Blockchain – still very desirable for banks and FIs, but not fully trusted yet – has already made its way to use cases and pilots in the financial services. Possibilities are endless, some say, but where is the next big success for blockchain?
It’s KYC or Know Your Customer, according to the panelists at Blockchain for Wall Street conference, which took place this morning.
The KYC process is costly, inefficient, and mandatory. It requires financial institutions to acquire customers’ personal information, such as name and address, as well as financial information, including bank statements or tax returns. All of that happens at the customer onboarding phase, and can be frustrating or offputting. Every bank is also required to perform its own KYC, even if another bank has just completed the same task on the same customer.
This creates a lot of duplicate effort, and use of blockchain has the potential to reduce much of the headache, according to Sandeep Kumar, managing director of Synechron. “There is a lot of conversation in the space of sharing the KYC, and the role that blockchain can play, so that the customer does KYC only once,” he said.
The consulting and technology service provider Synechron has recently launched a Blockchain Accelerator Program to offer Blockchain-as-a-Service (BaaS) for the players in the industry. Speaking broadly about blockchain, Kumar mentioned that banks and larger FIs face difficulties connecting with pilots in the space.
Emmanuel Aidoo, director of blockchain and cryptocurrency strategy at Credit Suisse, agreed on the promise of blockchain in the KYC space, noting that the effort is in early stage. “Must we have duplicate efforts of doing KYC? Consortium is certainly a better way to approach this,” Aidoo said. “But for most of the banks you won’t even see the word ‘blockchain’ in their project files, so it’s still very early-stage.”
There is some progress in the KYC space, however: over 2,000 financial institutions globally (325 from the Americas) have signed up for SWIFT’s centralized KYC registry as of January. So what can blockchain add to this? Here is Deloitte’s take from a recent whitepaper:
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The use of distributed ledger system, such as a blockchain, however, could unlock advantages by automating processes and thus reducing compliance errors. A blockchain-based registry would not only remove the duplication of effort in carrying out KYC checks, but the ledger would also enable encrypted updates to client details to be distributed to all banks in near real-time. In addition, the ledger would provide a historical record of all documents shared and compliance activities undertaken for each client.