How One Blockchain Startup Is Combatting Centralization of the Credit Industry
Startup company Bloom seeks to take advantage of blockchain technology’s perks to create a platform where the participants will have global access to credit services.
According to Bloom, the traditional methods of credit checking leaves billions of people without basic credit services. The stats of the company show that fewer than 9 percent of the citizens in developing countries have ever taken a loan from a financial institution. The lack of access to credit services forces numerous people to take loans from the shady underworld of illegal lending, the company states. Bloom believes that, no matter the country or the region, access to credit “is a fundamental cornerstone of social mobility” since it is the key for individuals to reach their economic goals.
Bloom also pointed out the problem of governmental monopolies in credit checking. According to the startup, 90 percent of the top lenders in the United States use the FICO score, which is in the hands of the U.S. government. Bloom stated that, despite the popularity of FICO, the credit system leaves over 45 million U.S. citizens with no credit score, thus, they are not allowed to — or they have to work hard to — take loans from financial institutions. The blockchain startup also highlighted the issues of other countries:
“In China, your credit score is affected by your political opinions. France, Portugal, Spain and the Nordic countries do not have credit scores, opting to only report negative information to your file. In the United Arab Emirates, religious restrictions on lending have prevented the development of a consumer credit reporting system. In the United Kingdom, you will have trouble getting a high credit score if you are not registered to vote.”
With its Ethereum-based platform, Bloom seeks to migrate all lenders to the blockchain. The company is currently developing an end-to-end protocol for identity verification, risk assessment and credit scoring, all kept on the blockchain. By implementing blockchain tech, Bloom strives to find solutions to the issues within the credit system. Furthermore, the Bloom platform will offer cross-border, global services for 7 billion individuals, the company wrote.
Implementing blockchain technology within the credit system would also provide solutions to security issues. Equifax, one of the three largest U.S. credit agencies, was recently breached by cybercriminals, leaving approximately 143 million Americans exposed. The FBI is currently investigating the hack; however, the Equifax cyberattack ranks among the three largest data breaches of all time, according to The Wall Street Journal. The publication reported that the current breach could be the most dangerous of all since the attackers were able to acquire key personal identification documents — names, addresses, Social Security numbers and dates of birth — all at once.
“It’s certainly the worst single breach of personal information that I know of. This data is the key to everyone’s files and interactions with financial services, government and health care,” Avivah Litan, vice president of the industry-research firm Gartner Inc., said in a statement to the WSJ.
Equifax reported that the credit card details of approximately 209,000 U.S. customers were compromised in the hack. According to independent security researcher Andrew Komarov, the financial details could be sold for $500,000 on underground markets, such as dark net marketplaces.
Bloom published a blog post in response to the Equifax breach. The company seeks to solve the security issues within the credit industry by creating their own decentralized protocol. Bloom strives to implement globally federated, secure IDs on the blockchain. This way, according to the startup, they can “dramatically mitigate” the risk of identity theft by reducing their reliance on single-source forms of identity verification.