Zug, Switzerland – April 13, 2023 – Merit Protocol, a platform connecting employers with financial service companies to enable employees to get better access to financial services, announced the integration of Dock’s Verifiable Credential technology.
Using Verifiable Credentials, Merit Protocol will enable employers to issue fraud-proof and instantly verifiable employment history and income data. It is anticipated that this will reduce the cost of the application process by up to 10X, all while preserving employees' privacy.
Problem: Hard for People to Access Small Loans
Merit was built with the mission to make it easier for employees to access good financial products, such as personal loans, based on their work record without compromising their data privacy and security. Right now, it’s hard for tens of millions of people around the world to complete the required documentation to regularly take out personal loans every year to pay for their day-to-day needs, particularly with rising interest rates and higher living costs.
A major barrier for financial service institutions to provide small loans is not having enough access to quality data on potential borrowers to make a decision on whether or not to provide the loan. It could cost $30 to $60 USD just to get the data from centralized institutions like TransUnion and Equifax and only 40% of signed applications actually lead to the loan getting funded. There are also costs to securing and maintaining the database of personal data.
So for these institutions, it’s too expensive and high risk to offer small loans up to a few hundred dollars when the costs of getting relevant customer data are so high. In the US, the average small dollar loan is a few hundred dollars, and consumers typically apply for these around eight times a year. These small loans have extremely high fees and interest rates, resulting in borrowers owing two to three times the loan amount. This practice has resulted in a payday loan industry that often takes advantage of these borrowers.
Many loan applicants also go through a terrible experience filling out long applications and often filling out the same information repeatedly. This adds more stress to an already difficult situation of living paycheck to paycheck.
How Dock's Technology Contributes to Merit Protocol’s Employment-Based Lending Solution
Companies need quality data, which many employers already have, to decide whether to provide a loan to a customer. Merit Protocol acts as a bridge between financial institutions and companies and their employees, as they provide access to quality employment data in a way that preserves employee privacy by using Verifiable Credentials and Zero-Knowledge Proof (ZKP) Technology. Merit Protocol has integrated Dock’s Verifiable Credential and ZKP technology into their platform and is also preparing to launch a digital identity wallet app using Dock’s white label wallet.
A Verifiable Credential is a fraud-proof and instantly verifiable digital document that proves something about yourself, like your identity or a qualification you have earned, in a secure and trustworthy way. Verifiable Credentials are usually stored in people’s digital identity wallet apps rather than a centralized storage location and can be used to present only the minimal amount of information needed to do a transaction in order to preserve customer privacy.
A Zero-Knowledge Proof (ZKP) enables you to prove something without revealing the details that support the proof. For example, with ZKP technology, employees can prove that they meet the minimum salary requirement to qualify for a small loan without revealing the actual salary.
Alex Lyashok, Co-Founder and CEO of Merit Protocol commented on why he chose Dock among many other providers. “We look for alignment on the mission first and foremost. We want to work with an organization that is also making it their business to enable consumers to take control of their data and to reduce reliance on centralized institutions or institutions that potentially engage in predatory behavior. We also looked for a partner that creates a secure, reliable solution that can be made compliant with GDPR and other consumer protection laws. Dock emerged as the one we are aligned with.”
Dock’s technology solutions will help Merit Protocol to:
- Reduce the cost of loan evaluations up to 10x
- Infuse financial service products with privacy-preserving technology so the companies can make better products
- Provide a much better employee experience to access small loans and give them full control of their data
- Enable financial institutions to access quality employee data and reduce fraud
- Speed up the application process as data can be verified instantly
"We’re delighted to be partnering with Merit Protocol to bring Verifiable Credential technology to the employment-based lending sector so that employees, employers, and lenders can engage together in a more secure environment. This partnership will improve access to vital financial services products at scale, maintain data integrity for organizations, and give employees total control over their data,” said Nick Lambert, CEO at Dock.
Using Verifiable Credentials and Zero-Knowledge Proofs reduces the cost of evaluating a loan significantly because it eliminates inefficient data verification processes and removes the cost of storing data because data is not stored in centralized locations.
About Merit Protocol
Merit is a privacy software company that helps organizations make better products based on employment record data.
About Dock Labs
Dock is a Verifiable Credentials company that provides Dock Certs, a user-friendly, no-code platform, and developer solutions that enable organizations to issue, manage and verify fraud-proof credentials efficiently and securely. Dock enables organizations and individuals to create and share verified data.