Tomorrow we will need someone we can trust with our most sensitive data while, at the same time, benefiting from the convenience automation brings. Imagine a world in which individuals can financially benefit from innovative fintech without needing to blindly rely on third parties or to sell out their privacy.
Access to financial services in developing countries
Today’s societies rely much on citizens’ fair access to credit. Loans enable us to buy goods with money one does not have yet. This has proven very efficient in optimizing economic participation and in generating wealth. However, this requires that lenders take risks. There is a gamble in whether those to whom credit is extended will convert the borrowed capital into at least enough profit to pay back the loan.
This dynamic has naturally created the need to rigorously assess borrowers’ reliability. Lenders want a precise statistical assessment of the risk each borrower reflects. Higher assessed risks are adjusted for through higher interest rates.
A fundamental problem lies in the scarcity or inaccessibility of reliable statistical data to lenders. The high complexity of the risk calculations on individual borrowers has forced many lenders to default to simply increasing interest rates.
This has resulted in a perverse effect: Lower income individuals and families are often forced to forego borrowing or to face high interest rate loans that may create perpetual indebtedness. Though this may make fiscal sense from the borrower’s perspective, this phenomenon hurts not only low-income families and businesses, but society in general as wealth generation is stunted.
A new source of data for financial services: The digital economy
We have witnessed over the past decade a democratization in technologies related to sharing data and information. Technological solutions are now available to answer these problems of risk assessment. At the same time, recent regulations on data and privacy protection have been issued all over the world. Compliance standards have emerged that often severely restrict services dealing with potentially sensitive data.
So, on one hand there is an enormous amount of potentially useful data generated daily in the digital economy. On the other hand there are increasing restriction limiting the use of that data. The challenge lies in making this data available to statistical modeling while also complying with stricter local and global data regulations.
Nowadays, most potential sources of useful data are e-commerce platforms such as banks or of health facilities, and these platforms are largely closed ecosystems. They have, to this point, most often avoided the release of in-house data to also avoid the costly overhead stemming from privacy issues. However, we propose that there is now a quite adequate and parsimonious solution to this tension between valuable data and privacy concerns.
The concept of a decentralized Privacy-first data platform
Credify offers lenders a decentralized way to assess lending risks. It has created a unique system that sits effectively between the data sources and those seeking the data. The sources such as banks, insurance companies, financial institutions, healthcare facilities can ensure they are in compliance with privacy regulations as they disseminate data to lenders who wish to reduce their lending risks. This does not require a vulnerable central server farm in Credify’s control. Instead, Credify provides a direct conduit between data sources and data users, eliminating the possibility of a leak from intermediary servers.
Data source companies with Credify accounts can easily verify which users are in possession of their data. They will retain full rights to that data and can be certain they are in full compliance with all relevant regulations.
When a member of the network needs data from another member, Credify notifies the user of the details of the data transfer. Only then does it initiate the cryptographically protected transfer without accessing the actual data, and logs everything in a secure blockchain for easy validation.
Note: The blockchain acts solely as an immutable ledger, and is in no way related to a financial asset such as a cryptocurrency.
As can be inferred, we have different incentives for each party:
- The Credit institution is the one who pays a fee for the use of Credify’s service. Its incentive is that it has, at minimal cost, automatically onboarded a new user.
- The bank is enhancing customer experience with tailor-made services from partners, as well as receiving from Credify a commission on the credit institution’s fee.
- The individual borrower is provided a tailor-made offer directly embedded in his banking application, and with a discount based on the money saved through the use of Credify’s system.
The future of identity
The innovation we have outlined in this article entails, most importantly, the seamless embedding of financial services in the application process of potential borrowers. This digital embedding of financial services on applications is made possible through their access to a credit offering tailored to the borrowers personal profile found directly on the application.
In addition, the control that individual users will have over their data is unprecedented. A user can be onboarded with Credify, either by directly signing up on the application, or by benefiting from an offer on a third-party application. This user will subsequently have the ability to control who he is sharing his data with, and to enforce his rights in compliance with the legislation of the country he is living in. The very name “Credify” is derived from the word “Credit”. Credibility and trust is fundamental to the network, both for the users and for the services providers holding personal data. The user requires assurances that the actors with whom he interacts are compliant with all relevant norms and regulation, such as the GDPR, PDPA, ISO27001, and HIPAA. The service providers require assurances that the user’s identity is reliably verified and that the data can be trusted. These concerns are fully addressed with innovative eKYC (Know Your Clients) solutions integrated within Credify.
The Credify solution acts like a data wallet possessed by the user. It empowers him to access financial services that rely on his personal data to provide him with high-grade services at minimal cost.
Imagine walking into a real-estate retail office tomorrow with the intention of buying a property. The clerk greets you with a smile and proposes that you scan a QR code featuring Credify’s rainbow-colored logo. You are quickly presented with a detailed list of potential data you could opt to share with the real-estate service. And not legal gibberish, but a clear and objective explanation of why the real estate may need this data to enhance the service they are offering, and why you should trust the real estate company to deal with you fairly and securely.
If you decide to share your data, the real-estate company receives your information along with proof that it is legit through an eKYC linked to your account. They are now ready to serve you a coffee and happily show you a tailor-made catalog of their available properties you may wish to buy.
Use cases of Credify’s system are numerous, and we have skimmed through only a fraction of them in this article. Starting from the need to include all members of society into the financial sphere of opportunities for wealth-building, we have seen how connecting the economic actors who hold and require essential data is of primary importance. Users need to be able to access their personal data from companies that hold it and to regain control over that data. Many have suggested that data is the new oil. This metaphor can be extended since digital services need the fuel of personal data to function. Tomorrow we will need someone we can trust with our most sensitive data while, at the same time, benefiting from the convenience automation brings. Imagine a world in which individuals can financially benefit from innovative fintech without needing to blindly rely on third parties or to sell out their privacy. This is what Credify is making possible.
By Bruno Sivanandan
From an IT engineering background, now endeavoring to participate in offering the economy new means of leveraging the potential of new technologies. Therefore working on a compliance framework at a Technical, Organizational and Regulatory level from within the businesses as well as through advocacy groups.