Royal Bank of Canada files patent for blockchain-based credit score system

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The new system would supposedly automate credit ratings, and would enable people to see how they were rated.

A patent application has been filed in the US by the Royal Bank of Canada (RBC) yesterday for an automated credit scoring system that is built on a blockchain. The system would supposedly be able to factor in more data than traditional credit rating systems to offer better loans based on a more comprehensive background check of a borrower. Additionally, borrowers will no longer be in the dark when it comes to understanding how their credits scores were determined under the proposed system.

The “system for credit and digital identity records” would supposedly also include a digital identity system where each individual is registered with a set of identifiers, and can also assign a universal identifier which can be combined with blocks to generate a digital identity for the individual.

The platform would record events in every individual’s credit history, which the patent application says would be verified each time before adding them to the blockchain. From here, they can automatically recalculate a debtor’s credit score based on updates made to the ledger. The patent also includes the integration of smart contracts for significant parts of the system, such as requiring electronic signatures and the terms of every transaction. The patent application includes a lot of potential uses; whether they will succeed at implementation or not is yet to be seen.

It can be noted that RBC has been experimenting on blockchain technology since last year, despite Canada’s central bank opting out due to several hurdles. In September, RBC’s executive vice president for innovation and technology, Martin Wildberger, announced that they are using a blockchain software created by open-source blockchain development company Hyperledger to send payments between the US and Canada. Wildberger said that while they are forward-thinking in terms of technology, they are also ensuring a safe transition in the still-early stage technology.

“Everybody recognizes blockchain will be transformative and critical,” said Wildberger. “At the same point in time, I think everybody recognizes these are early days.”

“We wanted to set it up as a shadow ledger so that we can demonstrate our leadership in exploiting that technology while at the same time recognizing that the technology is still early in its adoption phase,” he added.