KYC Blockchain Technology: The Answer to an Inefficient KYC Process
ByLast Updated May 06, 2023
KYC processes serve as the foundation of a financial institution's anti-money laundering efforts. Discover how businesses are revolutionising the time-consuming and exhausting process. According to current estimates, global KYC spending will reach up to $1.2 billion in 2020.
With such a large sum being spent on improving KYC processes, it is natural to believe that the process will be unhackable and error-free. Despite the significance of the process, KYC continues to be inefficient. Clenched by time-consuming and labor-intensive tasks, the high scope of effort duplication, and the risk of error While the current KYC process is failing to serve its purpose for financial institutions, the tiresome, long, and repetitive process is making customers unhappy.
A ray of hope comes from the fact that several financial institutions and service providers are attempting to solve the problems by incorporating next-generation technologies such as cognitive technologies and AI.
In this article, we will look at Blockchain, a technology that we believe holds the key to eliminating inefficiencies and duplication in KYC processes.
To truly understand the changes that Blockchain can bring to the counterproductive KYC process, it is necessary to first understand the current system's flaws. The issues will assist us in understanding how
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Blockchain technology for KYC is quickly becoming a requirement.
Centralized KYC System:
Each bank or financial service provider has its own set of specifications with no standardisation. This frequently leads to users performing the KYC process with each bank and service provider they use. Furthermore, a tightly siloed system like this prevents FIs from tracking consumers' expenses on other platforms, resulting in each institution having its own set of incomplete data.
This data centralization in silos results in an inefficient KYC process. One that causes problems such as:
- Fraudulent data misidentification
- Customer's inability to be tracked
- Customers providing false information Delays in processing time
- As a result of these challenges, the previously mentioned spending figures and a consistent
- An increase in cases of money laundering
To remedy the situation, the KYC process is gradually being moved to Blockchain. Let's take a closer look at the process of using Blockchain for KYC verification and the benefits that the movement provides to the fintech industry.