With the millions of underbanked and unbanked, we need to establish a better way to identify, authenticate, and engage

Fintech in Asia is a growing industry, and what’s interesting in this region is that both startups and established financial service providers are getting into high gear in building products that are aimed at empowering users into doing more with the technologies and resources at hand.

Each market has its own nuance. Those backed by a strong financial sector like Singapore and Hong Kong would focus on innovating through efficiency. Meanwhile, in Asia’s emerging markets, there is a focus on the unbanked and underbanked sectors. Those with emerging financial sectors would focus on expansion and improving access.

In addition, there are a handful of banks in the region that are now working on blockchain technologies in improving the flexibility, security, and accessibility of their services. The advantages here are clear: a decentralised and immutable ledger, along with smart contracts for automatically executing condition-based actions.

Also read: This Singapore blockchain startup wants to replace banks; has raised over US$15M in ICO to do so

To date, however, there is still a need for fintechs in the region to rethink and re-tool their KYC standards, in order to better address the needs of this ever-evolving industry and clientele. This is the main push behind SelfKey, which is launching its marketplace platform for identity management, along with it an Ethereum-based identity token, KEY.

Founded in August this year, the Hong Kong-based startup is focusing on a marketplace for identity and KYC services. The company wants to involve three main stakeholders into the equation: the user, the relying parties (banks, financial institutions, companies), and certifying authorities.

The inspiration from SelfKey actually came from some frustrations about how KYC is currently done. “Having done KYC processes many, many times, and having setup companies for people as a corporate secretary, I realised that the KYC process was annoying, and so I tried to build some technology to fix it,” shares Edmund Lowell, co-founder and CEO of KYC-Chain, which manages the SelfKey Foundation.

As with any blockchain-based technology, SelfKey works on incentivising each activity with token use and payment. For instance, for a user to register his or her identity, he will have to pay KEY tokens to the certifying authority (usually a notary or other trusted entity). It’s the same case with banks and other businesses that need to verify the user’s identity – they will need to pay tokens to access.

In all of these, users have control over their credentials, and the extent of granularity shared with the banks and other businesses. This option offers a truly decentralised approach to identification, which offers certain advantages over bank- or government-led KYC initiatives.

Why KYC?

The objective of KYC – or “know your customer” – is, of course, to ensure compliance with international anti money-laundering reporting standards. This helps financial institutions avoid being used by customers to launder money, with particular highlight on potentially criminal activity.

Therefore, banks, and other such institutions, need to verify your identity, so that it can ensure accountability in the event that there is some dirty money or “black money” involved in transactions.

Even without potentially criminal activity, the KYC process is important in ensuring compliance with a government’s internal revenue generation requirements. One purpose of money laundering is, of course, to evade or avoid tax liabilities. An adequate KYC process can help minimise this.

An evolving environment

Right now, most fintech-oriented KYC initiatives by banks are fragmented, and these might have some implication in the integrity of transactions. This is one reason for regulatory agencies to start adopting new technologies in ensuring better KYC.

For instance, recently, a consortium among Singapore’s IMDA and a number of major banks – including HSBC, Japan’s UFJ Financial Group, and OCBC Bank – is developing their regional KYC blockchain proof of concept. The KYC blockchain enables information to be recorded, accessed and shared across a distributed network among participating banks. It also ensures that information can be validated by other government agencies, tax registries, and credit bureaus through a streamlined process.

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