Exploring the potential of blockchain for KYC

Abstract

Today, financial services firms face more new and impending regulation than ever before. One area where firms are especially struggling is implementing compliant and effective Know Your Customer (KYC) procedures. Banks experience high onboarding costs of corporates, lack of standardisation across the industry, and a lot of manual effort is required for KYC. In addition, banks’ corporate customers have a far-from optimal user experience due to the long onboarding time and repetitive onboardings at multiple banks. Blockchain can address most of the prominent issues and revolutionise how banks address KYC. The new blockchain-enabled KYC utility model entails a network of banks that shares a distributed ledger with corporate client profiles. It replaces the current centralised KYC utility model, enhances data transparency, facilitates the auto-execution of KYC and other checks, increases efficiencies and ensures an enhanced customer experience. Blockchain can provide a solid solution to a number of challenges that KYC faces, but blockchain in itself comes with a number of challenges that need to be solved before it can be used in production on a large scale. Regulations, privacy concerns and market adoption are the important challenges at the moment. To progress with a blockchain-enabled KYC solution, it is advised to carefully address these challenges, apply the right implementation strategy, cooperate with different players within the financial industry, find inspiration and lessons learned from KYC and blockchain start-ups, and balance the long-term blockchain vision with more immediate solutions to KYC challenges.