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For financial institutions, Know Your Customer (KYC) is an important process for anti-money laundering, helping to detect and prevent criminal behaviors around the world. Despite its importance, KYC at many financial institutions is inefficient with tedious processes, duplication of effort and risk of error, so it’s clear that a change in KYC is needed. And blockchain could be the right solution to do that!

KYC at a glance

“Know Your Customer” (KYC) refers to the process of verification of the identity of the customers and clients either before or during the start of doing business with them. Banks, digital payment companies or any kind of financial institutions are now required by norms to have their customers KYC process completed before allowing them complete access to all service.

KYC refers to a process that banks and other financial institutions use to gather identifying data and contact information from current and potential customers. Its purpose is to prevent fraud, money laundering, and other illicit activity, as well as the misuse of financial accounts. KYC and Anti-Money Laundering (AML) practices go hand-in-hand in helping to prevent dishonest and criminal financial activity.

How does the KYC work?

KYC practices usually start before an individual becomes a customer. Financial institutions must first verify the stated identity of a potential customer before opening an account. Because there are no legal verification standards, this process may look different for each bank. Some identifying documents required by KYC processes include driver’s License / government-issued photo ID, passport, social security number, PAN card, voter ID Card. Moreover, address verification is also necessary.

Depending on the bank’s practices, applicants may submit different documentary proof like utility bill, account statement from a different bank or credit card issuer or a lease agreement. After providing a customer with an account, banks are required to perform periodic record updates.

This means they continue to “recertify” their customers with intermittent requests for KYC information throughout their banking relationship. Reducing and eliminating money laundering and financial fraud is the clear advantage of KYC practices. While it makes things more complex and time extensive – especially for the banking industry and its customers – the benefits outweigh the inconveniences.

Benefits of a blockchain KYC utility

According to KPMG, the immutability and transparency of blockchain provides a streamlined way for financial institutions to gain swift and secure access to clean and up-to-date customer data. This results in greater operational efficiency, increased trust between institutions and reduction of labour-intensive data gathering, processing time and costs.

For regulators, the use of blockchain provides a single source of customer data for better understanding and visibility of customer activity across financial institutions. From a customer standpoint, an institutions use of a blockchain-enabled KYC utility could reduce onboarding wait times and eliminate the need to repeatedly provide the same information to their financial services providers.

While a blockchain-based utility can help banks reduce the burden of time and cost associated with gathering customer information, KPMG believes that it is critical banks still perform due diligence on customer information obtained from the platform. Care and attention must be given to issues such as privacy regulations and customer permissions. When used in combination with other technologies, a blockchain KYC utility demonstrates strong potential to help financial institutions reduce the time and cost associated with KYC processes, while providing greater visibility to regulators and better customer experience.

A clear need for change

Nowadays, banks and large financial institutions around the world are struggling to meet the ever-increasing scale and rate of regulatory change. Processes for KYC compliance, in particular, are costly and time-consuming with the added and significant concern of the extraordinary fines for non-compliance today. For financial institutions, the costs associated with KYC processes are high: $60M – $350M spending/bank and $600+ / KYC on average, which translates into lost revenue opportunities. These processes are also time consuming: 5-100 documents / KYC, approximately 24 days to on-board a new client and a KYC refresh takes almost 20 days.

For corporate customers, today’s KYC-related processes might be seen as a poor customer experience due to changing requirements from bank to bank and long on-boarding times. With these factors in mind, it’s obvious that something has to be done to improve and optimize the KYC process. Solution? Blockchain.

Improving KYC with Modex BCDB

Modex BCDB is a new take on blockchain technology which removes the need to invest resources in blockchain training and facilitates fast adoption of the technology in businesses. The solution proposed by Modex is a middleware which fuses a blockchain with a database to create a structure which is easy to use and understand by developers with no prior knowledge in blockchain development.

As a result, any developer who knows to work with a database system can operate with our solution, without needing to change their programming style or learn blockchain. Through our blockchain component, Modex BCDB is able to transform with minimal changes any type of database into a decentralized database which holds the same valuable characteristics inherent to blockchain technology: transparency, increased security, data immutability, and integrity.

How can Modex BCDB improve the KYC process? It can increase speed – from 3-4 weeks to couple of days by compressing data gathering and automating processing. Our solution can also reduce costs by at least 20% by eliminating duplication through shared services, and also reduce risk via a distributed and shared ledger that acts as an immutable, assure audit trail of all corporate KYC process. Last, but not least, Modex BCBD (Blockchain Database) can enhance the user experience via instant visibility across all shared information by a customer, secured through a consent-based mechanism, which controls information access.

About Modex BCDB

Currently, the majority of blockchain solutions present on the market are oriented towards blockchain as a service, limiting themselves to a rigid view and application of the technology. A company or the CTO of a company can come to the realization, after a bit of study that their business can solve several issues and streamline back-end processes by implementing blockchain.

The problem is that in order for a company to implement blockchain technology only through its own tech team, they need to invest a significant amount of time and resources to study what type of blockchain is most suited for their needs, and commence a lengthy process of learning the development specificity of the respective blockchain, as well as scouting for developers proficient in the technology.


Every enterprise is reserved and unwilling to make changes to its database, and for good reason, as data loss or data corruption constitute major risks. Modex BCDB doesn’t work by deleting the existing database, or data entries. The database is maintained intact throughout the process, data integrity is ensured by calculating the metadata of the records and storing it on the blockchain.

Moreover, the system does not restrict access to the blockchain or to the database, so when a developer needs to make a reporting or ETL transformations, they can always perform warehouse analytics by accessing the database directly. This is because Modex BCDB has been purposely designed to be agnostic. With our solution, clients are able to set up a network, regardless of the type of database employed. In a consortium, each company can maintain what type of database they prefer (Oracle, Microsoft, IBM, Mogo DB), and connect them through a blockchain-powered network to ensure cohesion, availability while protecting corporate interests.

About Modex

Blockchain company Modex is promoting the adoption of blockchain technology and strongly believes in a future built around blockchain. Modex offers fully integrated services designed to solve the last mile adoption problem of the blockchain and aims to make blockchain user-friendly for every single device or person.

At Modex, we can innovate thanks to our incredible team of experts and we offer services for the entire blockchain technology ecosystem: Marketplace for Smart Contracts, community tools for developers and blockchain as database services for enterprises. In over two years, using cutting-edge technologies and with a clear strategy, Modex has evolved from the world’s first app store for blockchain into a complex ecosystem designed for developers’ needs and enterprises looking for blockchain solutions. Our mission is to spread and facilitate the adoption of blockchain into society and to solve real-world problems using this revolutionary technology.