Hi! Alicia here, your friendly marketer. CULedger: do you know what it is? Probably? Maybe? Not sure? This month, I asked our CEO Doug Burke to interview CULedger CEO John Ainsworth to discuss what the heck CULedger is anyway, and why should you care. Coming from a perspective of ZERO technology expertise, I wanted this interview to inform the credit union folks who: a.) are not technical, b.) don’t have time to follow the nitty-gritty details of tech updates, c.) who just want to know how, when and where this is all going to affect their credit union. Can you blame us for being overwhelmed??
Sitting in on the interview, I gathered that at a base level, you should care because this deeply affects your member. CULedger is working to provide credit unions what is called a “self-sovereign identity,” meaning members will no longer have a clunky, annoying, and wildly-different experience every time they engage with your credit union, part of the “walk-in/call-in/log-in” trifecta. Also, it greatly reduces fraud. It’s seamless, like in the Sci-Fi movies. This is coming from a Millennial, who literally has less than 1 second of patience when it comes to customer experience. And the patience Gen Z has for a clunky experience…no modern measurement is capable of such a low figure.
Anyway, enough with me blabbering, Let’s dive in to the interview.
DB (Doug Burke): Let’s start with the basics. Who is CULedger and why should a credit union care about them?
JA (John Ainsworth): The whole reason for CULedger is because the world’s going to the Internet of Things and the fact that we now want to have direct connectivity, but we also want to be secure. This is the essence of why we are here, you know? We are a CUSO that is creating a global distributed ledger platform, a self-sovereign digital identity that reduces fraud, improves member experience, and puts the member’s identity back into the hands of the member.
Put it in context of the origination of the Internet and TCP/IP with the technology of protocol, that was the underlying fabric of the craziness of this landscape. If you start thinking about distributed ledger (DLT) as Internet 2.0, which is what it’s mostly referred to as, then you can start to think about how it’s not necessarily a product. It’s an enabler of technology. But it’s really about digital and the digital exchange and less about blockchain or DLT.
If you look at the macro scale: because of all of the innovation and the Internet of Things, the amount of people that continue to come in between a credit union and the member just continues to grow.
I’ve got my cores, digital banking providers, A.I. (artificial intelligence) vendors, my autonomous lending guys. Just the whole ecosystem between a credit union and their member is growing rapidly.
The macro problem behind the issues credit unions are facing are the dependencies upon other tech partners, along with the revenue cost – this is why they should be paying attention to CULedger.
DB: Can you tell us a little bit about the short history, the philosophy, and the purpose of CULedger?
JA: It started off as a research to action out of CUNA’s National CU Roundtable. The main question was, “Could there be a P.O.C. (Proof of Concept) that uses the emerging technology around blockchain to actually solve a problem?” John Best [CEO of Best Innovation Group] was one of the innovative founders of that initiative. He spun off the first POC. I was an advisor for John on the other side, giving my perspective on a payments landscape and what we had been doing with distributed ledger as a broader payment network through pursuit of the other country markets.
The original use case was for reducing fraud in the back office and the recognition that if Doug calls in, and I don’t necessarily know who Doug is and Doug doesn’t necessarily know who I am. There’s a lot of fraud and risk for those not-face-to-face transactions. There were about 70 credit unions that participated in that first research-to-action product.
But during that whole time of the research to action, the whole world of technology and Internet of Things was moving. We realized there’s a bigger opportunity to leverage distributed ledger beyond this one use case, and that it can be very foundational for credit unions to be able to own their own railroad and take some of the control back. That’s what actually led to the formation of our CUSO.
DB: Readers might be wondering, “Why and how is CU Service Network involved with CULedger?” We’ve taken some of our capital and placed strategic bets with CULedger. We believe in their strategic direction. And we want you to know that we aren’t sure where it’s all going to end up at the end of the day, but we feel very strongly that it will be beneficial for the credit union movement. We’re making the bet on behalf of our credit unions, as a voice for them. We feel CULedger and the Sovrin Foundation’s mission and values of cooperation, customer experience and reaching the underserved align with our own mission.
CU Service Network got involved with CULedger nearly three years ago because of what you mentioned: the fraud. We were interested in improving shared branching. Authentication was near and dear to our hearts to help prevent shared branching fraud. But it’s really evolved significantly beyond just how it could interact with a teller.
DB: Well, why don’t you give a little bit of background about yourself, John? You are one smart guy.
JA: I’m an old geezer. [Laughing]
I started off in correspondent banking with SunTrust. That’s where I first fell in love with community institutions and credit unions. I then went into Visa and spent over a decade with them. My first role was on the brand side, managing relationships like Bank of America. I had a startup in between and then landed at MasterCard for another decade. I managed the community instructions for North America as well as all the global processors. Then I came to CULedger.
This is the fourth time in my career that I’ve kind of been called nutty. The first time was at Visa, when we relaunched Visa Debit. Why would any smart person want to use debit, because you don’t get the float? We saw something there that it would catch on. The second was the introduction of e-commerce. I was literally in the room at Visa when we did the first e-commerce transaction. And yet again, people said, “Hey, I can send in the check and it kind of works.” And we were like, “Well, there’s a lot of friction and it’s not very convenient.” The third was EMV. That was a pain in the butt. Now, with distributed ledger and the world of the Internet of Things, it being the fourth generation of the Industrial Revolution: distributed ledger, A.I., virtual reality and quantum computing.
And so here we are yet again. So, this is the fourth version of this for me. That’s why I’m an old guy.
DB: An old, smart guy. Each time you go through one, you learn from before, right? [Laughing]
Can you explain how CULedger has evolved and what your roadmap looks like?
JA: Sure. Once the recognition that the original use case was to solve “call-in” fraud, not authenticate web fraud, but it also helps friction and fraud when I’m logging in, and also if I am walking into a branch. If I’m a member and I call into my credit union, they’ll ask me the traditional four or five questions – you know, what’s the birth date of my dog and all the other insanity before they are comfortable that I am who I am. If I’m logging in and I get locked out, I will have a different experience because I have 200 passwords and I’m trying to remember which one to use.
And if I walk into the branch, they want to see my driver’s license etc., so all of these methods of interacting with the credit union have a different member experience. They all have some friction and some level of fraud or risk. We want to provide one solution that can be incorporated to have that consistent omni-channel experience that reduces friction for the member, but at the same time actually helps reduce fraud and increase efficiency as well.
DB: What are your key strategies today in the near term? In the stage of proof of concept and working with credit unions?
JA: In our current state, we’ve launched the ID product. Listing off a few credit unions here: Desert Financial, Unify, TruWest, Suncoast Schools, PSCU are coming up with POCs to address the fraud part.
The fact that I’ve got this peer to peer connectivity, the first Lego block, which is authentication. But I also have the next building block, also because of a peer to peer, which is the opportunity for us to have what we call verifiable consent or a smart transaction. An example of this is loan participation: Doug wants to lend me 10 million dollars. I need to know that there’s some evidence of that or contract that Doug’s going to lend it and I’m actually going to receive it. So that’s the second piece. And the third is somehow we’ve got to get the 10 million dollars from point A to point B. The authentication, the trusted data and the movement of virtual currencies – those are the three pieces. What we’re delivering today is the authentication part. Our strategy is one, not only to participate directly with credit unions or aggregator providers, as you would be, but also embed that authentication into other services. We’ve announced the partnership with Autonomous Lending. We’re announcing a relationship with the loan participation company Fiscal Hive. Our solution can be embedded with other FinTechs so that we’re not necessarily competing with everybody in the world. We’re enabling them.
Any FinTech has the same problem for authentication and movement of money. So today we’re just in authentication. We’re solving the what we call call-in/log-in/walk-in problem.
One of the most frequent scenarios I get questioned on is, “OK, great. You’re creating this ID. But the Internet is growing very quickly with the number of providers. How do you know this idea will be interoperable with all of the other players? This isn’t a repeat of a beta VHS conversation, right?”
Doug: And the answer is…?
JA: And the answer is we are screwed. Just kidding! [Everyone laughing]
Right now, the answer is because we have been participating in the World Wide Web Consortium the acronym, the W3C. In fact, that’s funny. Last night (November 19, 2019), they just announced the final global standard for the buzz word “verifiable credentials,” but it’s talking about ID. We actually not only are using that standard, we also contributed to the writing of the standard. And we’re also one of the first global use cases of that standard. As opposed to us trying to create a standard and convince the rest of the world why that’s the right one, we’ve taken what has now been adopted as the world’s standard and we’re applying it. We’re just ahead of the curve. Others will eventually have to adopt it.
DB: CU Service Network is also an investor in Evernym, which helped create the Sovrin Foundation. Can you lend two sentences to how Sovrin plays into all of this and why it’s important to credit union members?
There is a global trend that is supporting for consumers to control their own identity. You know, we’re tired of the Facebook breaches. We’re tired of people basically capturing our data and selling it, using it. Sovrin’s mission, as a global organization, is to help consumers effectively manage their identities. That plays into things like GDPR, which is a large compliance initiative. The member benefit is that we’re empowering them to control their own identity as opposed to a third party that might be breached or have bad intentions with it.
You know, there’s a privacy initiative behind all of this: as I’ve become more dependent on connected devices and I’m using my fridge or my car to have these types of transactions, I don’t want all of these providers basically knowing who I am and all of my personal data. CULedger is a Sovrin steward, meaning we sit on their governance committee. We are not only a participant with Sovrin, but we’re also a driver in terms of their governance.
If you look at W3C, the World Wide Web Consortium, that’s a global governing body. Sovrin is a global governing body. The other participants are large companies like IBM, Microsoft, and MasterCard.
DB: The best summary I would make of the Sovrin Foundation is that it is an entity that establishes neutral standards. They’re not trying to monetize and productize anything. They’re just saying, “Hey, we can all agree we’re going to give this away for free and then other players can go monetize it. But we all agree to a certain format or standards.”
JA: So why would a global organization like the Worldwide Web Consortium or Sovrin Foundation really care about credit union participation? It drives back to inclusion and the recognition that there’s two billion people sitting on the sidelines but don’t have access to financial services.
At the end of the day, it’s not going to be Chase or Citibank or Santander that wants to actually embrace that consumer, it would be organizations like credit union cooperatives.
I keep evangelizing the term D.A.R.Q. There are four prevailing technologies that will define the next decade. Digital ledger is one, very relevant to us. A.I. is number two. Three is for reality, virtual or autonomous, and the fourth for quantum computing. All of those are coming very quickly at us and they all fit together kind of as a Rubik’s Cube. It’s all about digital. We have a piece of the digital puzzle.
DB: Any advice for credit union folks who are not technology people? How involved should they be in following all these tech updates?
JA: That’s a great question. I’d say keep aware of the evolution of digital and how it’s impacting our lives and changing member needs and wants. I now want to be able to purchase from my fridge, I’m connected with my car. We’re going to need to serve those digital needs as our members change, especially as we’re trying to attract new segments.
You have all my data. You know me. You have the intelligence around A.I. and other tools. You should figure out a way to bring time back in your member’s life. They shouldn’t have to ask you for that.
Doug, you’ve heard my example of Chick-Fil-A, but I still continue to evangelize that. The fact that I can use the Chick-Fil-A app, and I get to pull into a special parking lot and I get to beat everybody else waiting in line. It’s an emotional reaction for me and it’s a new definition of loyalty. You know, it’s not about the 10% discount off the chicken sandwich. It was that I got 20 minutes back in my day. And that’s very meaningful given where we’re at and what we expect digital will do for us, you know?
DB: Agreed. And I will end with this: If credit unions are interested in this technology and CULedger, there are many, many ways they can get involved. From simple surveys to bigger pilot testing.
Thank you so much for your time, John.
JA: Well, thanks for the opportunity. And you guys are great partners. Every day is part of the journey.