Do blockchain systems reduce the costs of know your customer compliance?

Take corporate clients: they usually have relationships with multiple banks. And they have to give each of these banks the same information, which is inconvenient. That is where blockchain offers the possibility to provide the information to a bank once and allow the next bank to access it.

Exactly. In order for this trust to arise, we need an independent instance. Take the commercial registers or land registers: they are classic directories monitored by authorities and hence trustworthy, but they still only contain very specific information. For KYC in the financial sector, you need a lot of information, for example, whether there are politically exposed people in the company or who the beneficial owners are.

The advantage of a blockchain solution is that the information comes from multiple network nodes and cannot be changed. One bank verifies the address of the customer, and another bank verifies the bank account information of a customer, and in total, I always have a distributed verified data record. I can always trace it back: Where did the information come from? Is it still valid? And the customer can always see who accessed this information and decide whether that is wanted or not.

And that is a very important advantage: it is about ethics and transparency. We have to give the people who own the information the power to control this information too instead of just entering it into a black box. This is called the “self-sovereign identity”: if I have my information in this blockchain-based system, I can, for example, inform three banks of who my authorized signatories are. I might give my address to 15 parties and my bank account information to seven banks for euro transactions, but only to two banks for dollar transactions.

Because each piece of information was verified by two independent third parties. This is a change from a centralized to a decentralized instance. A lot of research is being done on so-called permission systems: they ensure that participants only feed in and retrieve information in such a way that consensus and trust ensue. With popular blockchain applications such as Bitcoin, the trust comes from the fact that hundreds of anonymous network nodes verify a transaction. With our topics, KYC and finance, you will have much fewer network nodes because there is a manageable number of market participants and institutions, who usually know each other.

Yes. When I give a regulator or stakeholders a node in this private blockchain, all my reporting obligations are met without manual processes, without paper, and that of course represents huge savings.

If it succeeds in building, apart from its existing brand, the trustworthiness on the technology side, yes. We as Main Incubator have also already acted as platform operators for blockchain-based securities transactions. You are up against players such as Microsoft or IBM and have to show that you are more suitable – for reasons of security, speed, and costs. This is a very typical market environment that you have to work.