KYC Optimization using Blockchain Smart Contract Technology

Abstract

In the present scenario, it is vital for any organization, especially the financial organizations, to understand customers and their financial dealings better. KYC is a process to verify identity and related details of corresponding customers. The current KYC mechanism has a severe concern in financial institutions as it requires separate ledger for the separate financial organizations. Every institution has its KYC process, which sometimes may include third-party, which may cause increased maintenance cost, time and redundancy. There is considerable wastage of costs in the form of opportunity cost, maintenance cost, customer verification cost and many more of around $27 million according to an economic survey. The current KYC process is very time-consuming, and it decreases the user experience. We have proposed an enhanced KYC system using blockchain technology to improve the existing KYC system. An inherent feature of the DLT is used to remove the third-party involvement, and smart contracts are used to build our logic in the mobility of the data. Blockchain technology has various types of cryptographic security which provide a safer place to transact over an unsecured channel. Using the facility of DLT, cryptography and consensus mechanism of blockchain, the proposed model of KYC process can optimize storing, updating, sharing of data and accessing operations along with enhanced security, transparency and privacy. It also enhances customer ownership and improves customer experience. It not only reduces the time duration and document update problem but also saves opportunity cost, aggregation, cost, maintenance cost and many more costs, which can affect the performance of any organization.