Pakistan’s central bank has given the green light to commercial banks and other financial institutions to develop a shared Know Your Customer (KYC) platform for increased security requirements.
In an official disclosure, the State Bank of Pakistan (SBP) confirmed that the upcoming shared e-KYC platform will be blockchain-based, designed to provide privacy and efficiency. According to the central bank, only banks and financial institutions have access to customers’ personal information, away from the prying eyes of a centralized entity.
A shared e-KYC platform is expected to provide a range of benefits to Pakistani banks, including uniformity in processes and cost-saving functionalities. Banks can access and verify the necessary personal information with the click of a few buttons, in accordance with existing KYC and Customer Due Diligence (CDD) rules.
“This new platform will provide banks with a number of benefits including; timely exchange and updating of customers’ KYC/CDD (customer due diligence) information across the banking industry through a secure digital channel, standardization of KYC/CDD data, improvement of customer onboarding experience and cost savings for the banks” , the statement said.
In addition to eliminating a central repository for customer data, the shared e-KYC platform provides additional security measures for customers, requiring express consent before banks can access the data.
“Given the importance and usefulness of this platform, both for banks and their customers, banks are advised to join the ‘shared e-KYC platform’ and deploy the necessary financial, technological and human resources for the timely and effective implementation thereof,” the SBP said.
The platform, developed by the Pakistan Banks Association (PBA) in collaboration with Avanza Group, has been experimenting with a blockchain-based KYC platform since early 2023.
However, the ambitious project has drawn criticism over the possibility of a security breach due to a bank having a ‘weak security architecture’. The recent hack of Avanza Group’s marketing website has cast a shadow of doubt over the future of the ambitious project.
Banks are turning to blockchain-based KYC solutions
Financial institutions are leaning on blockchain to improve existing KYC processes, with Norbloc making a bold attempt to introduce a shared KYC platform in the United Arab Emirates. Swiss-based company Wecan Comply has made significant progress in setting up a shared KYC platform for Swiss banks, as Australia and Spain dip their toes into a similar scheme.
In May, professional services firm Deloitte announced plans to move to blockchain for improved KYC processes in a historic partnership with Polkadot para-chain KILT, citing multiple use cases.
“Digital credentials that are convenient, cost-effective and secure have the potential to open new digital marketplaces, from e-commerce and DeFi to gaming,” said Micha Bitterli, Deloitte’s head of managed services. “Deloitte has the technological knowledge, reach and confidence to issue credentials that are accepted worldwide.”
Watch Ejad Labs’ Arzish Azam: Pakistan should take advantage of blockchain technology
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