The Importance of Upgrading Process of KYC Verification - Blockchain

KYC verification is important, but the way it is happening currently is that customers end up filling up the same forms again and again for multiple entities – not only creating duplication, but also sharing sensitive personal information with several parties, therefore increasing risk of data breaches.

It also gives customers a poor experience. Customers need a system that allows them to stay in control of their personal documents, and not share them to vulnerable third-party locations.

Broken KYC Processes

KYC processes are essential to comply with fraud and anti-money laundering regulations. It allows institutions to verify the identity and intentions of the companies with whom they are conducting business. This is vital for minimalizing crime in both the financing aspects as well as other services. However, the number of service providers asking for KYC has created a mess of overlapping processes. Every time a customer wants to join a new service, they end up filling up KYC forms which ask for the same data as the previous ones. This is both inefficient and frustrating for the customer.

“The Equifax data breach in 2017, for example, exposed sensitive personal information belonging to 143 million Americans.”

Solutions Surfacing

There are many, however, who understand this and are looking to change the traditional approach. One solution is asking customers to verify their KYC once with a trusted organisation, and once approved, use this same seal of approval to other service providers.

The problem with this approach is most banks won’t accept other’s attestation for their own business and insurance reasons. This also doesn’t solve the issue that there are third parties involved who are saving this sensitive information. How much are companies willing to trust third-party providers? Reducing the number of parties involved seems like a solution. Some say that this personal information should belong to the individual themselves.

Here is where blockchain comes in - blockchain-powered platforms make it possible to create a secure, efficient KYC system that achieves this, while also keeping regulators satisfied and giving businesses a way to offer the same services without the costs and risks of storing personal data.

Blockchain for Personal Document Control

Technology like blockchain (and even zero-knowledge cryptography and biometrics) are powerful components in creating a secure system. A few companies, including ODeX, offer blockchain based KYC verification to store documents and keep them updated. The information provided to others in the network will be provided with a read-only version of the information for security and will need to be granted to read the information in the first place. It is to be used only as attestation. This is also known as a smart track, where digital identity is required to be able to unlock the verified KYC. Furthermore, there is a timestamp available to show when the KYC was accessed and by whom, which allows for transparency. This improves both customer service and reduces the need to get a third party for storage involved.

The future looks exciting!