The Royal Bank of Canada has become the latest financial institution to openly declare its interest in blockchain tech applications, having submitted a patent application on 15th March. The patent title reads:
Embodiments described herein provide a credit score platform using blockchain technology. Credit records are recorded using blocks linked by identification data. The credit record stores historical and predictive information about borrowers used to compute credit ratings.
Fairer and More Thorough Credit Scoring
The principle behind blockchain tech is transparency and immutability. This seems to lend itself well to the lending industry, where there is greater demand than ever but the credit scoring mechanisms are currently something of a mystery to the general public. A more transparent system would pave the way for a greater acceptance rate, and a greater positive reward to a customer’s credit score upon successful repayment and contract completion.
The Royal Bank of Canada aim to automatically generate credit ratings based on historical data and future predictions, as well as providing a completely transparent scoring algorithm so that there is no mystery behind acceptance or otherwise, and no accusation of bias. Of course, part of the automated process would be a lender matching service and the automated creation of a smart contract.
The Tech Is Already Operational
There are already companies that provide this exact service, so the Royal Bank of Canada already have a blueprint for success. Colendi, a Turkish business owned by Bulent Tekmen, are offering exactly this system, including a service known as micro-credits, which will allow people to borrow smaller amounts of money for lower periods of time than banks traditionally offer. This short-term lending market has up to now been dominated by payday loan companies, who charge large amounts of interest.
It is as yet unclear as to whether the Royal Bank of Canada will be outsourcing this service or developing their own blockchain in-house.