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RBC Patent Outlines Credit Score System Involving Blockchain Technology

Blockchain is becoming pervasive in almost every corner of the tech industry—and that’s a good thing.

The latest development comes from the Royal Bank of Canada (RBC), as they have made a patent for technology that uses blockchain as part of the credit scoring process public. It was filed in the U.S. in the fall last year and was released last week.

A blockchain credit scoring system would involve a distributed ledger where each block includes identification as well as specific transaction data and a timestamp. Additional blocks will include user data and events/data used in credit scores. Using these blocks, the system would theoretically be able to generate a credit score, and future credit events—everything from paying off credit cards to taking out a mortgage—would create new blocks and adjust the score.

That all comes together to create an easy-to-access credit score that can then be transferred and shown to anyone who may want to inquire.

RBC also mentions in the patent that the blockchain could be run by one FI, a group of FIs, or even a collection of authorized entities such as credit bureaus, the government, and more. This kind of distributed oversight of the ledger would be ideal, as the power to control the credit score blockchain would fare best in the hands of many.

Privacy is key in cases like this, as a credit score comes with attached financial records. Blockchain offers a unique solution, as the distributed ledger records and kind of change or discrepancy.

“By using a blockchain distributed ledger, each party may be able to rely on the DSL-expressed contract to be tamper resistant (and in some embodiments, tamper-proof),” reads the patent.

The blockchain itself would be completely anonymous, so even if outsiders are able to look at the ledger, they would be unable to track it to a certain person. This is due to RBC’s reliance on digital identity, something that many other organizations are currently fiddling with, like the Canadian government’s project into using digital identity to track travel and tourism.

“A credit record can track recent and historical data for the borrower linked to a digital identity,” the patent reads. “A credit record is recorded using blocks and each block includes at least one identifier in the set of identifiers linked to the digital identity identifying the borrower.”

“The digital identity connects blocks for the credit record. A credit record can be dynamically compiled by identifying and aggregating all blocks with identifiers linked to a digital identity uniquely identifying the particular borrower.”

Essentially, there are anonymous markers included in each block that only the borrower and whomever the borrower informs can identify. By compiling all blocks with those specific markers on them, an entity such as a bank or credit bureau can obtain a whole credit score.

The patent includes a massive number of examples and technical details surrounding the use of blockchain to develop a credit scoring system. Right now, it is all theoretical, as RBC has not hinted or shown that this will be implemented anytime soon. Still, it’s refreshing to see blockchain escaping its cryptocurrency roots and being applied elsewhere.

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