General Motors Financial Company (GM Financial), the financial services arm of the largest American automotive manufacturer, is exploring the use of blockchain technology to improve data management standards and help address critical auto finance industry issues like identity verification and synthetic identity fraud.
GM Financial has joined Spring Labs’ Spring Founding Industry Partners (SFIP) program which focuses on researching, developing and implementing the Spring Protocol prior to its public launch.
Sprincoin Inc., operating under Spring Labs, is the tech company building the Spring Protocol, a blockchain-based network that enables network participants to exchange information without sharing underlying source data. The initial use case for the Spring Protocol focuses on the exchange of identity, fraud, and risk information among financial institutions to enable a more efficient, transparent, and secure ecosystem for consumer financial data than the one that exists today.
The partnership with GM Financial is the second collaboration of the sort the startup has announced this year. In January, it announced that 16 marketplace lenders, including leaders SoFi, OnDeck and Avant, have joined its SFIP program to explore the use of its technology to combat fraud and enhance their ID verification capabilities.
As part of the partnership, GM Financial will work with Spring Labs as the startup develops its blockchain products, the first of which are expected to launch in the first half of the year.
“We came together with the view that we could develop a series of use cases that would match some of [GM Financial’s] core business priorities as a lender, or potentially [those of] GM as a parent company,” Adam Jiwan, CEO of Spring Labs, told Forbes.
Mike Kanarios, chief strategy officer of GM Financial, believes Spring Labs’ blockchain protocol could help GM Financial tackle synthetic identity theft, a type of fraud in which a criminal combines real – usually stolen – and fake information to create a new identity used to open fraudulent accounts and make fraudulent purchases.
Synthetic identity fraud and similar deceptions are costing the company millions of dollars per year in losses of inventory and prevention costs, Kanarios said. A blockchain-based identity verification program has the potential to provide a “better, faster and cheaper system” than current processes, he said.
“As the captive finance arm for General Motors (GM) and one of the world’s largest auto finance providers, we are continually innovating and evolving our fraud prevention and detection capabilities to better serve and protect our customers and dealers,” Kanarios said in a statement on Monday.
“Today’s announcement underscores our commitment and investment to advance these efforts.”
GM’s collaboration with Spring Labs isn’t the firm’s first foray into blockchain. In late 2017, it joined Hyperledger, an open source collaborative effort to advance cross-industry blockchain technologies. GM is also a member of the Mobility Open Blockchain Initiative (MOBI), a group dedicated to exploring the potential of blockchain in the automotive and mobility space launched in May 2018. Other members of MOBI include BMW, Groupe Renault, Ford, Accenture, the World Economic Forum, Bosch and IBM.
Last year, GM filed a patent application in the US for a “method and system using a blockchain database for data exchange between vehicles and entities.”
Blockchain use is still in its infancy in the automotive industry but industry participants are convinced the technology will be a disruptive force. A study by IBM released in December 2018 found that 62% of auto executives believe blockchain will disrupt the sector by 2021.
Among the potential benefits of blockchain in the sector, the report cites operational efficiencies, improved transparency of information and transaction traceability. In particular, it identifies finance, supply chain and mobility services as the areas that would benefit the most from blockchain.