In the financial industry nowadays the blockchain technology spreads exponentially. Blockchain technology is a cryptocurrency transaction where the blockchain is a decentralized world (Digi world). Here the transactions records are immutable and this may contain a digital transaction.
Every blockchain technology has a block, at that each block it stored a piece of information. By using this way of blockchain technology the banking sector moving from the traditional method to high security.
The advantage is the blockchain technology is used in the banking sector and it improves efficiency and it enhances security. In blockchain technology, it is a digital ledger at every blockchain has a chain (ie) each block in the chain contains several transactions and every transaction that is noted in the blockchain and the transactions recorded are added in every participant’s ledger.
These transactions are managed by the blockchain multiple participants, which are also known as (DLT) Distributed Ledger Technology.
- Know Your Customer:
KYC is abbreviated as a Know Your Customer.KYC is taken into account as one of the foremost complicated and expensive compliances to employed and maintained. inline with a recent survey conducted by Thomson Reuters, banks spend on average £40 million a year on KYC Compliance. The report also found that some banks spent up to £300 million on KYC, AML, and CDD (customer due diligence) compliances.
On-going regulatory change, with nobody internationally agreed standard, makes it increasingly hard for banks to stay compliant. Thus, because it can take such a protracted time to onboard a replacement customer due to lengthening KYC procedures, this can be having an increasingly negative effect on customer experience, additionally as overall efficiency of banking operations.
Current KYC systems also entail substantial duplication of knowledge among firms. this is often where Blockchain and DLT (distributed Ledger Technology) can step in and alter the sport.
The sharing of customer information has already existed, SWIFT, as an example, has established a KYC Registry, allowing 1125 bank members to share KYC documents. Yet this number accounts for under 16% of their total network members of 7000 banks.
The use of blockchain and DLT allows automation of all processes, resulting in a discount in compliance errors. Employing DLT within the KYC database wouldn’t only remove all duplicates in information collecting efforts but also enable encrypted updates of customers’ information across all bank members’ databases on an almost real-time basis.
Blockchain may effectively store all related KYC documents yet as all activities of past customers for straightforward retrace and tracking. These records would function as evidence of compliance from Banks, at the identical time, it can easily detect abnormal patterns when any entity makes efforts to form a fraudulent ledger.
The current burden of KYC Compliance is often significantly reduced through the sharing of clients’ data and past transactions among firms, and also the use of blockchain technology for settling payments yet as storing data can make an excellent stronger case for KYC within the industry