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Role of blockchain in enterprise kyc
1. Role of Blockchain in Enterprise KYC
KYC checks are now entering the mainstream but not narrowed to Banks
and Financial Institutions. Commercial organizations of diverse industries
such as manufacturing, retail and services need to implement KYC checks
as a screening process. Increasing number of money laundering, financing
of terrorism and criminal behaviors, Governments around the world
proposed legislation to maintain an efficient KYC process.
While there have been regulatory requirements for banks and insurance
companies to ‘know’ their customers, there is generally no legal obligation
for non-financial organizations to conduct integrity screening. Though
non-financial organizations may not always be legally required to screen
customers, they suffered reputational damage.
2. Let’s Understand The Importance of KYC in Enterprises/Commercial
Organizations
Uber: Uber Technologies Inc. is a global ride-sharing service provider. Uber
has been prominent in the sharing economy, but has also been the subject
of protests and legal actions since Uber’s drivers were accused of sexually
assaulting passengers.
The following incidents raised questions company’s screening efforts on
drivers. In California, proposed legislation titled Assembly Bill 24 would
require ride-share drivers to undertake fingerprint checks and further
screening before acquiring driver permits. While Uber has defended the
safety measures it currently has in place, additional incidents by drivers
against customers (for example in India) have added to the pressures the
company faces.
Home Advisor: This Colorado-based digital marketplace claims to connect
homeowners with pre-screened local service professionals for complete
home assistance. However, in a recent event, one of the site’s user claimed
website’s screening might be inadequate and that it possibly list unlicensed
contractors. She also claimed she was about to hire a professional but in
reality, the contractor was unlicensed and had a criminal record.
3. Airlines: Airlines have always been easy targets of terrorist and terrorist
activities. However, airlines are often relying on airport institutions and
immigration departments to do the screening for them. On the other hand,
Department of Homeland Security released a report that concludes the
weaknesses in the (Transportation Security Administration in the United
States) TSA’s screening processes for airport workers, stating that the TSA
allowed 73 individuals with possible links to terrorism or ‘terrorism-related’
information to access high-security areas within airports.
The following report questioned the screening procedure of TSA and raised
concern on the institution’s ability to adequately screen airline customers
and suggest airlines to conduct their screening.
These modern-day examples demonstrate the reputational damage that
can be caused by customers or the third parties that an organization
engaged to provide goods or services to customers, and highlights the
need to screen these parties before further interaction.
Blockchain in KYC
Despite the significance of these processes, KYC at financial institutions is
an inefficient, time-consuming and labor-intensive manual processes.
Moreover, it’s been prone to duplication of effort as well as a risk of error.
Information gathering and processing are the two factors which took over
4. 80 percent of the effort for KYC while only 20 percent effort requires in
assessing and monitoring information for critical insights. This leads to a
tiresome process, repetitive questioning and long processing times that
causes frustrating experience for consumers.
As the convergence of operational, regulatory, cost and customer
experience challenges, it is clear that a change in KYC is needed.
Technology may be an answer – but is Blockchain Application
Development Services the right solution?
Benefits of a blockchain KYC utility
Blockchain ensures a streamlined way for financial institutions to gain
swift and secure access to clean and up-to-date customer data due to its
immutability and transparency features. This boost of greater operational
efficiency increased trust between institutions and reduction of
labor-intensive data gathering, processing time and costs.
The evolving technology provides a single source of customer data for
better understanding and visibility of customer activity across institutions.
With blockchain-enabled KYC utility, a customer also experiences reduced
onboarding wait times and escape such repetitive questioning for
information validation.
5. Corporate industries which are struggling with reputational damage
understand the importance of blockchain-enabled KYC utility in regaining
the public trust. Together with banks and financial service providers,
commercial organizations also find blockchain development a
cost-efficient way to conduct more detailed customer screening (KYC
process).
A Blockchain-Enabled KYC shared ledger platform benefits all stakeholders
by:
Enabling Greater Transparency: Private and immutable ledger enables
sharing of KYC information across banks in a transparent and secure
manner
Reducing Operational Inefficiencies: Reduces customer onboarding time
and enhances the customer experience
Enabling Up-To-Date Customer Data: A single source for customer data
reduces the potential for fraud by inhibiting data ambiguity
Organizations That Will Be Benefited With Blockchain Supported KYC
Different organization realizes the importance of Blockchain-enabled KYC
utility to validate the integrity of their customers. Here are some of the
6. use-cases of commercial organizations that will significantly benefit from
the screening process.
Healthcare: Healthcare companies which are active in the trading of drugs
to the healthcare institutions and hospitals can conveniently assess the
hospital’s knowledge, and service. This help the traders to be satisfied that
the hospitals will use the drugs correctly and keep them according to set
industry standards. Blockchain-enabled KYC screening reduces the
chances of illegal trading of drugs, highly toxic and dangerous products.
Lodging and Travel: In the past few years, lodging and traveling service
have been used to execute several terror/criminal activities around the
world. As the legislation become strick in every country to ensure the safety
of citizens and tourists, accommodation providers are required to validate
the integrity of customers. Here, blockchain technology enables service
providers to screen potential renters while allowing them houses or rooms
on rent to lower the risk of them using the location for an illegal purpose.
Outsourcing Vendors: Outsourcing technology solutions for mobile and
web-based (i.e., SaaS) needs is a trend of today. However, the service can
be misused as it is tough for IT companies to validate the identity of the
client which sits offshore. With the help of Custom Blockchain Technology
Development Services, outsourcing vendors would be able to check a
client’s past criminal history to prevent a crime that technology could
7. facilitate. Fraud in payment transactions will reduce since KYC screening
also help vendors ensure that persons does or doesn’t impose of any
economic or other sanctions by the government.
E-commerce: E-commerce industry has been on an upward growth
trajectory, so as the increasing fraud rates with buyers. The online
marketplace is used by third-party sellers to sell products/services. Here a
background check on sellers is required to make sure no illegally-acquired,
counterfeit, grey-market or stolen material is sold over the website/mobile
that is inappropriate for specific audiences. It is the online marketplaces
which have to deal with reputational damage due to any fraudulent
activities. Blockchain solution will help the industry significantly.
Transportation Network Industry: Car and another type of vehicle renting
services have been on the surge from past many years. Unfortunately, the
service misused to execute several illegal and criminal activities. KYC
screening based on blockchain network help the service provider to
validate the authenticity of a customer’s driving credentials and know
about the driver whether he/she imposed of any illegal activity, suffering
from any mental illness or has had restrictions on their activity.
Mileage Program Runners: Airlines, car-rental and alike companies today
facilitates customers to register for a mileage program. These services
invite security violations if misused by the individual subjected to sanctions
8. by governments, banned from travel on no-fly lists, etc. Blockchain-enabled
KYC utility airlines and other service providers to cope with the security
challenges which has several bottlenecks.
Is A Blockchain KYC Utility The Answer?
As we mentioned, the end-to-end KYC verification process involves a
significant portion of time, cost and effort, leaving fewer resources to
monitor customer behavior for anomalies. It is time to flip this ratio with
evolving technologies. A clean and up-to-date customer data reduce
screening and verification time, freeing up resources to focus on more
complex KYC challenges.
Since the technology reduces obstacles and inconvenience of acquiring
KYC information, companies of all domain become better able to advance
their commercial business agendas. Not only it enables improvement in
efficiency, but also corresponding reduced cost. Simultaneously, the
customer experience will improve, and overall customer satisfaction will
increase.
Nonetheless, a blockchain utility does not solve all the KYC issues but
demonstrates strong potential to help Banks, financial institution and other
commercial organizations to lower the burden of time and cost associated
9. with KYC processes, while providing greater visibility to regulators and a
better experience for customers.
What’s your pick from the information? Will, does blockchain be a true help
for enterprise KYC? We would love to hear from you!
