Pakistan’s central bank has given the green light for commercial banks and other financial institutions to develop a shared Know Your Customer (KYC) platform for heightened security requirements.
In an official disclosure, the State Bank of Pakistan (SBP) confirmed that the incoming shared e-KYC platform will be based on blockchain, designed to offer privacy and efficiency. Per the central bank, only banks and financial institutions will access customers’ personal information, away from the prying eyes of a centralized entity.
A shared e-KYC platform is expected to offer a range of benefits for Pakistani banks, including uniformity in processes and cost-saving functionalities. Banks can access and verify necessary personal information with a few buttons in compliance with existing KYC and customer due diligence (CDD) rules.
“This new platform will provide a number of benefits to banks 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, enhancing customer onboarding experience and cost savings for the banks,” read the statement.
Apart from eliminating a central depository of customer data, the shared e-KYC platform provides extra security measures for customers, requiring express permission before banks can access the data.
“Given the importance and utility of this platform, both for banks and their customers, banks are advised to join the ‘shared e-KYC platform,’ and dedicate required financial, technological and human resources for its timely and effective implementation,” said the SBP.
The platform, developed by the Pakistan Banks Association (PBA) in partnership with Avanza Group, has been experimenting with a blockchain-based KYC platform since the start of 2023.
However, the ambitious project has received criticisms over the possibility of a security breach stemming from a bank with 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 valiant attempt to introduce a shared KYC platform in the United Arab Emirates. Swiss-based firm Wecan Comply has made significant inroads into establishing a shared KYC platform for Swiss banks as Australia and Spain dip their toes into a similar arrangement.
In May, professional services firm Deloitte announced plans to turn 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 technology knowledge, reach, and trust to issue credentials that are globally accepted.”
Watch Ejad Labs’ Arzish Azam: Pakistan must take advantage of blockchain tech
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
