TECHNOLOGY
ANALYSIS
KYC BLOCKCHAIN BLOCKCHAIN TECHNOLOGY IMPLICATIONS
The introduction of blockchain technology in the KYC process can amount to a 10% reduction in headcount
How can blockchain revolutionise the KYC process? JESSICA SMITH
Know Your Customer (KYC) is regarded as the backbone of a financial institution’s anti-money laundering efforts. Recently, industries have experienced a massive shift to digital transformation in the last ten years, and the change was more accelerated 60 percent of as companies started banks showed prioritising cost savings, interest in efficiency and security. One using their particular industry that funds to benefitted most from the drive digital digital shift is the financial adoption sector. According to a study technologies published in 2020 by Ernst like AI, and Young, 60 percent of blockchain, banks showed interest in analytics and using their funds to drive robo-advisors digital adoption technologies like AI, blockchain, analytics and robo-advisors. KYC is regarded as the backbone of a financial institution’s antimoney laundering efforts (AML). Hence it is commendable to see global spending on AML and KYC solutions reaching the $1.2 billion mark. The signifies how institutions are investing in rgtech, which is the management of regulatory processes within the financial industry with the help of technology. This is done so that regulations
50 | November 2021 | International Finance
become more efficient and accurate. The adoption of the emerging technologies for KYC processes has been increasingly spearheaded by regulators and governments. For example, Dubai’s Department of Economic Development and International Finance Centre announced the expansion of a KYC tool for financial institutions that is powered by blockchain technology and it will help process more than half of all KYC checks in the city. KYC is a regulatory requirement that underpins our current global economy, but many believe that its current processes are inefficient and outdated. It is imperative that financial institutions from all over the world must conduct time-consuming, costheavy checks in order to verify their customers’ identities. If not complied with existing regulations, not only will they face fines but they often have to navigate between many different regulatory borders, along with storing and protecting their huge amount of users’ data. But, no matter how much entities strive to keep up with digitisation, evolving processes do not happen all at once and change is not linear. And this is exactly what we are seeing in the KYC space. While organisations have taken steps to innovate and improve, KYC processes still remain lengthy and inefficient, primarily because of a lopsided focus on information gathering and processing
