Process Innovation and Unification of KYC Document Management System with Blockchain in Banking
Priya Jindal, Jasmine Kaur, Kiran Sood · 2022
Banks through the process of customer due diligence (CDD) collate pertinent information about the potential customer or on-boarding a user as a client before opening any accounts or authorizing them to start their journey as a customer in any financial institution. Such CDD processes must follow “Know Your Customer” (KYC) regulations and guidelines. The “Know Your Customer” (KYC) process is a vital banking tool to gather, verify, screen, monitor, and store customer information to combat illegal transactions. The current process of KYC followed by the banking institutions has some bottlenecks or issues like KYC requests can delay transactions and it takes a longer time to complete the whole process up to a satisfactory level. When the customer desires to take benefit of the same facility from diverse banks this becomes a redundant process and increases operational costs because the same set of documents is produced in front of the bank to verify again the customer's identity and entails substantial duplication of efforts between banking firms. Now the banks are more customers centric and accept changes in their business model. The chapter aims to uncover the potential of blockchain technology that can reinvent and revamp the KYC verification process in the banking sector. The chapter suggests that the herculean task of the banks can be lessened by unifying the procedure of KYC through blockchain application by using the Distributed Ledger Technology (DLT). DLT provides an ideal solution where KYC compliance is validated only once, and when an alike customer wishes to approach different banks then these particular banks can acquire the customer's particulars without conducting the whole operations once more. The DLT would not only eliminate the replications of efforts to implement the process of KYC in intra-bank customer onboarding but would also enable the distribution of clients’ details in encrypted form to maintain the privacy and security of data in all banks in real-time. The process innovation and unification of the KYC would prove supportive at the time of merging banks in the Indian banking system.