Blockchain can assist banks with consumer lending

Posted Jul 1, 2018 by Tim Sandle
Many industries gaze at blockchain and scratch their heads in puzzlement. However, for the finance sector Ripple is in use for cross-continental transactions and the next area for reform is consumer lending.
The finance sector has been in the lead in terms of implementing blockchain and tokenization. The next area where the technology is likely to be applied is with traditional loans. Here blockchain offers numerous advantages including transparency, efficiency, and security. Each of these steps can make use of cryptocurrency as collateral.
The advantage of cryptocurrency assets as collateral lies in the efficiency the digital currency can bring into the entire lending process. For any cryptocurrency asset approved by the lender, blockchain allows for immediate validation of its authenticity, ownership and worth. This should enables anyone to get immediate backing for a loan, provided they have a verifiable means of making repayments.
The types of startups that are making in-roads in the finance space include Ripple, a real-time gross settlement system, currency exchange and remittance network. Ripple is by companies such as UniCredit, UBS and Santander. A second is the Depository Network [DEPO]. This is a multi-platform network enable lenders, including peer-to-peer lending marketplaces, banks, other credit institutions to accept digital assets as collateral.
Another is SALT, which offers loans backed by Bitcoin and Ethereum against U.S. dollars. The U.S. centered firm launched with an initial coin offering in 2017. SALT uses a peer-to-peer model which centrally matches lenders with borrowers. Lenders are able to determine the terms of the contract together with the interest rate.
A further example is ETHLend, which offers Ethereum based-loans backed by ERC-20 tokens. Similar to SALT, ETHLend adopts a peer-to-peer model, but as a difference to SALT, this blockchain is fully decentralized. Loans assessed are based on smart contracts on the Ethereum network. This allows both borrowers and lenders to find, and to interact directly, with each other. With the ETHLend model, borrowers can determine the terms and rate, while investors can select which loans to fund.
The Depository Network adopts a different approach to these other models as it is not Depository Network a lending platform. The offering from the company is in the form of depository infrastructure, which other lending platforms, banks and credit institutions, can utilize. Depository Network clients are already-existing lenders. The clients can deal with their own client base and they are entirely responsible for all of the terms, conditions and regulations pertaining to the deal.
In other areas of the economy there are the beginnings of tokenization of non-cryptocurrency assets appearing. Notably this in sectors like property, auctions and intellectual property rights. In the longer-term many assets have the potential to be placed on a token and hence pledged for a loan. This trajectory signifies that the overall market potential for cryptocurrency loans will expand significantly over the coming years.