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TransUnion, Spring Labs, Quadrata bring off-chain credit scores to DeFi

Reliable off-chain credit scoring on the blockchain, now available, will provide better service and attract more participants to the DeFi ecosystem, the companies who made it possible say.

TransUnion, Spring Labs, and Quadrata have partnered to deliver off-chain credit scoring to DeFi and Web3 applications for the first time. The score, which is user-permissioned, will inform risk-based decisions.

How the credit score is used

Spring Labs developed a patented process that takes an applicant’s off-chain TransUnion credit score and places it within a range of scores. The scores are delivered to dApps using its technology and Quadrata, a digital passport network created by Spring Labs.

The process serves important functions, Spring Labs’ COO Joel Eckhouse explained. The technology enables the score to be ported into a digital wallet while maintaining borrower anonymity. The lender decides based solely on the score range and not on personally-identifiable information.

Quadrata co-founder and president Lisa Fridman said the development brings efficiencies to overcollateralized lending. Borrowers can leverage their reputations to obtain more favorable rates. DeFi apps can target those consumers who are more likely to receive loans. 

Using smart contracts, lenders can create customized terms, such as preferred credit score ranges. Smart contracts apps can also utilize Quadrata’s technology to access

KYC/AML status, country of residence, credit reputation, and accredited investor status of Quadrata passport holders. It enables TradFi participants to have more assurance that they are dealing with safe participants.

Use cases abound

This efficiency will improve other use cases, Fridman added. She cited undercollateralized and unsecured lending. Eckhouse added margin lending, options, and futures trading. Consider areas where added trust can improve processes.

Liz Pagel headshot
TransUnion’s Liz Pagel said adding off-chain scoring is a massive win for DeFi.

“We see credit information on-chain as a key element for consumers to access more capital-efficient solutions in Web3,” Fridman said. “It’s an important step to leveraging blockchain technology for essential financial use cases in the future.”

The announcement comes as there is a push for greater financial inclusion. Some lenders are looking for ways to meet the needs of the previously underserved. The combination of TransUnion’s credit scores, which cover nearly the entire US adult population, and Quadrata’s technology, foster lending opportunities to new groups.

TransUnion senior vice president and consumer lending business leader Liz Pagel works with traditional financial institutions such as credit unions, banks, and fintechs. She said this development is a big step toward opening DeFi to more traditional lenders.

“This is a huge win for lending in the DeFi ecosystem,” Pagel said. “It allows trust between anonymous wallets and lenders.”

“Decentralization is a spectrum,” Eckhouse concluded. “The whole ecosystem benefits from having a rich spectrum. Enabling developers and companies to explore spectrum optimal is the optimal place for connectivity between the real world and DeFi.”

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  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.