PBA Develops Shared e-KYC Platform for Banks and Other Financial Institutions

Pakistan Banks Association (PBA), under the guidance of the State Bank of Pakistan (SBP), has undertaken the development of a “shared e-KYC platform” for banks and financial institutions aimed at bringing more efficiency in fulfilling KYC compliance and customers’ onboarding process. This new platform will provide several benefits to banks including; timely exchange and updating of customers’ KYC/ CDD 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. According to the SBP, the “shared e-KYC platform” has been built on Distributed Ledger Technology (DLT) whereby customers’ KYC/CDD-related information shall reside with the banks only, without the need for a central entity to house this critical customers’ data. Further, to protect the rights of the banks’ customers, the data will be accessed only with their explicit consent. The SBP has strengthened the AML/CFT regime including processes for Know Your Customer (KYC) and Customer Due Diligence (CDD) over the years. To further streamline the KYC/CDD processes, SBP has allowed banks to rely on third-party financial institutions for performing effective and efficient KYC/CDD. It is reported that PBA contracted to develop a blockchain-based shared Know Your Customer (KYC) with a local IT company that has experience in designing the same solution for GCC countries. With a customer’s consent, any KYC data collected by one bank’s compliance department can be shared with another. Shared KYC provides several benefits to banks, with a massive reduction in cost if the bank can use data collected elsewhere. It also removes a major friction in signing new customers. From a consumer perspective, if someone is shopping around for a mortgage, it can make the process far more painless if KYC data can be shared. It could make switching between banks easier, but there’s always considerable customer inertia. However, there’s a third potential benefit that consumers need to be aware of. When a consumer agrees to share data, they need to ensure they only agree to share KYC data, not other data that could infringe on their privacy. Given the importance and utility of this platform, both for banks and their customers, the SBP advised banks and financial institutions to join the “shared e-KYC platform”, and dedicate the required financial, technological, and human resources for its timely and effective implementation.