Banking

Blockchain startup aims to be Equifax killer

credit score report

Today Spring Labs announced that it raised $14.75m in a seed funding led by August Capital. The founding team is behind the online consumer lender Avant. At one point the platform achieved a unicorn valuation and has raised $1.8 billion in funding. Avant has 600,000 customers and has originated almost $5 billion in loans since 2012.

The startup describes its product as a decentralized network for identity and credit.

Targeting credit bureaus

The new venture squarely aims at credit information companies like Equifax. It intends to allow lenders, banks, and data providers to securely and efficiently exchange data with each other.

On the consumer side, the startup wants to address those who struggle to access credit. Sometimes this is because there’s a material error in the credit information. The company estimates this applies to 20% of consumers. The aim is to allow banks, lenders and financial institutions to share data directly rather than via credit information companies. And to provide consumers with more control over their identity data.

On the other side, they note that institutions usually receive no compensation for the data they provide. Once they pass information to the centralized credit bureaus, they have no control.

Spring Labs also believes there are other sources of untapped credit information for the unbanked, such as telecom and utility companies.

They aim to kickstart early growth by leveraging the relationship with Avant which provides services to several large banks in the United States. They’re in discussions with banks about adopting the Spring Network alongside Avant’s bank-focused product.

“We see a huge opportunity here to improve the infrastructure of the global credit ecosystem in a more decentralized and secure way, with the right incentives in place to drive participation and information sharing,” said Eric Carlborg, Partner at August Capital, “Further, this is a team we’ve known for years and backed in the past. They are the right group to not only develop this promising technology but also get it into the hands of the financial system in a regulatory compliant way.”

Technology

The company which was formed this year hasn’t yet outlined detailed technology plans. They refer to a dual-layer blockchain ‘that enables the public sharing of attestations among institutions with added security via a second layer of permissioned nodes that comply with regulatory requirements and facilitate privacy-preserving smart contracts.’

Like many other blockchain startups, this is just the beginning. It remains to be seen if they can build their vision, though the promising team and connection to Avant give them a head start.

Update

On 9 April Spring Labs announced an industry advisory board. Members include Sheila Bair former Chair of FDIC, Nigel Morris Co-Founder of Capital One and QED Investors, Bobby Mehta former CEO of TransUnion, and Brian Brooks EVP Fannie Mae.

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