The advent of blockchain with the promise of new and exciting database technology has brought numerous traditional systems due for an overhaul. Having already demonstrated its potential in the market with a new set of currency and regulations, the ability of blockchain-based applications to link smart contracts has significantly improved the efficiency of existing traditional systems to identify a consumer in the marketplace. For quite a while now, know your customer (KYC) process has been facing a longstanding challenge of establishing robust authentication of other identification sources. Flaws in KYC solution security has induced replicated instances of money laundering and financial frauds. However, the major issue lies with the lack of transparency regarding the use of customer data that leads to inefficiencies in collating data between parallel systems since organizations are penalized heavily for failing to comply with KYC regulations. In today’s environment of volatility, ambiguity, uncertainty, and complexity, blockchain has become the pinnacle of technology solution for the financial sector seeking help with identity problems and KYC compliance. Based on a decentralized computing architecture, blockchain enables accumulation of data from multiple authoritative service providers into a single immutable, validated database that is cryptographically secured.
With this architecture as the backbone, KYC verification has no obstacles in unleashing its true potential to be efficient, safer, faster and easier. The inbuilt immutability of blockchain database stems from creating and sharing a distributed ledger with all users across the network to store ID details of individuals, making the data extremely reliable. The accessibility of data within this architecture is solely based on user consent via a One Time Password (OTP), and a private key allocated to the data. Even though the data can be accessed by a third party like banks or card providers, the ownership of the data remains with the end user. Due to this reliability, the financial services sector can verify their users or customers quickly without the need for further ID checks. The KYC policy is standardized, and with the increasing amount of data being collected, blockchain streamlines the procedure of controlling operational processes by routing and coding the workflow into smart contracts. In doing so, the KYC solutions ensure a secure and efficient decentralized mechanism to collect, store, validate, refresh and share KYC information for the customers.
Blockchain-based KYC solutions are bound to play a significant role in cutting down costs regarding identity verification for a more secure, organized and unified model of data handling in the near future.
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