Credit Rating Firm Backs $8 Million Fundraise for Crypto Alternative

A startup looking to build a credit scoring protocol on top of the recently-launched Ontology blockchain has raised $8 million in seed funding.

POINTS, founded in 2017, said it drew funding from a mix of traditional venture capitalists including Danhua Capital and Ceyuan Ventures, a backer of OKCoin. Other participants in the seed round include the Ontology Foundation as well as Zhong Cheng Xin Credit Technology, China's first nationwide credit rating agency.

The new capital will be used to expand the company's engineering team in an effort to speed up its development of blockchain-based know-your-customer (KYC) and credit scoring applications. The idea is to build its protocol on top of a decentralized network and empower apps that can eliminate repetitive processes around identity.

Sarah Zhang, the founder and chief executive of POINTS, told CoinDesk:

"Currently, whether it's for banking or registering at a crypto exchange, users need to repetitively upload their profiles. Meanwhile, institutions also need to repetitively conduct the KYC process manually, which is time-consuming and leads to a huge data storage on their ends."

But instead of asking financial firms to be validators, who update and share a distributed ledger that contains user ID data, POINT's protocol incorporates another layer of a more centralized database to take up the role as a validator.

Key partnerships

To that end, Zhang said the company partnered with an IT firm called Teleinfo, which is is a wholly-owned subsidiary of the China Academy of Information and Communications Technology. The Academy is directly administrated by the Ministry of Industrial and Information Technology.

The partnership effectively gives POINTS the access to a database of 1 billion profiles of Chinese customers.

Zhang further explained:

"When users voluntarily upload their information through the blockchain application, the database will validate that information ... and then timestamp and store validation results into the blockchain. Therefore, participating nodes such as banks will only see the validated results (for KYC) instead of the exact user details."

In a similar way, POINTS is also charting the development of another blockchain-based application on top of its protocol for credit scoring in a move aimed to "serve the unbanked."

By partnering with its investor Zhong Cheng Xin, Zhang said the company also gains access to 500 million existing credit profiles provided by the rating agency.

With banks running as nodes on the blockchain, the database can extract credit data of a user from different institutions as well as from user's own submission, in order to compute a credit score, which is subsequently stored on the blockchain.

"The end goal is to give a user a credit profile as complete as possible so that they can access to financial products that otherwise may not be available," she added.

And to incentivize user data submission, Zhang said the system will issue its own tokens but has not yet decided exact utility scenarios or whether the token can be traded.

Zhang image courtesy to POINTS