Yesterday credit rating company TransUnion announced it will make off-chain credit scores available for DeFi lending on public blockchain. The solution is in partnership with blockchain startup Spring Labs, in which Transunion is an investor, and Quadrata, a Spring Labs spinoff that provides digital identity passports and KYC solutions.
To date, most DeFi lending has been over-collateralized with cryptocurrencies. However, DeFi lending is increasingly expanding beyond this, triggering the need for credit scores.
“Credit scoring is an important tool for lenders to help mitigate risk regardless of the platform being used,” said Jason Laky, EVP of financial services at TransUnion. “This partnership with Spring Labs and Quadrata will allow for DeFi lenders to have access to this critical information when making their lending decisions.”
Spring Labs claims the process supports the provision of credit data while maintaining privacy over the consumer’s identity on the blockchain. The data is delivered directly to the consumer, and then the user shares a subset with the lending application.
The announcement explicitly states that the individual requests a credit score. The emphasis is likely because of the privacy objectives. However, it’s also noteworthy that the Consumer Financial Protection Bureau is suing TransUnion over ‘digital dark patterns’ which the CFPB alleges ‘dupe Americans into subscription plans’.
Meanwhile, Spring Labs was founded to expand the amount of data available for consumer credit profiles. Its original goal was to encourage more financial data to be shared by telecoms firms, insurers and utilities using privacy preserving solutions built on a permissioned blockchain. Apart from developing Quadrata, it has been involved in other data exchange networks, such as one that prevents solar panel loan fraud. It has raised a total of $63 million in funding, including from Transunion and GM Ventures.