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Credit union blockchain consortium enlists IBM to plot expansion

A credit union blockchain project originally designed to create an identity verification system is looking to expand into other areas and getting a boost by officially partnering with IBM.

CULedger, the Denver-based consortium, has already developed and tested its digital identity blockchain as a way to help authenticate financial transactions remotely or within a credit union network.

The IBM partnership will allow the companies to develop new blockchain-based services that are intended to help credit unions provide better service to their members. It will also work to create new products and improve existing ones, with the digital identity verification system called MyCUID at the center.

Julie Esser, CULedger’s chief experience officer, said the initial focus on digital identity “is the first pillar in a three-pillar road map” over the next few years. It plans to start work on smart contracts for lending, as well as cross-border payments, wire transfers and even loyalty rewards.

“This is an odyssey and we’re at the very beginning of it,” said Dan Gisolfi, the chief technology officer for trusted identity at IBM.

IBM logo
Ginni Rometty, chief executive officer of International Business Machines Corp. (IBM), is silhouetted while speaking during a keynote session at the 2019 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Tuesday, Jan. 8, 2019. Dozens of companies will give presentations at the event, where attendance is expected to top 180,000, with the trade war between the U.S. and China as well as Apple's sales woes looming over the gathering. Photographer: David Paul Morris/Bloomberg

To date, CULedger has made MyCUID, the digital identity verification system, the central thrust of its blockchain service efforts. CULedger’s initial focus for MyCUID is know-your-customer measures, a common use case for financial institutions to use blockchain technology.

“Blockchain is one of those technologies which is looked at as being ideal for the identity space and giving people control of their identity not just for financial institutions but also for governments and other organizations,” said Craig Borysowich, a digital platform strategist at Capco.

MyCUID essentially follows a credit union member anywhere they travel. For example, a member belonging to a credit union in California could withdraw cash from an institution in New York, and even overseas, as long as the credit unions belong to the same network.

“That’s something that’s very powerful,” Gisolfi said. “Our initial conversations in working with CULedger was a common understanding and interest in identity.”

Esser said MyCUID is meant to reduce credit unions’ exposure to fraud while helping to lessen compliance costs associated with KYC. She also noted credit unions can use the system to protect against internal fraud attempts with employees, and as a way to verify third parties that work alongside institutions to manage back office operations.

When asked about what role IBM’s Watson artificial intelligence platform will play with future blockchain-related CULedger projects, Gisolfi said nothing is planned at the moment, but that it could be a possibility at a future date.

Borysowich said one area where Watson AI could be helpful is financial assistance when financial transactions are analyzed and recommendations made to members.

In the meantime, CULedger is working to deploy distributed ledger technology to assist as a verification tool for voice banking via smart speakers such as Amazon’s Echo device and Google Home. CULedger is working with the credit union services company Best Innovation Group and Connect Financial Software Solutions on the project, which will use MyCUID to verify voice banking transactions.

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