The KYC process cost financial institutions an estimated $48 million per year [1], and digital ledger technology (DLT) can lower and redefine the KYC process.
I have to rely on KYC cost estimates for financial institutions as the baseline because I was not able to find any data on the KYC process for small businesses.
The KYC process
As part Money Laundering Control Act of 1986, regulators require all financial institutions to onboard their customers before conducting any business with them.
The KYC process should be carried out only once. This reduces the cost of the KYC process, maintaining privacy, and increases transparency in case of a conflict. Additionally, the use of the public/private key and a token further increase security, immutability and transparency.
Our proposed KYC process includes the collection of necessary identity information during the exchange of documents between the customer and the business.
The future KYC process is divided into two parts. The first part of the process requires the registration of users in a permissioned database that cryptographically stores the documents. The second part of the process is a distributed ledger containing permanent records that are immutable.
[1] 1,122 institutions that responded to an authoritative Thomson Reuters survey on the impact of global changes in Know Your Customer (KYC) regulation.