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 or 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.