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OneAZ Credit Union explores the use of blockchain technology
“We are in an era of instant gratification, where we are not compared to other financial institutions, but rather to companies like Amazon, Apple, Google and Facebook,” says Sandeep Uthra, Chief Technology Officer at OneAZ.
Arizona’s OneAZ Credit Union will explore implementing blockchain technology developed by San Francisco-based distributed ledger technology company Metallicus.
The partnership between $3.4 billion-asset OneAZ and Metallicus was announced on June 11. Metallicus has partnered with several credit unions since introducing its Metal Blockchain Banking Innovation Program in January, “leveraging its relationships with former bank executives and members of the Federal Reserve,” Metallicus said in a statement emailed to American Banker.
Many credit unions have explored new technologies to meet consumer needs and, more importantly, small businesses. For years, financial institutions have explored the idea of using encrypted blockchains for services such as cross-border payments, accessible account opening, financial management and transaction processing.
In more recent years, financial institutions have shown greater confidence in the capabilities of distributed ledgers.
Sandeep Uthra, Executive Vice President and Chief Technology Officer of OneAZ and Advisory Board Member for Metal Blockchain, will work closely with Metallicus to ensure systems are technologically sound prior to integration.
Uthra said it is becoming increasingly necessary for credit unions to embrace “digital transformation” in financial services and “bring the overall banking ecosystem to their consumers in a secure manner.”
“We are in an era of instant gratification, where we are not compared to other financial institutions, but rather to companies like Amazon, Apple, Google and Facebook.”
Uthra could not comment on the licensing fees OneAZ paid to integrate Metallicus technology at this time, but added that the credit union will likely see the highest return on investment in a better member experience, which should lead to customer loyalty and cross-selling. .
In its current form, distributed ledger technology acts as a decentralized system where individual nodes host a shared, immutable database. Each node is accessed with an encrypted key, ensuring that the information cannot be manipulated. For credit unions, this can reduce technology and transfer costs, improve data security and act as a middleman in transactions, said Michael Katz, a fintech consultant at Mannay Financial Services Group.
Metallicus will work with OneAZ to develop a layer one protocol on its layer 0 blockchain, granting the credit union control of custom nodes.
However, as is the case with OneAZ, most credit unions with distributed ledger partnerships are still in the preparatory research phase for implementation. Rather than completely replace credit unions’ existing technologies, OneAZ plans to integrate these systems into its existing infrastructure, Uthra added.
Katz said OneAZ and other credit unions’ growing adoption of blockchain-backed technologies will exponentially improve consumer usability.
“There are many opportunities related to data auditability using zero-knowledge proof technology to maintain privacy when verifying data and financial data,” Katz said. “Integrating traditional institutions into the ecosystem accelerates the creation of more user-friendly and UX-friendly products.”
And while some blockchain technologies, such as cryptocurrencies, have faced regulatory crackdowns, Katz said distributed ledger technology in financial institutions can curb concerns about “transparency and immutability.”
Metallicus said it plans to include more than 30 institutions in its Metal blockchain program by the end of the year. Uthra said OneAZ wants to get ahead of this new technological change.
“Credit unions are making great strides to steer the banking technology landscape much faster than banks in many cases,” Uthra said. “Simplification and speed in meeting our members’ needs are key.”