Headquartered in Sweden, Norbloc is on a worldwide mission to solve banking’s growing KYC problems with blockchain technology.
To prevent fraud and money-laundering, banks and financial institutions have to know who they’re dealing with. The diligence they take in verifying client identities is necessary for what’s known as ‘know your customer’ (KYC) compliance. It can also be costly and resource-intensive. And even more so if compliance isn’t met.
Estimates vary but it is widely reported that KYC compliance costs and complexity are increasing. These costs can include the investment in resources to meet compliance as well as fines for non-compliance, but there’s also the cost of losing clients due to the complexity KYC checks add to the onboarding process.
But what if institutions could share what they have already verified about customers safely and securely? “Significant cost savings can be achieved by taking steps to digitise the collection and handling of customer KYC data, and even more benefits are possible if this is done by creating an ecosystem whereby financial institutions collaborate around sharing of data, contributing to enhanced data quality and coherence across a market,” said Astyanax Kanakakis, CEO and co-founder of Norbloc.
‘Financial institutions want to be the first follower, not the first mover’
– ASTYANAX KANAKAKIS
Norbloc has developed this solution using blockchain technology. “We build platforms that deal with the collection, verification, management and sharing of sensitive customer information, notably KYC data. They reduce cost and friction both for financial institutions and their clients, and remove duplication of efforts and data,” Kanakakis summed up neatly.
Founded in 2016, Norbloc claims to be the only company with a distributed KYC network in operation at scale. This live example of KYC on the blockchain was launched in the United Arab Emirates in July 2020. According to Kanakakis, it involves nine institutions currently holding more than 300,000 customer KYC files on the network.
Norbloc is also involved in a similar shared KYC proof of concept with the Central Bank of Sri Lanka.
While Norbloc could be a revolutionary cost-saving solution for financial institutions, this is not an industry that easily moves with new trends. “Traditional financial institutions are inherently conservative and resistant to change,” said Kanakakis. “They want to be the first follower, not the first mover.”
Convincing the financial sector to adopt new technology takes time and, Kanakakis added, is easiest when you have working model for reference. “We now have that reference case and are receiving a lot of interest because of that. The journey to get there has been challenging and taken time but has also given us an opportunity to receive input from global financial institutions on our platforms, in order to develop a product that really solves a pressing need in the most optimal way.”
‘All of this contributes to more efficient and well-functioning financial markets as a whole’
– ASTYANAX KANAKAKIS
Headquartered in Stockholm, Norbloc is an international operation with a development hub in Athens and its commercial office in Dubai. The ultimate goal for the company is to become the backbone of regulated data networks for financial institutions and governments globally.
For Kanakakis, Norbloc’s technology just makes sense in terms of operational efficiency. “From a regulatory and compliance perspective, overall data accuracy is improved, irregularities and discrepancies are more easily identified, and remote audits can be carried out. All of this contributes to more efficient and well-functioning financial markets as a whole,” he said.
Across its three platforms – Sancus, Atlas and Fides – Norbloc targets the most pressing problems when it comes to regulated data: the lack of digitisation and the duplication of efforts. These three platforms assist in the collection, validation and secure sharing of sensitive data between institutions. The company also promises compliance with data regulations such as GDPR.
“Our ecosystems operate using a distributed database abstraction layer that, coupled with a distributed ledger, provides the foundation of the ecosystem,” Kanakakis explained. “Additionally, we have developed our own key management system and messaging protocol to ensure high levels of security as well as ease of use to the end customer.”
Using this technology, institutions can combine their KYC efforts and streamline their onboarding process for customers.. Beyond finance, this can also be useful for government entities involved in the KYC process, such as corporate registries and tax authorities.
“In terms of savings, these reach 30 to 40pc of the current cost base of institutions, not including the potential our platforms give to participants to monetise on their data validation efforts, further enhancing the positive monetary impact,” said Kanakakis.
Underpinning Norbloc’s platforms is considerable proprietary IP that has been tested by more than 10 large financial institutions. “That is the ultimate proof point for our IP and technology behind our platforms,” said Kanakakis.
‘We are seeing a lot of interest from governments and semi-governmental entities in Europe’
– ASTYANAX KANAKAKIS
Kanakakis knows the financial services industry, having spent more than 12 years in finance and consulting. “Even though I studied computing, I spent the majority of my professional life working in financial services in large corporations. That experience instilled a level of professional discipline that is (probably) worth all the long hours at the office,” he joked.
His co-founder, Vitalii Demianets, comes from a technical and mathematical background. “When we met, he was the lead architect of one of the biggest bitcoin miners in the world, overseeing data centres that at the time were larger than installations from AWS etc in Sweden,” said Kanakakis.
“Together, we bring business acumen and technical knowledge that allows us not only to solve the right business problems, but also to solve them in the most technically efficient and innovative manner.”
The duo’s company is currently cash positive and commercial traction is accelerating. The company may start seeking external investment later in the year but, for now, top of the agenda for 2021 is expansion in Europe.
“Remote onboarding and data sharing is high on the agenda of governments and financial regulators around the world, particularly as it facilitates business continuation activities in an environment where physical interaction is less desirable due to the pandemic. In light of this we are seeing a lot of interest from governments and semi-governmental entities in Europe, who want to lay the foundations for data sharing ecosystems that contribute to better functioning markets.”