Blockchain and Crypto
Credit unions are testing a blockchain-powered digital identity tool
- Credit unions are testing blockchain-based digital identity solutions
- Credit unions hope the distributed ledger technology underpinning the digital identity product can also support other blockchain applications for credit unions, including those dealing with loan participation, settlement and clearing
Credit unions are jumping on the blockchain bandwagon, looking to ledger technology to create and improve digital identity solutions. Over 80 credit unions have invested in the CU Ledger initiative, a distributed ledger network that's been in development for over a year and that's aimed at improving service offerings to members. Digital identity is a foundational problem that organizers hope to use the network to solve. "Digital identity was chosen because it's of most benefit to our membership," said John Best, CEO of Best Innovation Group, who is leading the development of CU Ledger. "The challenge is this idea of sovereign identity -- putting identity in the hands of the customer." Organizers of the CU Ledger initiative are working with a company called Evernym, which claims to have developed an "open-source global identity network on a permissioned distributed ledger." In other words, two parties will be able to securely share information as needed, without having to remember cumbersome passwords or offer identifying information to third parties who store the information -- mitigating the risks of Equifax-like data breaches. As for real-life use cases, its first application will help identify customers identify themselves when they use call-center services, and pilots with credit unions aren't expected to begin until the second half of next year. The CU Ledger initiative is being overseen by the Credit Union National Association and the Mountain West Credit Union Association. So while adoption of the tool by credit unions is still somewhat far off, the use of blockchain to solve digital identity issues is the subject of debate among analysts. Still, many banks have forged a path ahead on digital identity, with Canadian banks and Capital One being prominent recent examples. There are hurdles, namely that the blockchain can't risk being compromised at the outset -- and of course, the relative newness of the technology still means a lot of creases still need to be ironed out. Still, Best said he hopes the the CU Ledger network could act as a platform for fintech vendors who could offer other blockchain-based solutions for credit unions, and in addition to digital identity, other use cases could include loan participation, settlement and clearing. And any credit union would be able to tap into the tools CU ledger offers, regardless of how big or small. He said working together is part of credit unions' history and they're a natural fit for the model, but the challenge is educating members and staff. "Credit unions have always operated in a collaborative world, and they've formed around the idea of common bonds, communities or employment or employers," Best said. "The challenge is understanding -- bringing credit unions up to speed with distributed ledger technology's capacities and benefits."