KYC and authentication processes are an essential, but tedious and time-consuming part of many businesses which cost them billions of dollars every year. For customers too, these processes are something which they would readily miss, given their unexciting nature and repetitiveness. However, in the absence of the option of waiving these procedures from business operations, a new solution deploying blockchain technology might just make them more bearable for businesses and customers.
Traditional KYC
KYC procedures are an unavoidable routine for financial institutions. KYC is necessary to establish the identity of customers, ensure that their money is coming from a legitimate source, and evaluate money laundering risks associated with the customer.
A typical KYC procedure involves the customer being physically present at the institution, filling out forms and handing over numerous documents. After all the formalities are fulfilled by the customer, it becomes the institution’s responsibility to store the customer’s personal information safely to prevent identity theft.
This process, apart from being inconvenient to customers, translates into additional operational costs for the company as well. There is a possibility that the person matching the identification documents with the physical person might make a mistake in doing so.
Also, there are chances of leakage of customers’ data if the company doesn’t protect it with adequate security measures. In a study conducted by Javelin Research and Strategy, it was found out that that $16 billion was stolen from 15.4 million U.S. consumers in 2016.
Traditional Authentication
A traditional internet-based authentication process typically entails verifying the identity of a customer using two-factor authentication or three-factor authentication at the level of a transaction.
However, the trouble with these authentication processes is that they involve redirecting the customers to another browser to perform authentication formalities leading to higher drop off and basket abandonment rates. The process is also quite expensive for merchants as it involves numerous parties such as Issuing Bank, Acquiring Bank, Payment Schemes, ACS (Access Control Server) and MPI (Merchant Plug In) providers etc.
Also, during this process is susceptible to Man-in-the-middle (MitM) or Man-in-the-Browser (MitB) attacks. Card fraud losses worldwide are estimated to reach an alarming $31.67 billion by 2020.
How can Blockchain help?
The fintech industry is rapidly embracing the Blockchain technology for the efficiency gains it presents to them. A blockchain allows for p2p exchange on a decentralised, shared, auditable and immutable ledger.
In simpler terms, blockchain lets two people sitting in different parts of the world transact with each other without involving any intermediary, and in an absolutely secure manner. For traditional KYC and Authentication processes, the implementation of Blockchain could mean a complete overhaul.
VeriME, a Singapore-based Blockchain startup, is already in the process of designing an ecosystem where KYC and Payment Authentication is facilitated by Blockchain. The decentralized Verification-as-a-Service (VaaS) ecosystem uses sophisticated biometric technologies and machine learning tools to identify and authenticate the customers on Blockchain during the purchase of goods and services.
Customers have to a create a profile on the VeriME profile only once, and they can use that profile to fulfill KYC formalities and authentication formalities with all of VeriME’s partner service providers. Vietnam’s Largest Payment Gateway, NganLuong, has recently partnered with VeriME for Secure Digital Identity Verification Services.
The D-KYC and D-SECURE are completed within a matter of seconds once the customer’s profile has been approved by VeriME. Customers benefit from it in the form of not having to travel to the Service Provider’s place for KYC formalities.
For Service Providers, using the VeriME platform translates into considerably lesser expenditure on KYC and Authentication formalities. Also, Service Providers are saved from the burden of safely storing their customers’ personal information.
VeriME’s ICO is round the corner. For more details about it, visit https://verime.mobi