Spring Labs, a blockchain startup, has come up with a way for banks to eliminate credit bureaus and other third-party entities from the loans process, Bloomberg reports. The startup is testing a decentralised peer-to-peer model made up of 16 lenders and fintech firms, including SoFi, OnDeck Capital and Avant.
Currently, banks give credit bureaus their customer information for free and then buy it back, as they cannot do credit checks themselves under current regulatory and competition frameworks. Thus, banks need a third-party to grant loans. A blockchain-based system would enable them to cut out the middleman by verifying clients identities for them. Moreover, the model is said to offer better security than traditional centralised systems, making it easier to reduce fraud spotting fake customers.
Spring Labs, based in Chicago and LA and which is advised by former Goldman Sachs president Gary Cohn, say all the lenders they've spoken to are interested in a peer-to-peer system. Moreover, the "triple-blind" method means no information about either the lender or the customer is revealed, and Spring Labs does not have access to the data on its network.
The information-sharing system and anti-fraud services are currently being tested and are expected to launch in the last half of 2019, according to its CEO.