How can Blockchain-Enabled KYC Solution Drive Secure Transactions

The distributed ledger technology of blockchain serves as an ideal solution for secure and trustworthy transactions. This automated platform streamlines the operations and enhances compliance procedures. Blockchain-enabled KYC solutions enable financial institutions, businesses, and individuals to address the inefficiencies of a traditional KYC process.

The traditional KYC process is time-consuming and costly. Blockchain-enabled KYC solution redefines the verification process, making it quick, transparent, and cost-efficient.

Blockchain KYC Solutions- Benefits and Barriers

Blockchain-based KYC platform delivers trust and security within the platform and enables user verification processes in a smooth manner. Blockchain in KYC space accounts for many benefits which can be specified as immutable, transparent, private, and a shared ledger which automates the mechanism.

However, blockchain-enabled KYC solution is still in a nascent stage and has various requirements for implementation.

• Viability of technology: For enabling a global KYC utility solution, a blockchain-based mechanism is required which is well-efficient and able to manage a high level of business complexities and logic that would be able to accommodate numerous nodes.
• Delivering return on investment: The cost to develop, execute, and migrate a system to a blockchain-enabled solution can be high.
• Regulatory framework: It is essential to be in line with the regulators and abide by the current regulatory reforms.
• Standardization of data model: Proper identification and verification of common data set results in greater efficiency.

Apart from these, there are also other barriers to blockchain-based KYC solutions that include governance concerns, a common central party to regulate the transactions, establishment of an overall data storage model. There are also other concerns regarding market-wide acceptability and accessibility of infrastructure.

However, Blockchain KYC solution plays a pivotal role in accelerating client on-boarding.

A potential model for blockchain-based KYC platform

Blockchain-enabled KYC solution can offer the following:

• Collection of entity data: When all the data whether government based, private, or public is made available on a single platform then all the hustle of an individual to verify this identity would be eliminated. A user need not provide his information on multiple sources as it is stored on a single authoritative source.
• Verification of entity data: The data or information is made self-reliable and verifiable through the mechanism of cryptography. It removes the need for forensic validation and the need to rely on any third party for passing the information.
• Screening: Initially a need maybe there to have an offline ID to verify and identify the exact user. A previous unique ID or a new ID may be created to eliminate the risk of any false identity.
• Monitoring: Single data storage enables the banks and financial institutions to receive regular automatic updates and reduce the chances of exposure to risk.
• Reporting: All the records are efficiently maintained on an immutable network of KYC profile which requires proper permission and access to edit and view the transactions.

Progressing towards blockchain-enabled solutions

There are two main approaches that are being considered for blockchain-enabled KYC solution and that are mentioned as below:

• Utility Concept

This model is an intermediary step for blockchain-enabled solutions as it addresses many considerations such as centralization, digitization of records, and access to trusted data with the standardization policy. It facilitates higher flexibility in the model and provides a blueprint that would accelerate KYC adoption in the market.

• Blockchain-enabled document exchange pilots

Another model to get started with the blockchain KYC platform is by serving the banks with the pilot KYC program. This platform secures KYC documents and distributes them to multiple counterparties from a central interface after the authorization of an individual.

Future Perspective

The integration of decentralized ledger technology with KYC automates the verification process and provides a safe and secure platform to enhance the experience of clients.

There is a huge need to harmonize the overall requirements with multiple financial institutions and their regulators, and efforts are being taken to solve the fundamental problems. Therefore if you are considering addressing the KYC problem and building trust in the market, associate with a blockchain-enabled KYC solution development company.

Schedule a call with our experts and learn how you can go ahead with the implementation of blockchain-enabled KYC solution.