The Royal Bank of Canada may be interested in putting credit scores on a blockchain.
In a patent application released Thursday, the bank outlines a platform built on a blockchain that would automatically generate credit ratings using a borrower's historical and predictive data. The application as described proposes a system that would utilize more data sources than existing credit rating systems, improving the loan process while creating an immutable record.
Notably, the RBC patent application indicates that it would redesign the credit rating system to provide more transparency for users to understand how their scores are calculated. Further, adding this new level of transparency would help users improve their scores more quickly than is possible at present, according to the filing.
One way the system could work is by using marketplace information to analyze loan offers based on existing credit histories.
The application explains:
"In another aspect there is provided a system for credit and digital identity records with a distributed ledger of a plurality of nodes, each node including at least a computing device, and the distributed ledger having a plurality of blocks, each block comprising identification data linked to a set of identifiers for an individual, transaction data, a timestamp indicating when the block was created, and a hash reference for the distributed ledger."
If a loan application is submitted, the system would automatically determine what sort of loan and creditor would be appropriate before generating a unique smart contract that contains the terms of the loan.
In other words, the blockchain-based system would automate every step of the credit rating process through a more transparent system, according to the filing.
At press time, it's unclear if the system would use one single blockchain or multiple networks, or whether RBC would be ready to build the system if the patent is granted.
RBC image via Shutterstock