Identity verification company TheKey looks to blockchain to reduce costs
Beijing-based decentralized distributed ledger blockchain developer TheKey BDMI International Foundation Ltd. announced Monday that the company has produced two test applications based on its system that will provide identity verification services for sensitive industries.
The two test applications, designed for check verification and cashing, will be used as a foundation for building out the company’s identity validation ecosystem. The platform would be used to help providers meet regulation and compliance while reducing potential fraud.
Using blockchain technology, TheKey proposes to provide what it calls dynamic multidimension identification for highly regulated industries that need “undeniable” and “unalterable” verification.
These industries include financial institutions that may need to implement “know your customer” policies to follow money laundering regulations such as banks, payment processors, healthcare and insurance. Such industries use a lot of paperwork and procedures to prove that customers and transactions are verifiable and spend millions of dollars a year to prevent fraud.
According to a report from Thomson Reuters, the proliferation of KYC with financial institutions with $10 billion or more in revenue saw an average spend on procedures increase by $150 million in 2017 from $142 million in 2016. The same report showed companies have expanded the average deployed KYC compliance employees to an average of 307 last year, up from 68 in 2016.
“Identity proofing or verification brings a very high cost for all businesses,” the company wrote in a statement, paraphrasing Ken Huang (pictured, second from left), president of TheKey. “Most businesses, including banking and insurance, are required by law to meet KYC requirements. The average cost of such a service is around $100 per customer. This is repeated in each bank or insurance company that people do business with.”
TheKey’s ecosystem provides an interface with its identification technology and a blockchain for three primary roles: the validator, which has the information needed to verify and authenticate identities; the service provider, which provides the infrastructure for the service involved after identity is resolved; and the individual user, who provides identification and receives the service from the provider.
A healthcare insurance company, for example, could be a service provider and would trigger an identity verification request for medical records based on a particular user. The individual would then accept and confirm the request by confirming his or her biometric data through a TheKey application or terminal at the hospital. That would trigger automated processes including a smart contract, a programmed exchange of information on a blockchain that triggers under specific conditions.
TheKey would then transmit the biometric data to the validator, in most cases a relevant database regulated by a government agency, and settle identity through encrypted channels. Once complete, and the identity of the user confirmed, the medical records outlined by the smart contract would be made available to the service provider.
Because all of the transactions involving verification and settlement occur on a blockchain, it produces a tamperproof historical record of the request, the participants and the outcome. The private data and identity records are not stored on or connected to the blockchain platform, just the parts showing the agreement between entities and identity validation. As a result, a third party, such as a regulatory watchdog or other entity, could examine the blockchain in the future in an audit and verify each transaction without lifting the privacy of the participants.
With the need for KYC procedures and systems that increase trust and reduce fraud, many enterprise companies have looked to blockchain solutions to automate trust and reduce paperwork. On the identity front, Microsoft Corp. is also working on a distributed management platform as part of the Microsoft Identity Division. In August, blockchain firm ShoCard Inc. raised $4 million for enterprise security identification cards.
In healthcare, ODH Inc. and Hashed Health teamed up to build a patient care and billing blockchain after receiving $1.8 million in a seed funding round. Health Wizz unveiled a blockchain-based healthcare data sharing platform in November to allow patients to manage who had access to records. Estonia also explored securing 1 million of its own health records with blockchain technology through a partnership with security and infrastructure company Guardtime AS in 2016.
TheKey has been developing this system since November 2017 focused on establishing the feasibility of its platform. Originally, development was expected to produce working test products in June, but this was accomplished last month and now two products have been put through rigorous testing.
During the next stage, TheKey developers intend to focus on the performance, efficiency and reliability of the underlying technology. The company also said it intends to look into developing exclusive hardware that is trustworthy and secure to provide a physical layer to underpin its application infrastructure.
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