The first meeting of US credit unions looking to pioneer so-called distributed ledger technology (DLT) in CULedger, a “dedicated” version of the banks’ R3 Consortium, happened in August.
Illinois-based Baxter Credit Union (BCU) was joined by 55 credit unions and four of the largest credit union service organizations (CUSOs) on the CU Ledger blockchain project, led by the Credit Union National Association (CUNA) and Mountain West Credit Union Association (MWCUA).
Accordin to the poeple from the participating companies, the effort is similar to work being conducted at major consortium projects launched by big banks. For example, R3CEV has attracted more than 40 traditional financial institutions for trials that have focused on applying the tech to commercial paper and trade finance.
But while R3 has garnered more attention, CU Ledger believes it has a better chance of pushing technology through to commercial production first, due to the cooperative nature of credit unions.
“The two basic [blockchain] concepts are scale and security, and we’ve together credit unions representing enough members so that when we get this going we should be able to scale quickly,” said Rich Meade, chief of staff and chief operating officer at CUNA.
To Meade, this is setting up a David and Goliath-type dynamic, one where the smaller, nimbler and smarter participant might prove more adept at succeeding at its goals more quickly.
“We focus on individual people, while they focus on commercial entities,” Meade said, adding: “Credit unions have more to gain than to lose when looking at this opportunity. The competition among us isn’t big enough to push out [our] cooperative side.”
“It may function as an asset custodian, improve record keeping, support remittance and settlement functions, and even automate contracts,” said George Peabody of Glenbrook Partners, a research firm that previously collaborated with PSCU on a blockchain whitepaper.
“While these are early days in blockchain technology development, the emerging applications based on this new approach could alter how assets of many kinds are transferred and tracked. It’s time to pay attention.”
For instance, the industry created the CUNA Mutual Group, which provides commercial and consumer insurance and protection products, and CO-OP Shared Branching, a national network of credit unions that share facilities so members have convenient locations to perform financial transactions.
The credit union industry also came together to form a technology standards body, CUFX, which developed standards for integrating software technology into existing credit union systems. CUFX went so far as to define the data fields (What is a member? What are the different loan types? Etc.) and specified how information is transmitted within credit union systems.
Software providers now have a standardized template for building for credit unions, making it faster and easier for them to plug into third-party software systems.
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