There are many questions in the financial industry about the adoption of blockchain technology. A top query is focused on regulatory compliance concerns related to Know Your Customer (KYC), the process of verifying the identity of a consumer as well as any potential risks of illegal intentions toward the business relationship.
Creating A Standard KYC Process with Blockchain
Currently, there is a lack of standardization in the industry when it comes to addressing KYC requirements. Since there is no industry norm, verifying a person’s identity is often regarded as a disorganized, time-consuming process that causes friction with members or customers, particularly during the onboarding period. Yet, KYC is one of the most important regulations as bad actors become more creative in their hacking methods or stealing identities.
As blockchain technology becomes more accepted and adopted in the financial industry, credit unions can leverage this highly secure technology to create standard processes surrounding KYC. Even more revolutionary, blockchain can enable credit unions to utilize a shared network and rely on one another’s KYC verification when working with members.
A Shared Branching Evolution
KYC processes can become problematic when considering how consumers and financial institutions, and related workflows, interface with regulatory bodies, such as the National Credit Union Association among other auditing agencies.
One of the main challenges with KYC is that every credit union must adhere by the requirements, but organizations are not sharing the aggregated information. The data lives in silos. If a consumer is a member of two credit unions, for example, that member should not be required to provide the same personal identifiable information to both credit unions when applying for a mortgage at one credit union and car loan at the other. Rather, these credit unions, regardless of geographic location, should be on the same secure network. Members’ credentials should be trusted without the antiquated constraint to share redundant information and data.
Credit unions should view KYC as an opportunity to explore a next-level shared branching model. One of the problems with shared branching today, which at one time was considered a questionable concept, is that a participating member can’t be authenticated in a streamlined manner. But by combining SSI and some of the existing KYC processes on a decentralized network, a safe, secure shared financial services and shared branch branching model can be realized.