In this digital era, how often we see an executive from the bank visiting a customer's office or home to collect identity documents physically and verify the details as part of fulfilling regulatory demand - Know Your Customer (KYC).
The advent of technology nowadays has helped banks to collect identity data real-time and verify the received data connecting to central data repository. In spite of this maturity, financial institutions are still losing operational efficiency and margin towards KYC activities as customer identity is yet not fully digitized. They continue to look out for more effective solutions to achieve key customer experience goals such as reducing document handling touch points and there by save valuable time of customer, bring in transparency, protect confidentiality and secure sensitive personal identity documents supplied by the customer.
Blockchain technology, a distributed database providing speed and ease offers a high potential solution to simplify the identity management process in KYC use cases through digitization and achieve greater customer experience quotients. Blockchain computing architecture uses self-sovereign identity concept, a model where one's own identify is maintained by self, provides transparency on entities accessing the owned identity data. Using this model, the verification of a customer identity in real time is performed, which brings in substantial cost reduction by eliminating disparate systems and technologies in the enterprise architecture, secures data transaction paths by bringing together disjointed data pockets from different sources into a unified trusted immutable digital view, encrypted using strong cryptographic techniques. This architectural model effectively solves the KYC use case needs which every financial institution in today's digital world executes.
Fig. Simple representation of Identity management process model built on Blockchain architecture
A typical process model adopted by identity management platforms leveraging Blockchain architecture,where retrieval plus provision of customer (identity) data handled securely with bi-directional authentication is sketched above. To illustrate briefly, customer registers his/her identity information (Passport, Pan, Aaadhar, etc.) digitally in a Blockchain based KYC platform and submits the details to bank while opening a new account/seeking a new service with them. The bank taking the submitted inputs seeks the necessary identity documents (Passport, Pan, Aaadhar, etc.) digitally from the customer subscribed KYC utility/platform. Upon receiving the request from bank, the KYC platform acknowledges the request and undertakes customer's consent though OTP/email verification link towards sharing the digital identity view. The solution establishes transparency to the customer on identity data exchanged, protects sensitive identity data from intruders/hackers to ensure high level of data integrity and prevents misuse of identity data in any manner. More interestingly, this architecture also provides the flexibility to re-use the digital identify profile more than one time across different banks/institutions or any organizations a customer may interact with.
In spite of the promising capabilities discussed above, being a new technology change wave, the Blockchain solution has to yet over ground towards establishing ownership definitions for identity information handled, becoming a standardized solution for KYC use cases across geographies and under banked regions, where banking processes are yet to be completely established, financially viable and digitized. However, this technology promises a lot possessing the capability to completely digitize and automate KYC use cases. An exciting development in the current digital economy indeed.