Blockchains and the credit underwriting process in the banking sector

Abstract

The future banking landscape is being shaped with new business models, rising customers’ expectations and more stringent regulations. In bank lending, the demand to deliver almost instant credit responses while keeping loans quality and compliance will increasingly pressure credit underwriting. In this context, technology will play an important role. Some of them may become central, as is the case of blockchain. This dissertation brings both subjects together. It aims to identify and discuss opportunities to enhance bank’s credit underwriting through the use of blockchain technology. The data for the study was collected from semi-structured interviews conducted with experts in credit and/or blockchain from different countries. The data collected was analysed through Thematic Analysis as per Braun & Clarke (2006). The results show that, according to the study participants, there are opportunities in two areas of the process: compliance and financial risk analysis. By enabling the share of KYC processes and other mandatory checks between financial institutions, blockchain can help credit areas to meet compliance obligations. By promoting the share of customer data and facilitating the access to collateral records, blockchain can improve the financial risk analysis. Consortiums to explore blockchain technology will be a trend and cooperation between banks will pave the way for the future (instead of competition). Challenges and concerns are also raised. For the participants, the settle of some foundational elements will be a critical factor of success. The findings of this study may be of great significance for the Banking Industry since it is the first time the potential of blockchain technology is looked at from the perspective of credit underwriting and opportunities in this field are discussed at the same time. If implemented, such opportunities may bring enormous gains in efficiency and cost savings.