Point of views

Know Your Customer and Blockchain, could this be the perfect marriage?

In this article I question the likely success of a ‘marriage’ between KYC and Blockchain.
To begin I assess the current state of play for KYC finding it a challenge for both business and customers due to contributing factors including:

  • Complicated regulatory framework made up of a varying country and region-specific measures which are increasing in volume year on year.
  • Poor customer experience for individuals and businesses engaged in KYC.
  • High regulatory oversight which creates a risk of financial and reputational damage from non-compliance.
  • Shortage of qualified and experienced human resources.
  • Disjointed approach to KYC technology systems across the sector.

The state of play for Blockchain is both simpler and more complex, whilst great hype surrounds the mainstream adoption of Blockchain there are many critical accelerators that need to happen for Blockchain to achieve mainstream adoption in less than the predicted 5-10 years.

Once the state of play is established I articulate the resultant business challenges for banks and financial intuition, these are:

  • Increased operating costs
  • High risk of reputational damage
  • Poor customer experience
  • Increased Technical Debt

Looking at potential models for a marriage of KYC and Blockchain I first outline a utopian view before focusing in on a more detailed and realistic model of a KYC platform underpinned by Blockchain, based on current industry and technology constraints and similar in principle to a Proof of Concept recently completed in Singapore.

To determine whether this KYC platform has the potential to transform KYC into a new fully digitalised and optimised state, a scenario of a standard banking task performed on the proposed KYC platform is used to determine whether the key tenets of digital transformation which are, new customer experiences, business models and value creation models, can be achieved.

In the conclusion, to answer the question ‘KYC and Blockchain, could this be the perfect marriage?’ the article refocuses on the identified business challenges and assesses whether the benefits achieved from the digitally transformed KYC state would solve the business challenges.

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