How can blockchain-based technology remove the need for KYC?

As a retailer, your customers may be subject to KYC checks. They can be a large bottleneck in your sales funnel. However, as a legal necessity, they must be done.

The blockchain provides many ways this process could be made easier, and it is being used already in some sectors. In the article below, we discuss how blockchain tech can remove the need for KYC. 

What is KYC?

Know your customer (KYC) is a protocol that involves several steps used to identify and verify an individual.

They are generally used by financial institutions. It helps the organisation understand a customer's intended activities or if their funds are from legitimate sources. It is also a safeguard against money laundering. 

Over the past few years, KYC requirements have become stricter. This is understandable in the financial sector. Yet those in retail who have to use them are increasingly being restrained by KYC, having to devote time and resources to its implementation. Thus, cryptocurrency offers a way to make this process easier. 

What retail sectors use KYC?

Art and antiquity dealers are a sector that must comply with KYC.

This is because they are a prime target for money laundering. Transferring funds to art or antiquities is a great way to hide wealth away from authorities. Yet it can be tough for retailers to implement, as people do not always want to give away their details when purchasing desirable, high value items. 

Another sector that must follow KYC is the real estate industry. This has some of the most stringent KYC and anti-money laundering checks available. Both the lender and the conveyancer will perform these. This is because the property is a great way to tie money up in physical assets, which are often high-value items. 

Some sectors that require KYC checks have already begun to employ blockchain technology. One is the online casino industry. Many traditional operators require a lot of information about a customer before they can sign up to play.

Yet with no-kyc casinos, people can play games and gamble anonymously. They still get all the benefits any other players would, such as customer services, game selection, and fast payouts. The difference is that they do not have to hand over vast amounts of personal information to do so.  

How can blockchain remove KYC?

By being decentralised, blockchain gives people access to their own data. Any data that is recorded is immutable, meaning it can not be removed or altered and thus has a certain degree of trust. 

This can increase accuracy as it provides a definitive source for data. Any discrepancies are easier to check and cross-reference. This can also increase efficiency by doing away with paper documents and manual data entry. When combined with smart contracts, methods of paper signing and checking can be done away with entirely. 

Essentially, it can help retailers identify profiles much quicker as the output of all KYC checks can be done from the blockchain. This will make identification much easier and the retail process smoother. Even if KYC checks are still required, switching to the blockchain will make your sales funnel more fluid.