Have you ever experienced this long-lasting process of personal data registration while opening a bank account, or underwriting an insurance policy, or switching from a financial advisor to another one? This typically implies inputting lots of information for banks, insurers and asset-managers to get to know you. And unfortunately, it’s usually repeated each and every time you deal with a new company.
You’ll get required to disclose your name, address, age, income, wealth, etc. plus proof of all these elements together with a copy of your ID card, telephone invoice for your address and more.
Of course, these requests are mostly due to local regulations. For instance, since beginning of 2018 in Europe, MIFID 2 regulation is imposing on all companies to follow some rules especially on the KYC (Know Your Customer) and AML (Anti Money Laundering) processes.
What does this have to do with blockchain?
Blockchain is a shared, decentralized and global infrastructure that stores information in the system and represents the ownership of property. It provides people with the possibility to make transactions on any kind of data, in a completely transparent manner. Blockchain-based systems are typically not owned by any central authority, but rather shared by all network participants.
Blockchain is thus a pretty interesting tool to store, secure and share data.
What about privacy?
“The EU General Data Protection Regulation (GDPR) replaces the Data Protection Directive 95/46/EC and was designed to harmonize data privacy laws across Europe, to protect and empower all EU citizens data privacy and to reshape the way organizations across the region approach data privacy.”
In order to comply with GDPR, no personal data or information should be stored on a blockchain, from which it would be impossible to be erased. However, financial institutions performing their own KYC checks and assessments could upload their findings in an encrypted manner, making it virtually impossible to identify underlying investors while retaining the benefits of shared checks and resources.
In order to comply with GDPR, no personal data or information should be stored on a blockchain, from which it would be impossible to be erased.
By using a common reference identifier, financial institution could access the stored data to perform their KYC whenever customers request for a new service within the same banking relationship, or from another bank.
In other words, a secured digital passport would enable financial institutions, advisors and asset managers to perform KYC for a fraction of the costs they’re paying today, thus driving fees down.
COO of Lili