The Reserve Bank of India (RBI) has classified the centralised Know Your Customer Registry (c-KYCR) as a high-risk data source, prompting the growing fintech industry to advocate for a decentralised, blockchain-based database to improve data quality.
What Happened? Per an ET report, experts in the industry are voicing concerns about the sustainability of a centralized KYC registry, suggesting a blockchain solution to rectify errors and outdated information.
Tech giants Tata Consultancy Services (TCS), Wipro, and IBM have already developed decentralized identification platforms. For instance, TCS’s Quartz uses blockchain and AI technologies to meet financial institutions’ KYC, anti-money laundering, and fraud management requirements, according to R Vivekanand, President of BFSI Products and Platforms at TCS.
Wipro has created DiceID, a decentralized platform for identity credential verification. The platform utilizes verifiable credentials protocol, digital representations of claims about an individual or entity that anyone can cryptographically verify.
See also: How India’s First Full-Time NFT Gallery Hopes To Address Challenges Faced By Country’s Artists
Regulators such as the Securities and Exchange Board of India (SEBI) and the RBI have initiated discussions, but the actual implementation remains limited. Meanwhile, deployments of these technologies are already underway outside India.
Due to RBI’s concerns, banks are now asking fintech partners to perform video or in-person KYC procedures, adding to customer discomfort. A shift to decentralized KYC could potentially mitigate these issues while boosting data security.
Despite the potential benefits, the transition to a decentralised system could present technical challenges, including integration with current core banking systems.
Yet, decentralized KYC platforms could enable banks and consumers to better manage their data and share it on a need-to-know basis, suggests Sharat Chandra, co-founder of the India Blockchain Forum.
Read next: RBI Anticipates Return Of Majority ₹2,000 Notes By September End, Assures Ample Currency Stock
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.