There are many ongoing discussions on the capabilities of blockchain technology, e.g. how network security could be enhanced, and how the technology could help to build smart applications for the payment industry. I would like to also move KYC into the focus of the blockchain debate.
KYC & Seamless UX: a Paradoxon?
In the past years, AML regulation became stricter, not least because of the increasing number of terrorist attacks, often followed by a call for preventing the financing of terrorism. However, the challenge is that these tightened requirements have a negative side-effect on the e-commerce and fintech industry. These industries are making progress at a pace with which current KYC/AML schemes cannot keep up with, and critical for their success is a smooth and intuitive user experience.
Due to the wide scope of AML requirements, the on-boarding of customers has become an expensive and time consuming process. Customers often have a bad experience when trying to manoeuvre through the KYC/AML procedures, which has a negative impact on conversion rates.
Blockchain Technology – Saviour or Lab Theory?
The blockchain technology could be an answer to this, offering a cost efficient and convenient solution in contrast to the current complex and expansive KYC/AML procedures. It could even become a “game-changer”.
I am excited to start a discussion on the capabilities of blockchain technology with regard to KYC/AML and the current legal framework. I believe it is not only in the interest of banks, payment and e-money institutions, fintechs, etc., but also for governments and regulators, to develop and enhance these technologies to transfer and share KYC-data in a secure and transparent manner. The development of a virtual identity infrastructure based on the blockchain technology, and user-friendly applications using this infrastructure could be key factor to adapt the KYC/AML processes to the needs of the payment and fintech market. Ultimately, this will also help with the protection of personal data, by ensuring that sensitive data is only collected once, and with the full awareness and consent of the data subject.
What are your thoughts on this?
For a detailed insight on the topic and first ideas on how to create “an identity model”, see Dave Birch’s latest and very interesting blogs on “Putting identity on the blockchain. Part 1: Find a problem” (http://www.chyp.com/putting-identity-on-the-blockchain-part-1-find-a-problem/) and “Putting identity on the blockchain. Part 2: Create an identity model” (http://www.chyp.com/putting-identity-on-the-blockchain-part-2-create-an-identity-model/).