Know your customer compliance has long been a headache for banks. Tradle’s CEO and co-founder explains to Joy Macknight how blockchain technology can be used to improve the client onboarding experience.

Gene Vayngrib

Gene Vayngrib

Fulfilling know your customer (KYC) requirements is a costly and time-consuming activity for banks. Despite having thrown masses of people at the problem, the customer onboarding experience remains dismal because of friction in the KYC process. “The dissatisfaction on the customer side is very pronounced, which in turn is felt by the banks,” says Gene Vayngrib, CEO and co-founder of Tradle, a blockchain-based KYC and onboarding platform.

Yet traditional KYC utilities have not managed to gain widespread market acceptance – mainly because they are centralised, he argues. “Centralisation doesn’t work in today’s compliance world,” says Mr Vayngrib. “The beneficial owners or controlling persons of a company do not want to provide their data to yet another third party where it can be hacked or potentially misused from a competitive, privacy and safety point of view.”

In addition, moving data across borders to a central place is increasingly constrained by data residency laws or government policies in many countries.

Signed, sealed and protected

Mr Vayngrib believes that blockchain technology – which is decentralised, immutable, secure and transparent – can help solve KYC compliance issues for clients, banks and regulators. “There are many data points coming from different sources, such as government departments, regulators, the company itself or third-party source, which must be assessed as to governance, lineage and quality,” he says. “Blockchain helps to create a methodology for data governance when data is not sitting in one place.”

Blockchain records the continuity of data, documenting the interaction between the customer and bank across product lines, legal entities and jurisdictions. Using blockchain, Tradle engineered a solution where it does not see the customer’s data while ensuring the customer’s custodianship of their data. “The clients own their KYC profile: they digitise their KYC data with our software tools and then submit it to the bank,” says Mr Vayngrib. “The data itself is not put on the blockchain, but it is recorded in such a way that verifies the customer and bank interaction happened at this particular time with relevant digital signatures on both sides.” 

Career history: Gene Vayngrib 

  • 2014 Tradle, CEO and co-founder
  • 2012 Urbien, CEO and founder
  • 2000 Lablz (former HudsonFog), CEO and founder
  • 1991 Information Builders, general manager

Each verification step is also sealed on the blockchain. Mr Vayngrib adds: “This is important, because the next time the customer approaches the bank for a new product or service, they can use the data provided previously, even if it is a different part of the bank. The bank can verify that data was authenticated by the other line of business via the blockchain, even when it uses a separate IT system.”

International solution

Tradle is working with regulators to address KYC issues on an international level. It is one of eight regtech firms chosen to participate in the second phase of the Global Financial Innovation Network (GFIN) cross-border testing pilot. GFIN is a network of 17 regulators committed to working closely with regtech firms in a global sandbox environment to test innovative products, services or business models across more than one jurisdiction.

The next phase is for the firms to develop test plans with the relevant regulators for their cross-border trial, some of which will involve live transactions. Tradle, for example, is working with Abu Dhabi Global Market and the UK’s Financial Conduct Authority on self-executing cross-border KYC policies.

Mr Vayngrib says: “KYC is a global problem and can’t be solved in one country – it needs to be cross-border enabled. The ability to work with multiple regulators within the global regulatory sandbox is an incredible opportunity to finally solve this problem.” Through such collaboration, he believes best market practices can be revised and improved.

A new SaaS model

Mr Vayngrib believes that the world is experiencing a fundamental shift in how software-based solutions will be sold in the future, and KYC will play a similar frontrunner role as customer relationship management (CRM) did 15 years ago. “When Salesforce created the first cloud-based CRM system, it was designed as software-as-a-service [SaaS] and was the precursor of what was to come. KYC is at the forefront of the same kind of reset,” he says.

“Today, vendors manage the bank customers’ data; however, this is unsustainable from a cyber security, data privacy and data residency perspective,” he adds. “The technology to solve this problem is here today. It is a combination of blockchain, third-generation cloud and artificial intelligence, which are helping to go back ‘on premise’ but in the cloud. We call it 'private SaaS'.”

KYC will be the forerunner, according to Mr Vayngrib, because it involves collecting sensitive customer information – private, competitive and confidential. “The banks will run our solution in the cloud, under their own cloud account, but we will support it as SaaS. It is not on premise but gives the bank full control as if it was. Full protection of the data yet the serviceability levels of the current CRM SaaS. This is a reset for the whole industry as to the delivery of software in future,” he says, adding: “KYC is the new CRM.”

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