To bring improvement in the customer experience, the State Bank of Pakistan (SBP) has called on all commercial banks to begin leveraging blockchain technology for customer identification, or Know Your Customer (KYC) verification.
The incorporation of blockchain technology will enable banks to prevent money laundering, terrorism financing, decreasing the paperwork involved in the process of creating a bank account and will help to strengthen the financial infrastructure of the country.
How will it work?
The blockchain-based KYC system developed with the help of companies specializing in advanced banking applications, customer experience management solutions, blockchain, and artificial intelligence will help develop a shared, decentralized database of customer identities that will be reachable to all banks in Pakistan.
When a customer applies for an account or other financial services, their identification information will be preserved on the blockchain, along with any subsequent transactions they make.Therefore, all banks will have access to a shared, tamper-proof database. When a customer applies for an account at a new bank, the new bank will simply take the help of the blockchain to authenticate the customer’s identity, rather than having to experience the entire KYC process again.
Who will benefit from the Initiative?
The utilization of blockchain technology for KYC verification facilitates a number of benefits for banks, residents, and local startups. For banks, it will decline the cost and time necessary to authenticate customer identities.
Whereas for customers, it will simplify the process of opening accounts and reaching financial services quickly. Moreover, the new startups and techies who are waiting for the right opportunity to monetize their talent will also get exposure by showcasing their talent in building blockchain-based KYC systems.