Banking News

Credit union consortium CULedger unveils IBM blockchain deal

digital identity fingerprint

A year ago CULedger showcased a test version of its MyCUID customer identity system. Today it announced it’s working with IBM to develop additional blockchain applications.

CULedger originally started as a blockchain consortium and became a credit union service organization (CUSO) which a month ago confirmed a Series A funding round of $10 million.

Its flagship solution MyCUID was developed in conjunction with identity startup Evernym and uses the Sovrin Network which is based on Hyperledger Indy. When a credit union member phones a call center their identity is verified using a Sovrin-based mobile app, as opposed to the usual mother’s maiden name type of questions. CULedger’s technology partner BEST helped them to integrate MyCUID with voice banking so members can use MyCUID combined with Amazon’s voice appliance Alexa to make transfers.

Today’s announcement outlines the IBM scope of work as improving identity authentication and know-your-customer (KYC) compliance. It also mentions plans to implement applications around lending and payments.

KYC and credentialing

We spoke to Julie Esser, CULedger’s Chief Engagement Officer who explained that the immediate focus is on KYC and credentialing and particularly sharing that work within the industry. “It’s not only between consumer member or business member, but it’s also know your suppliers, know your employees. So any type of relationship that exists that requires some level of credentialing and KYC is a perfect fit for that.” Esser confirmed the work is based on Sovrin which IBM also uses for applications and is a steward that hosts a node.

Additionally, the KYC system uses Hyperledger Fabric. Self-sovereign identity implies that users control their own data. In the case of MyCUID, the consumer controls the sharing mechanism using Sovrin which also ensures authenticity of the identity. Fabric will be used as an immutable log so regulators can audit that the credit union is compliant.

But the consumer can also choose to share data with other credit unions. That’s because credit unions have a shared-branch concept so customers can go into a branch to execute transactions at their existing credit union or a branch of another credit union if they’re out of town.

“Credit unions will be able to cooperate and receive shared value from quickly exchanging sensitive data in a permissioned, individually controlled and transparent way. This decentralized approach using blockchain helps put the customer in control of their own identity,” said Marie Wieck, General Manager, IBM Blockchain. “The work underway between CULedger and IBM will also lay the foundation for new kinds of services and collaboration among credit unions as we work together to scale and extend the network.”

A network fo networks

CULedger had previously stated it would use the public Hedera Hashgraph network for cross border payments. IBM also has its IBM Blockchain World Wire for international transfers, which wasn’t mentioned in the announcement. In December CULedger disclosed it had joined R3’s global blockchain ecosystem. So one question is how do all these platforms fit together?

Esser clarified that CULedger’s vision is to build a network of networks. “We want the credit unions to have options so they can ultimately decide whether that platform works for their credit union and its membership. We’re not pushing one particular product, we’re making a menu of products open for them.”

She continued: “We’re building a peer-to-peer network of digital exchange. Digital exchange can be credentials. It can be things utilizing smart contracts. It could be things of value, currencies, loyalty points, settlements, wire transfers, all of those different things.”

John Ainsworth, CEO and President, CULedger commented that “a cooperative model that helps improve the member experience while benefitting all credit unions is the ideal approach to ensuring the next wave of financial innovation for the credit union industry.”

This article was updated with details about the network of networks, Julie Esser quotes and the Alexa integration.
A second update clarified that the credentialing / KYC solution uses both Sovrin and Hyperledger Fabric.