Blockchain Technology Facilitates the Implementation of Reusable KYC Solutions
KYC solutions are becoming increasingly important for crypto companies, financial services firms, and institutions, with the global KYC software market expected to expand at a compound annual growth rate (CAGR) of 20.8% over the next six years. The rise in identity-related frauds and scams, including deep fakes and AI-related scams, has contributed to the growth of the KYC market.
However, traditional KYC solutions pose challenges for both users and businesses. Users often have to repeat the KYC process multiple times, leading to a drop-off rate of up to 40%. Additionally, KYC implementation is expensive, accounting for 40% of all anti-money laundering compliance costs for banks.
To address these challenges, reusable KYC solutions have gained traction. These solutions allow users to leverage their past verifications instead of undergoing the process again. Trinsic, a digital identity startup, has launched an “identity acceptance network” that enables reusable KYC. Businesses can use Trinsic to verify users faster and reduce fraud. Partnerships with companies like CLEAR have been established to facilitate this network and expedite the KYC process.
Blockchain technology plays a crucial role in enabling reusable KYC by allowing users to own their personal information and data. For example, Dentity, a part of Trinsic’s identity acceptance network, stores users’ credentials on the Bitcoin blockchain. This decentralized storage ensures the authenticity of issuers and minimizes the information stored on-chain.
Chia Network, another player in the space, uses verifiable credentials (VCs) on-chain to perform KYC verification. This approach allows users to custody their own VCs and decide who can access them, reducing the risk of oversharing or data exposure.
While reusable KYC solutions offer numerous benefits, concerns about data security remain. Storing data on-chain addresses this issue, as demonstrated by Deloitte Switzerland’s issuance of reusable KYC credentials. These credentials enable users to establish a digital self-sovereign identity and share only the minimum necessary data with service providers.
However, challenges hinder the widespread adoption of reusable KYC solutions. Encouraging collaboration and interoperability among users and service providers is crucial. Privacy and data security are also major concerns, but advanced encryption techniques like Zero-Knowledge Proofs and Secure Multi-Party Computation can address these issues.
Overall, blockchain technology plays a vital role in enabling the implementation of reusable KYC solutions, offering improved efficiency, cost savings, and data protection.
