform, we have transformed a paper-based banking process into an enterprise grade digital platform ready for live production at-scale.
"Lygon streamlines the bank guarantee process, making it more secure, helping reduce fraud risks and providing advanced transparency and privacy settings."
John Papagiannis, director, Leasing and Retail Solutions, Scentre Group, said: “Bank guarantees are an important part of our relationship with our retail partners, and each year we complete several thousand leases across our portfolio.
“The current paper-based process is a pain point for us and for our retail partners because of the time involved and the manual nature of the process, taking valuable time away from focusing on customers."
Didier Van Not, general manager, Corporate and Institutional Banking, Westpac, said: “While the pilot is focused on retail property leasing, this technology has the potential to benefit many sectors and reduce the risk of fraud across billions of dollars guaranteed by the banks.”
“This is a significant expansion of the proof of concept we conducted in 2017. We have created a blockchain-based platform to digitise the bank guarantee ecosystem. The pilot will test live transactions using distributed ledger to prove the technology is commercially viable. It is a great example of digital transformation that refines the customer experience.”