Decentralized KYC
KYC is a process by which institutions obtain information about the identity and address of the purchasers. It’s a regulator governed process of performing due diligence for verifying the identity of clients. This process helps to make sure that an institution's services aren’t misused. The institutions are responsible for completing the KYC procedure while opening accounts.They are required to periodically update their customers’ KYC details. KYC may be a manual, time-consuming, and redundant across institutions.
The need for KYC
Customer Admittance
Anonymous accounts are restricted entry into the banking system. Preliminary pieces of information such as names, birth dates, addresses, contact numbers are collected.
Monitoring of banking activity:
Spurious and doubtful activity in any account can be zeroed in by the bank after understanding its customer base using KYC.
Risk management:
Now that bank has all the preliminary information and activity patter, it can assess the risk and the likelihood of the customer being involved in illegal transactions
Challenges faced in KYC
Disparity in specifications
• Every bank has their own specifications they adhere to
• Due to this lack of standardization, complying to each request in a customized way is time consuming.
impacts on customer relationships
• It becomes understandably irksome for a customer to provide the same information to different banking entities, sometimes in the same jurisdiction.
• Banks may even have more follow ups periodically for KYC.
Escalating Costs
Onboarding time for a new client is now a minimum of 26 days.
• Thomson Reuters estimated via a survey, that due to hassle of KYC, onboarding costs increased by 18% and they foretell a further rise of 14%.
Decentralized KYC as a solution
The blockchain architecture and the DLT allow us to collect information from various service providers into one cryptographically secure and unchanging database that does not need a third party to verify the authenticity of the knowledge. It makes it possible to form a system where the user will only need to undergo the KYC procedure once to verify his/her identity.
Process
For KYC procedure a user should be verified on the IDentriX wallet app.
The bank sends a verification request and confirms the passage of KYC if everything is normal.
The user is verified if everything is correct and thr transaction log goes into the DLT for future reference.
When a user wants to use the services of another bank, this second bank accesses the system and thus confirms the user’s identity.
The access to user data will be based solely on its consent.
Benefits
Data Quality
Lower turnaround time
Eliminating manual effort
Reductions in costs
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