The Luxembourg Bankers’ Association (ABBL) supported by the Fondation ABBL pour l’Education Financière in cooperation with the University of Luxembourg and its Interdisciplinary Centre for Security, Reliability and Trust (SnT) progress with the joint research project on the use of distributed ledger technology (blockchain) and data analytics for KYC (Know Your Customer) processes.
According to Serge de Cillia, the Chairman of the Fondation ABBL pour l’éducation financière:
“The foundation was founded in September 2016 with the purpose of fostering and promoting financial education and research in Luxembourg by organising events and trainings and supporting doctorate, post-doctorate and professorship studies in the field of finance. I am delighted that the Fondation supports this research project, of potentially high value for the Luxembourg banking community.”
At SnT’s 7th Annual Partnership Day 2018, representatives of the ABBL and SnT research team reported on intermediary achievements of the project.
Marc Hemmerling, ABBL General Counsel Digital Banking, FinTech & Payments and Program Director for the Project representing both the ABBL and the ABBL Foundation for Financial Education underlines:
“Know Your Customer is key success factor for any business. In the context of banking, there are also regulatory KYC obligations beside the commercial aspects. KYC-related expenses of financial institutions remain at their high levels with an upward trend. This is no doubt about the burden that banks and other financial services firms have to bear in order to guarantee that customer, private and public interests are duly met. Meanwhile, we at the ABBL believe that having an applied research project that aims at exploring how the issue could be addressed by the adoption of the blockchain technology is a promising approach”.
Dr. Jean Hilger, Head of ABBL’s Digital Banking and FinTech Innovation Cluster:
“There are numerous academic challenges and practical issues with a blockchain project in the very sophisticated domain like KYC. Nevertheless the major and initial goal for me is to see a blockchain project at work in a banking community which discusses the practical issues and advantages of distributed ledgers.”
This four-year project, launched in November 2017, develops and tests new conceptual and technological approaches to KYC procedures in the financial services sector, exploring how financial institutions could use novel methods of customer identification.
Dr. Radu State, Head of the Service and Data Management in Distributed Systems Research Group (SEDAN), SnT:
“We’re excited to work with the ABBL and to get feedback from its members on our research project as well as operational insights into the financial industry. Working on concrete projects with the local banks and realizing that we can solve real problems and increase the cost efficiency and speed of particularly tedious processes, it’s both a personal and professional satisfaction”.
The project utilises smart contracts to help provide a KYC system shared amongst financial services firms. Smart contracts are programs stored on the blockchain and executed with the same assurances of consensus as a regular blockchain transaction. By leveraging the blockchain, project partners aim at automation of certain shared parts of the KYC process.
Robert Norvill, PhD Student at SnT:
“The software is under ongoing development, guided by regular meetings with the ABBL pilot members. The information gathering and feedback process has been instrumental in understanding the challenges of KYC and how blockchain technology can be used to improve the KYC process securely”.
Andrey Martovoy, ABBL FinTech Adviser ABBL and Project Coordinator:
“Pilot banks that have joined the project provide compliance-related requirements for the proof of concept to researchers. As a result, the first phase of prototype development has been completed and the second stage is under way”.
Christophe Medinger, Project Leader at Banque et Caisse d’Epargne de l’Etat, Luxembourg (BCEE):
“Distributed ledger technologies used for KYC processes are an opportunity for Banks to mutualize tedious mandatory work with a real added value for the end-customers, such as a faster onboarding process. So far, the project holds the promises and we are excited being one of the participating banks”
Jean-Philippe Houard, Director, Head of Transfer Agency at BNY Mellon in Luxembourg:
“The SnT team has an in-depth knowledge of the blockchain technology and is rapidly adapting the prototype as the business opportunities are further explored. This collaboration is an exciting and concrete opportunity for Luxembourg to take the lead on an enhanced and simplified KYC experience for the wider region.”
This project is part of SnT’s Partnership Program, which currently includes more than 40 collaborations with public and private organisations, addressing major challenges facing industry and the public sector in ICT.
The University of Luxembourg, through SnT, has designated Professor Björn Ottersten as the Program Director for the Project. The scientific research is performed by Robert Norvill and his colleagues within SnT’s Services and Data Management research group (SEDAN) headed by Dr. Radu State, in collaboration with Dr. Zsofia Kraussl from the Luxembourg School of Finance (LSF) and Dr. Jean Hilger, Head of ABBL’s Digital Banking and FinTech Innovation Cluster (DBFI).