Know Your Customer (KYC) regulations have evolved and expanded rapidly, and for good reason. When a cybercriminal can purchase an identity for just over $1,000 on the dark web, consumers and businesses are at significant risk of fraud.
The dramatic rise in cybercrime during the pandemic led to swift regulation enforcement, a key example being the early institution of 6AMLD. Going forward, we’re likely to see even more extensive security measures take over.
For real estate financing, a key issue has been how to implement these safeguards. The fact is, traditional KYC processes are not only insufficient but expensive. Meanwhile, companies are shifting through numerous solutions in an attempt to transform their company operations for the digital era.
Before we get to potential solutions, it’s critical to understand why traditional processes, even when digitized, are no longer an option for most firms.
The problem with traditional KYC processes
Traditional KYC processes are a significant revenue and time leak. Offline procedures that rely on customer print-outs and documentation copies require digitization and significant resources. All of this delays onboarding.
But most online processes don’t fare much better. Many digital KYC processes still require manual data entry, verification, and approvals.
At the same time, KYC regulation has continued to become more complex. The mismatch of legacy systems with complicated compliance processes has created bottlenecks and inefficiencies and organizations scramble to remediate their process.
But KYC operations, especially for real estate financing and investment, suffer from more than inconsistency. When conducting due diligence with KYC/KYB operations, businesses have to consider data security, user privacy, sort through redundancies, and keep updated files on record.
Failing to do so results in higher risk for everyone involved in a real estate transaction. At the same time, the cost of maintaining secure systems is quickly becoming unsustainable. The cost of KYC compliance has dramatically increased the cost of onboarding clients, which averages at about $6,000.
We can see that the traditional process is no longer sustainable. And technology offers us a solution.
KYC on the Blockchain
While initially used as a ledger for payments, blockchain technology provides the optimal platform for KYC compliance. Built through advanced cryptography, blockchain technology offers a transparent and secure engine for any transaction.
Information exchanged during a transaction – such as KYC data – is compiled and logged within a block. Once that block is attached to the previous block, it cannot be changed. This feature alone provides an auditable, secure method of maintaining records. The process of creating a block, completed through mathematical equations, is also incredibly fast.
It’s also important to note that many actions can take place automatically on the blockchain, especially if a platform uses smart contracts. Smart contracts are essentially a set of conditions that, once fulfilled, automatically take action. These capabilities take the place of costly intermediaries, which further complicate and slow down the KYC process.
In other words, with blockchain technology, it’s possible to automate the KYC process and decrease onboarding times without sacrificing security or compliance measures.
Finding a KYC Compliant Blockchain Platform
So, how do you find a blockchain-based platform that makes sense for your business? While there aren’t many in the real estate financing space, more and more startups are popping up, with varying features. Ultimately, you’ll want a platform that provides secure and tested tools for investors to manage their own KYC data and identity profile when investing in real estate digitally.
At Earn, we have a user-friendly complaint onboarding process that makes it easy to verify and monitor customer and business information. Some features include:
- Establishing and maintaining compliant investor profile(s).
- Populating each profile with adequate data to ensure compliance for all parties.
- Associating profile data with the investor’s unique blockchain id, also known as their wallet.
- Streamlining subscription and allocation processes using pre-established investor profiles.
- Storing information securely and allowing the investor to subscribe to multiple offerings in the future.
In the best-of-class platforms, you will be able to cut out redundancies as investors only need to input their data once. Once saved on the platform, investors have complete control over their personal information from their unique and secure wallets. At the same time, our systems can verify information through the blockchain ledger without pulling sensitive information. Instead, our system sees a tokenized version of the data that is useless to potential malicious parties.
A solid KYC platform is essential for the future of real estate investing. Slow and inefficient onboarding is not only expensive, but it will turn away customers. And these manual processes are increasingly becoming more susceptible to fraud.
Blockchain technology can streamline KYC processes, secure client data, and make it easier than ever to stay ahead of the curve.
Our platform has been tried and tested by industry leaders. To learn more, book a demo with us today.