Blockchain-based credit scoring: A better version of “Score”

BLockchain-based credit scoring

What is happening with traditional credit scoring?

BLockchain-based credit scoring platform
  • Limited access: It is required to own a credit card and a credit history, which brings in the problem with the unbanked and underbanked. These 3.5 million people can not or are limited to access to loans for financial need due to some reasons, namely: Some don’t have qualify ID issued by the government, which is required to open a bank account; Inconvenience — when they don’t have bank branches near their campus or it takes time to use them regularly; Bank fees are too high or charged with no clue, causing low transparency; Not steady or lack of services; Distrust of banking system.
  • Limited data sources: Data is the only component to build these models, its quality and predictability are the keys to their success. While data used in current credit scoring relies upon an individual’s credit report only, causing mainstream lenders to possess too little credit information guaranteed to expand their loans effectively.
  • The problem with security: The credit data breach at Equifax, one of the three biggest credit bureaus in the US in 2017, putting personal data of more than 148 million Americans exposed. Noted that the data breach doesn’t harm the customer’s credit itself but the way that data was used. The breached data can include customer name, password, security answers, email address, credit card number, etc. Particularly, even with a phone call and some basic information, more detail of customer data can be compromised, such as their credit number, account balance, etc. These kinds of breaches still happen with or without publicized because this is a centralized model, and customer data is held and controlled by other parties.
  • Credit records are not portable: Due to some required regulations and the disconnect among different systems, credit records are forced to be re-created when customers move to other countries or sometimes using other credit unions’ services.

How can blockchain revolutionize credit scoring?

Enterprise blockchain credit scoring
  • Ensure security: As mentioned, blockchain technology offers a solution with immutability. Whenever an individual wants to change the information, it will need the permission of 51% of the chain nodes, which makes credit histories become more reliable to the lenders. Decentralized means that it is the customer who will keep and control their personal and transaction data, and remain a unified credit record with multiple duplicates cross-border. This prevents unnecessary personal data revelation and maintains data sovereignty rather than the current centralized credit scoring model.
  • Allow approach to the unbanked and the underbanked: Blockchain makes it easier and cheaper to the unbanked and underbanked to approach to loan through a digital ID, also bringing up the chance for them to access in other financial services, education, and other sectors that require identity when the government doesn’t.
  • Broaden sources of data: Blockchain can be used as an underlying technology for a credit scoring model to collect alternative data instead of traditional credit history. This alternative data includes payment information that is not found on traditional credit reports, behavioral information, or financial handling trends from activities like renting, utility bills, cell phone payment, homeownership status, and property values, etc. The point is to collect more up-to-date and richer information about customer financial performance. This also allows quantitative research to be applied in addition to the qualitative studies of the traditional model that helps to strengthen decision making.

The solution by akaChain

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The Permissioned Business Blockchain for Enterprises

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Akachain.io

Akachain.io

The Permissioned Business Blockchain for Enterprises

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