DCU FinTech Innovation Center Brown Bag Lunch: Blockchain in Digital Identity

June’s brown bag lunch (“BBL”) event focused on Blockchain in Digital Identity and was led by outside authorities on the sector, including Dazza Greenwood and Christine Ross, as well as Center Members.


The following post is from Center Member, Jeff McAuley of Energetic Insurance, who posed several questions during the event and drafted the following:

A Member’s Perspective:

One of the great things about being in a FinTech Incubator is the constant flow of ideas from leaders in the field. This comes from peer conversations from residents, but also from their guests and the occasional organized discussion. Recently we have the chance to convene over a brown bag lunch to discuss the potential for blockchain in digital identity management (you know, typical office lunch chit chat).

I’m a fan of blockchain, but not pre-sold on its universal application to solve any and all problems. As a less partial observer, I tried to summarize a few notes on why (or why not) digital identity might be an interesting application. These notes are meant to be the start of a conversation, rather than an authoritative or exhaustive list.

The conversation included, however, the summary below does not necessarily reflect their (or my) personal views.

How might blockchain be useful for digital identity management?

Unique Identifier: Many current identity systems rely on unique identifiers such as the number on a passport, driver’s license or social security card. A blockchain structure could provide a globally unique identifier that could be used across any system.

Verified Attributes:  A distributed identity ledger could include aspects of personal credit such as income, outstanding debts, payment history etc. all in a secure authenticated structure, that could be externally queried without necessarily sharing the actual data (ex. Is salary > 90,000?). This non-specific queuing could also prevent loan or admissions officers from making decisions based on protected classes including religion, gender sexual orientation.

Distributed Authority: An individual corporation or government could implement the blockchain identity framework, however, it could also be validated by peers through a web of previous transactions. Perhaps each peer-to-peer transaction could build a form of credit history. If the blockchain records previously successful transactions, or highly-rated exchanges then new transaction counterparts can “trust” that this entity will fulfill their obligations. This means that there does not need to be a centralized authority to validate identity.

Inherent (Access) Rights: A blockchain identifier could be used as a user authorization token (in the place of usernames and passwords) that could be verified by several different systems and provide appropriate access. Similarly, it could tie together disparate accounts with the same organization like a bank.

Inherent (Human) Rights: The blockchain could also encode rights based on the type of “entity” being identified. A human vs. a dog have different legal rights and can sue or be sued in different ways. This encoding of rights can form the basis for smart contracts. Who said identity had to be reserved for only humans?

Why might blockchain be a bad idea for digital identity management?

Centralization: Does putting ALL of my information in one place make it inherently less secure?

Freedom to be forgotten: Does the security of the blockchain mean that my past baggage follows me around forever?

Papers please”: Does the idea of a national registry that includes every aspect of my personal history sound dystopian? Perhaps there are good reasons to start down this road, but is there a risk that a totalitarian state takes advantage of this identity record in the future?

The Brown Bag Lunch Series
The DCU FinTech Innovation Center offers cohort members a monthly BBL event during which startup Members, industry experts and community members of the DCU community share insights on a given topic.

Do you have an interesting FinTech topic worth discussing or are you a knowledge expert that would like to co-lead a Brown Bag Lunch? Click here and let us know.

DCU FinTech Innovation Center Launches Brown Bag Lunch Series: Reinventing Retail Banking

DCU FinTech Innovation Center Launches Brown Bag Lunch Series:
Reinventing Retail Banking

The DCU FinTech Innovation Center offers cohort members a monthly brown bag lunch event during which startup Members, industry experts and community members of the DCU community share insights on a given topic. This inaugural event focused on Retail Banking Onboarding and was led by Ted Brown of Member Startup Salesbrief with featured viewpoints from:

Amandio Sena, Founder & CEO, Pyggly
David Araujo, VP Technology, DCU
Jeff Kukesh, Director of Product Development, Fidelity
Julie Moran, VP Member Service, DCU
Mike Degnan, Founder, Explorer Advisory Capital 

What follows is a collection of industry trends and anecdotes on the topics of onboarding customer experience, legacy retail bank practices, paperless enhancements, and incentive realignment.

Customer Experience Leads, Technology Follows

By now, the tech disruption territory has been well worn. All industries are bound for—or in the center of—a shakeup. For organizations, it’s important to keep in mind that the actual technology is only part of the disruption; application of the tech to both customer experience and internal operations is at the core of business evolution. In the case of retail banking new client onboarding, not only is the customer experience often confusing and cumbersome, but the internal incentives for bankers are mismatched with the true indicators of long-term client success. These areas of dissonance, which ultimately lead to funnel drop off, are where technology solutions have focused—and internal incentives should realign.

Flaws in the Retail Banking Onboarding Model
Most banks incent bankers on account openings, not account activity or client retention. This emphasis is particularly short-sighted given the 2.5x greater fee contribution active clients— defined as those regularly using at least two bank services—make to their banks. Couple the concept of active clients as more valuable clients with that of client attrition, typically 15% annually, with 50% of attriters having been with the bank for less than a year, and the argument for prioritizing client relationship development is clear.

So what’s happening between account opening, activation, and engagement? Most banks use a 90-day onboarding timeline to deliver coordinated communications, such as welcome brochures, emails, and phone calls. However, many banks’ temptation to cross-sell during this implementation window trains clients to screen or ignore onboarding communications that may lead to incomplete activations (plus, the paperwork can be, at the very least, overwhelming).

As many as 30% of onboarding clients will have their accounts closed for not completing the required steps within the designated timeline. So while active clients are more valuable, attempting to onboard and cross-sell during the same phase of the relationship, within the same communication stream, is simply a bad customer experience.

For those clients who do not complete the account opening, they are invited to reapply, often treated—and counted by bankers—as new-to-new prospects. For those who do complete an account opening but remain largely inactive, there is no process or incentive to reengage them, leaving a significant number of inert and overlooked accounts.

Rise of Automated Account Openings and Onboarding Apps

In 2009, Jeff Kukesh proclaimed that “paper is the devil.” It was this rallying cry that inspired his co-founding of oFlows, a paperless solution for loan and financial account openings. Thanks to the 2001 Patriot Act’s statement that digital authentication was sufficient to identify an individual, FinTechs like oFlows were able to digitize previously paper-heavy practices, offering banks and consumers a solution to take some of the pain out of processes like onboarding.

In 2011, oFlows was bought by Andera, later acquired by Bottomline Technologies in 2014. The original backbone of the solution continues to be a leader in the market of online account openings and other integrated acquisition solutions for retail financial institutions.

Past sales leader at Andera and Bottomline, Ted Brown, has brought his new company, SalesBrief, to the DCU FinTech Innovation Center where he and his team are working to optimize the content-driven sales process. By packaging print and video materials digitally and tracking prospects’ engagement through video views, pages visited, and overall time spent, SalesBrief is managing and monitoring coordinated communications across the sales funnel; from prospecting to converting to onboarding.

Thanks to the rise of automated account openings, and the intelligence offered by tools like SalesBrief, banks are gaining communication efficiencies while yielding more account completions. The client information gained through these solutions is also informing banks’ cross-sell selection, so when the time is right (post onboarding!), clients can receive offers that relate to their personal goals, as opposed to the promotion of the month. Now, that’s a better customer experience—one that will likely lead to more satisfied and active clients.

While FinTech is making strides by putting the customer at the center of the equation, it’s not enough to fully reinvent retail banking onboarding. Rewiring sales incentives from account openings to engagement will be critical to bettering bank revenues and relationships.

How DCU Does it Differently

As a credit union, DCU behaves differently than a bank. As a member-driven, financial cooperative founded on the principles of digital innovation, DCU behaves differently, period. When it comes to onboarding, the mantra is, “digitally engage to catalyze action.” Here are DCU’s 3 key onboarding principles:

  1. Incent bankers on account activity, not account openings
  2. Only message new users on the product being activated, assuming onboarding has been triggered by an event, like a car purchase requiring auto financing

This single service messaging can be frustrating, as DCU is missing an opportunity to tout its full offering; however, DCU’s discipline has created greater user openness to future cross-selling messaging.

  1. Use data gathered during onboarding to inform predictive cross-selling and bundle selected products at a discount to motivate purchase

By maintaining a focused and relevant message, delivered primarily through digital channels, DCU positions itself as a resource, building trust and deepening relationships on the members’ terms.

The Brown Bag Lunch Series

Do you have an interesting FinTech topic worth discussing or are you a knowledge expert that would like to co-lead a Brown Bag Lunch? Click here and let us know.

*Written by Christina Nagler of ccncontent.com

Boston Fintech Breaks Down Bitcoin and Blockchain

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Bitcoin and binary

Inside  the  DCU FinTech Innovation Center  the emerging technologies of bitcoin and blockchain have already emerged.  Havell Rodrigues, CEO/Founder of one of the Center’s Member Companies,  Adjoint,  and Jason Morton, the Center’s Entrepreneur in Residence,  are experts in blockchain and discussed how this technology  is shaping the  future of money.

“Blockchain is the future of the internet, or what the internet-of-value could be.” When Rodrigues describes blockchain’s potential he warns me that it gets  pretty technical  pretty fast. One of its more well-known applications of it is   bitcoin,  a digital cryptocurrency.  No one controls it, no one prints it out, and there will only ever be 21 million of them in “circulation.” Doubtful as it may seem,  bitcoin does have the  properties of currency:  scarcity, fungibility, divisibility, durability, transferability. From its humble beginnings in cryptography circles circa 2008, bitcoin’s popularity  exploded along with the need for anonymous e-commerce transactions on  Dark Web sites like the Silk Road, and now  giants like Overstock.com and Microsoft accept them.   But the real magic of bitcoins is made possible by the “Distributed Ledger Technology” behind  blockchain,   a kind of “incorruptible” digital ledger that lives like an irrefutable electron- everywhere and nowhere at once.

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Blockchain is “distributed” ledger technology.

As Rodrigues puts it, “This is the next level of value creation and exchange.”

So why is it called blockchain? “Well, ‘Block’, is used because transactions are reported in blocks in a  database, which provides immutability through the concept of ‘chain’, the concept of ‘hashing’. Essentially the system creates a hash of the underlying database, a new block is added to the database, and then blocks are chained  together where all participants have guarnatee of immutability of data. No one can go back in time and change previously recorded data. You change the data, you change the hash- it won’t match hash that everyone else has.” Because this  system is open-source and updated  constantly, it’s too  ubiquitous  and too fast to hack.

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Bitcoin transactions per day.

It’s also catching on. “Financial institutions have taken a big step forward, doing proof of concepts and experimenting with private blockchains to see what it can do. They have seen the business value of this technology, especially in its role of reconciliation of financial transactions, and are going into production mode,” including the DTCC. “I’ve got a bullish optimism with blockchain, or what I prefer to call Distributed Ledger Technology,” he says, before walking through a range of applications that eventually veer towards sustainability and the sharing economy.

“Blockchain  removes inefficiencies, enables new business models, and drives down costs from the system of investing. There’s  less paper trail, but a clear audited digital trail. Put entire communication trails onto blockchain, with smart contracts automating work flows, and make this info accessible only to relevant counterparties or to regulators.” 

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Legal Status of bitcoin

Jason Morton is taking time off from being a math and statistics professor at Penn State to focus on his startup, and he waxes pragmatic and political  when discussing blockchain. “One of the most interesting things to watch now is how  [blockchain]  interacts with the regulatory and geopolitical environment.  By now it is clear that political instability – be it India’s currency recall  or Trump’s rapid actions on trade and international relations – benefits blockchain technologies due to their role as a hedge and  their permissionless nature.”

While lack of regulation leads to  heightened risk and uncertainty, Morton maintains that  restrictive regulation keeps too much money on the sidelines, choking business models before they can develop. Because the new administration is in the midst of a rollback of Dodd-Frank and other components of  regulatory frameworks, “This   seems like an odd time to aggressively regulate public blockchain  initiatives, so it is likely we can expect a period of lassiez-faire for blockchain while the focus is elsewhere.”

While this bodes well for blockchain’s future and acceptance, Morton warns that “the relatively high level of regulation we have experienced was likely a double-edged sword for blockchain technologies.” On the one hand, it has increased demand for tokens (such as bitcoins) but it has also kept a lot of people from wanting to get involved in public blockchain projects due to concerns over regulatory risk. “So  a reduction in regulation could go either way. The need for token-based  crowdfunding may be reduced… or, blockchain-based  mechanisms could have the freedom to become the dominant platform.”

With the FinTech sector enthusiastically  exploring its applications, blockchain is primed for  “disruptive” innovation. As Rodrigues puts it layman’s terms, “The system is safer and better than emails and faxes, which are sadly still used today. You could have Uber or Airbnb decentralized; you could have peer to peer real  sharing economies using this underlying technology.”

Mass collaboration and advances in coding are replacing intermediaries like governments and banks, and the revolutionary shift triggered by blockchain will be a crucial component of the Internet’s Next Big Thing. And if you stand in the right place, you can already see it coming.

The DCU FinTech Innovation Center is the leading sponsor of FinTech startups in Boston and is dedicated to fostering FinTech startups and the Boston FinTech community. The Center focuses on helping startups gain initial customer traction and provides seed-stage FinTech startups with one year of free mentorship, workspace, community and a professional network. The Center is fully funded by DCU, is supported by DCU executives and is operated by Workbar.

Dave Gentry  is a fan of progress and recess. He believes in Olde English, new fortune cookies, and he answers to #davertido.