Credit scoring is an essential part of today’s financing process but there’s a huge flaw within the industry that’s been occurring for a very long time.
For context, the credit scoring process is monopolized by FICO, an institution that provides credit scoring for almost every lender in the United States.
This is a huge problem as a monopolized credit scoring system leaves tons of people in the US underbanked and a significant number of the population as credit invisible—a term for consumers without any credit history with any of the 3 major credit reporting agencies.
In the global scale, many individuals are still left unbanked while credit cards are something that nearly half of the world’s population don’t have access to.
These are just some of the problems currently plaguing consumers across the world, with a solution drastically needed by these people to finally have access to fair and transparent financial services.
Bloom is an end-to-end protocol and financial platform for identity attestation, risk assessment and credit scoring which is built entirely on the blockchain.
Bloom’s products and services will be available to anyone—even the unbanked and underbanked across the globe.
Bloom’s flexible ecosystem will allow users to have access to credit services which work globally and are extremely secure and transparent thanks to the blockchain’s inherent features.
Bloom aims to solve several key problems in the credit rating system which are:
- Eliminating the risk of identity theft
- Provide an efficient global credit scoring system
- Bring efficiency and improvements to an outdated credit assessment system
So, what does Bloom really do?
Firstly, the Bloom protocol is designed to assist individuals who are wrongly deemed as bad credit risks under the current system.
This improves efficiency as mentioned earlier because worthy borrowers can finally get financing while lenders have access to a wider, more profitable market—a win-win situation for all parties involved.
To achieve this, the Bloom team moves on with two unique strategies:
A peer-to-peer attestation network
This peer-to-peer network allows the community to personally attest if another user is suitable for a loan.
As explained by the website itself:
This doesn’t mean that Alice is saying “Bob is good for a $10,000 loan”. This is Alice saying “I trust Bob to be responsible with the amount of credit he takes relative to his ability to repay”.
The goal of this network is not to dig deep into finding out how much money a person owns or is able to pay, but instead to know if a person is a good fit for financing options based on genuine feedback from other members of the community.
This credit vouching network on Bloom works on the basis that if a loan is successfully repaid, participants can then gauge the viability and risk levels of the surrounding community.
The end goal for Bloom’s vision is to create a community where everyone helps each other by pulling themselves out of the high-risk group together by successfully settling loans and other financing options.
The use of alternative data
As expected, the costs and time-wasting of individually going through each individual’s profile can be better used elsewhere and is nothing but inefficiency in the already wobbly credit scoring system.
Besides, the traditional way of using historical debt is flawed as it restricts the regular individual too much.
Instead, the Bloom protocol aims to change this by introducing other factors to determine creditworthiness. For example, utility bills, phone bills, and service payments are used among a host of other factors in Bloom to determine an individual’s credit risk.
This relieves the burden on individuals who were trapped in the traditional credit scoring system; with Bloom, individuals cannot expect to get extremely good rates from the get go but they can get financing options a fair rate with their new credit system in Bloom.
For lenders, the cost of customer evaluation drops significantly which makes everything cheaper and more profitable for lenders. Again, everything done in the Bloom platform is designed to reward everyone fairly.
The Bloom protocol has three main components which makes up its services:
- BloomID – the feature responsible for establishing identity and creditworthiness in Bloom. With BloomID, parties can vouch for others on their credit worthiness; in return, they’re rewarded for accurate evaluations by the platform.
- BloomIQ – a credit history management system. BloomIQ assists individuals in reporting and tracking debt obligations tied to their unique BloomID in an easy-to-use interface.
- BloomScore – for calculating credit risks. BloomScore is a dynamic indicator of an individual’s likelihood to pay debts which adapts intelligently to a user’s debt history
A wonderful feature with the Bloom protocol is the BloomCard, the first ever credit card to be built entirely on the blockchain.
The BloomCard is far and ahead of other cards in the industry; that’s not all, BloomCard does not charge any fees on foreign transaction exchanges while at the same time, enabling users to spend Bitcoins and Ethereum like fiat in the United States as it is fully compliant with laws and regulations.
To expand on the zero-fee exchange, users also enjoy the benefit of having the best exchanges from BTC or ETH to USD without any additional fees thrown in the mix.
A unique feature of the card is that purchases made with the BloomCard contribute directly to the respective user’s BloomScore. The score will then measure the user’s purchasing power, the frequency of purchases, and payment consistency to build accurate credit statuses.
Unlike other cards, the BloomCard is available to everyone regardless of the country which means that users can enjoy BloomCard’s features even in underdeveloped countries.
What if a user wants to use it like a debit card instead?
That’s not a problem at all with BloomCard.
To use the BloomCard like a debit card, all users have to do is to deposit coins into their BloomCard wallet which then allows them to use their card as a debit card easily.
If cardholders want to make some side income, they can choose to lend their cryptocurrencies to other BloomCard users. In return, they will receive income from interest rates which are credited passively.
The Bloom token (BLT) has two main purposes: a) it allows organizations to participate in evaluating user identities and creditworthiness and b) as a voting token to suggest changes and improvements to the Bloom platform.
Aside from that, there are other benefits available to token holders:
Parties involved in the platform (attestors and lenders) on the Bloom network set their prices and receive payments in BLT which makes things run more smoothly and quicker.
Bloom invitation system
The Bloom network is slightly vulnerable to attacks due to the referral-based nature of the platform but the Bloom team has a solution in place to prevent that from happening.
To safeguard the ecosystem of the network, users who want to invite others to the network are required to put up a small amount of BLT as collateral to protect against malicious accounts signing-up.
Here are the details of the upcoming BLT token sale:
Token name: BLT
Token base: Ethereum (ERC-20)
Token supply: 150,000,000
Token sale duration: 30th November, 2017 – 30th December, 2017
Token sale target: $50,000,000
Token exchange rate: 1 BLT = $0.70