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Written by Cyndie Martini
on January 21, 2020

Credit Unions are taking the lead on blockchain-based authentication. Mainly in response to call center fraud, credit unions are now turning to distributed ledger technology and biometrics as an improved method to authenticate customers. 

It's no secret that call centers are prone to fraud. A 2016 study by Aite Group found that 61% of fraudulent transactions can be traced back to call centers. Hackers find it easier to bypass two-factor authentication and challenge questions by going through call centers.

“From a fraudster standpoint, it is the most vulnerable channel that can be penetrated,” Julie Esser, CULedger’s chief experience officer, said to Credit Union Journal. “They take advantage of the challenge-based security questions, which the answers to are unfortunately all over the web.”

Unify Credit Union in Torrance, Calif., is implementing a blockchain authentication scheme created by CULedger. Unify Credit is calling it MyCUID. It works by authenticating customers biometrically on their mobile phones. This may mean facial or voice recognition or a fingerprint scan. Once the customer calls the financial institution, a notification is sent to the customer's phone to authenticate. Authentication is token-based so that no critical identifying information is passed back and forth.

Two other credit unions, Desert Financial Credit Union and TruWest Credit Union are also testing MyCUID in their call centers. TruWest has rebranded the authentication service as MemberPass. All of these credit unions are first testing the service with employees in their call centers before allowing customers to use the service.

The blockchain authentication scheme isn't purely blockchain-based. Instead, it uses components of blockchain. Otherwise, the service would prove inefficient because of latency and proof-of-work consensus.

In addition to better authentication, the blockchain-based solution has another user benefit — it doesn't require users to know a username and password combination. 

CULedger cited that for every dollar of fraud, credit unions pay  $2.92. If only a small number of customers adopt MyCUID, it will still result in reduced costs for credit unions.

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