KYC (Know Your Customer) became a buzzword, after the 2008 financial crisis. The term became so popular that it is now part of common parlance. So, it predates some history and it did evolve out of complex social, financial and economic causes. In the process, KYC also led to a lot of difficulties in banking for both banks as well as customers.

Blockchain Solutions to KYC Problems

In the meantime, the current crop of technologies did not allow for a complete and effective manifestation of KYC. They didn’t encompass all the intricacies of human behavior nor did they simplify storage methods to encompass them all. This is where blockchain, as a new technology, comes in. It can solve many of today’s KYC problems to help banks concentrate more on their core businesses. Let’s explore how blockchain as a technology can solve KYC problems at the global level:

Onboarding Issues and Solutions

Onboarding has been a costly exercise for banks. It is an immensely time-consuming task as well. This is due to improper registry technologies and services. When a customer wants to open an account, banks send the customer’s personal information to the registries. They store the information in their databases and the customer becomes “KYC Compliant”.

As simple as this might sound, it led to many inconsistencies due to different regulations across different applications. This, in turn, led to repeated and redundant KYC submissions and checks, which cost enormous amounts of time and money. So, blockchain, as a sort of distributed ledger technology, publishes the information across all the nodes, once verified. The data gets decentralized in place of the current centralized registry services and technology. Thus, a KYC once performed can be accessed by multiple nodes with unique permission from the customer. This makes the process much easier, simpler, less time consuming and cost-effective. We at RecordsKeeper are solving this problem by allowing the users to put their personal & official records in the Blockchain locker & use them to get their KYC done. Sign up for the RecordsKeeper to know how it work.

Secure Storage of Data

Decentralized data is far safer than centralized databases. The latter is far more prone to attack, as chances of losing all the information to hackers are quite high. Decentralized data, published across millions of nodes, is highly immutable and less prone to hacking attacks. Since all nodes have to agree on the transaction, the data remains highly immutable. The data is also completely encrypted and anonymous, unless shared peer-to-peer with the bank or the agency by the same person.

Lower Overhead and Operational Costs

From soloed databases to redundant and repetitive checks, centralized database technologies run up costs, time and effort to huge levels. KYC processes are also usually counter-productive or less productive. So, this can lead to a lot of friction preventing banks from providing seamless services.

Thence, from the $6,000 to $25,000 spent on onboarding and $80,000 per petabyte of data, blockchain databases will cost less than just $5. So, blockchain is a technology that will solve many of today’s KYC problems and reduce cost, time and effort to make KYC processes easy and efficient.