Dubai International Financial Center (DIFC) and Mashreq Bank’s partnership to pilot a blockchain-based data sharing platform, trialing the use of blockchain with regards to Know Your Customer (KYC), is a step in the right direction.
Globally, banks are currently allocating their resources to blockchain in order to come up with easy and secure solutions for processes such as anti-money laundering, peer-to-peer payments, KYC, cross-border payments, and virtual currencies.
Recently, Mashreq Bank and DIFC launched a blockchain-based KYC data sharing platform, which is now active and supporting licensed businesses and corporates, enabling them to open digital bank accounts instantly. The consortium between DIFC and Mashreq, along with fintech firm Norbloc, was formed in July 2019 as part of the initiative.
This strategic decision was taken to harness the promising technology of blockchain by focusing on a specific use case, which could enhance both the quality and reliability of corporate KYC information. The platform is available to UAE-based banks for the sharing of verified KYC data between banks and licensing authorities in the UAE.
For a financial institution, KYC is an expensive part of onboarding a new client and each financial institution creates their own KYC. Therefore, banks have a high cost of customer acquisition, and for customers it means a painful process of going through new account opening formalities every time they open an account with a new bank.
The new KYC blockchain consortium will ensure a faster, reliable, and more secure onboarding and digital data exchange process, thereby removing existing cumbersome paper-based KYC processes. In addition, the platform will help oversee banks’ collection and management of KYC data.
This approach of integrating blockchain into banking by creating a KYC platform is a low-risk way of experimenting with and utilising blockchain’s capabilities. Overall, this effort is a positive development for UAE banks and shows the great potential of blockchain, perhaps making it the most sensible next step for others looking to adopt the technology.