FinTech Association, together with AK Bars Bank, launches blockchain technology
The FinTech Association's members Sberbank and Otkritie Bank, supported by AK Bars Bank, pilot tested a fast and secure exchange of KYC questionnaires using the blockchain technology. This is the first step towards using open APIs of banks to help boost hardware and software performance.
To comply with legislative requirements and international best practices, financial institutions must possess full information about each counterparty bank. Today, banks still exchange signed and sealed hard copies of KYC questionnaires, which is naturally very slow. The new blockchain technology aims to facilitate switching from physical to electronic exchange of KYC questionnaires, while also providing a one-stop-shop solution for all counterparties to modify their KYC data. Also, it helps identify the financial institution in the electronic system, ensures reliability of distributed data, and enables the user to track the history of changes in KYC questionnaires.
Encrypted questionnaires are stored in the unchanging distributed data store, with the respective link available in the blockchain transaction. Additional cryptographic techniques are used to distribute keys for decryption, making the data accessible only by the counterparty (who at the same time has no access to the full list of the bank's counterparties). The structure of interaction between the banks remains confidential. The prototype is built on Masterchain, a platform currently being developed by the FinTech Association.
“KYC questionnaire sharing by banks helps improve interaction among financial institutions, making it more cost-effective and transparent. The matter may not look especially exciting, but I'm sure it will do a lot to further cut the costs of interaction among banks,” said Sergey Ukustov, Blockchain Project Manager at AK Bars Digital Technologies.
“Automated KYC questionnaire exchange will allow for distributed storage and sharing of counterparty data required for their full identification and better understanding of their business, ownership structure, sources of profit, and other details that help identify potential threats,” commented Damir Galiev, Head of Project Office (Strategy, Innovation and Corporate Communications) at AK Bars Bank.