NEW YORK—A new report indicates that blockchain can make the process of onboarding businesses by banks and credit unions simpler.
Global accounting firm Deloitte announced that it has developed a new KYC (Know Your Customer)-as-a-service solution using blockchain technology that will facilitate the customer onboarding process for financial institutions, Nasdaq reported.
The proof of concept has been developed by the team headed up by Director and Blockchain Leader Thibault Chollet in Deloitte's Luxembourg branch. The name of the new solution is KYCstart (pronounced "kickstart").
“KYCstart creates digital identities for new customers that can then be used across different platforms and institutions, thereby making the customer onboarding process much more efficient while also reducing costs,” Nasdaq explained.
Currently, when a new customer is being onboarded by a financial institution, the process involves an employee of the compliance department electronically filling out Know Your Customer forms, which include information such as place of incorporation, ownership structure, whether they are regulated or not, whether they have any legal proceedings against them, and what type of business will be conducted with them, noted Nasdaq.
“To gather this information, compliance officers will regularly need to reach out to the potential customer via email and phone as well as scroll through the regulator's database to find any recorded wrongdoings and confirm the regulatory status of the customer,” Nasdaq explained.
Deloitte's new proposed model of completing the onboarding process, however, involves regulated KYC added-value service providers, which are authorized to perform KYC checks for customers who would like to be onboarded by financial institutions, such as banks, insurance companies and investment management firms, the news source said.
Customers and clients could then control who their company information is being shared with and would be able to keep track of the authorizations using blockchain-based smart contracts.
"With this proof of concept and related ecosystem, we demonstrate the benefits of using blockchain [technology] and smart contract[s] to considerably reduce the costs of one of the most important burdens of our institutional clients: KYC and customer onboarding," Chollet told Nasdaq.