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French bank Credit Mutuel Arkea has been working with IBM to use blockchain technology as a way of identifying its 3.6 million customers.
Blockchain is a type of distributed ledger technology that acts as a tamper-proof record, and is traditionally used for transactions.
Laurent Ovion, innovation and digital transformation leader at Credit Mutuel Arkea, says the aim of the project is to improve satisfaction for customers applying for new products by removing the need for lengthy application processes.
“Customer identity can be a very painful process for our customers and for our colleagues in the branch network,” he says.
Regulators require banks and other financial service providers to undergo a know your customer (KYC) process each time a customer signs up for one of their services – an often repetitive and lengthy process that requires a lot of customer information.
As banks often use different IT systems for different products and services, this process is sometimes repeated when an existing customer of the bank wants to open a new account or use another service with their provider. This can be frustrating for both customers and the bank, as well as wasting time and money.
“Each time a customer wanted to buy a new product or check their identity, it was a lengthy process that took a lot of application,” says Ovion. “It was a waste of time and a waste of energy.”
But by entering a customer’s initial sign-up details in the blockchain, these identification documents can be securely accessed across all of the bank’s IT systems, and customers will not need to provide the same information twice, he adds.
“If you want to open a new account in a branch and you already have an account, an online account or a life insurance account, we will check this information with the blockchain,” says Ovion.
After an eight-month investigation period, the Credit Mutuel Arkea group began a trial with IBM to develop an operational permissioned blockchain network that would allow staff throughout the business with specific permissions to view customer identity documents that comply with KYC requirements.
During the trial process, a number of IBM technologies and partnerships were used to leverage the blockchain technology, including the Paris-based IBM Studio for the user design process, IBM Bluemix Garage with Blockchain Services to develop the project through agile iterations, and the Bluemix IBM cloud platform.
The system was built on the open source Hyperledger Project fabric, a blockchain technology to which IBM has been contributing.
Beating legacy with blockchain
Many retail banks have large legacy IT systems built on old technology that cannot be changed for security and financial reasons, creating silos and making digital transformation difficult.
Such systems can also make it difficult to make use of customer data for personalisation and to improve customer service.
Distributed ledger technology breaks down the customer data silos that are often found in large financial services organisations by giving different departments and systems access to a single set of data, cutting down on application processes and data duplication.
This customer data, once entered into the system, can be used across the business for processes such as opening a bank account, buying life insurance or applying for a mortgage.
Ovion says: “We wanted to actually set up more than a prototype. We wanted to do something that actually works on our IT system and we wanted it to be different. We wanted it to be a non-transactional solution with blockchain.”
In June 2016, the system was trialled with a small number of customers before a larger trial with selected branches towards the end of the year.
Currently, the system is not in “real time” because the technology is not yet fully integrated with all the bank’s IT systems.
Ovion explains: “If you open an account in the morning and a second one in the afternoon, it won’t make the match, but if you want to open an account the day after, it will work.”
Credit Mutuel Arkea hopes that in the future, the process will be instantaneous and the technology will be available to all of its departments and customers.
Blockchain for all
At the moment, blockchain technology is most commonly used as transaction record for the crypto currency bitcoin, but other uses have been discussed, such as securing deployment of internet of things (IoT) devices.
Ovion thinks the bank’s trial of blockchain could prove interesting to other organisations that are struggling with siloed systems and long sign-up processes that can make customer identification difficult. It might be used for processes such as applying for a phone contract, buying insurance or applying for a loan, he says.
“Obviously, if we are able to build the same system for all the banks in France or in Europe – even if it’s not all the banks – it would be really interesting, especially for the customers, but also for us,” he adds. “There are a lot of different companies that could be interested in ID checks.”
Credit Mutuel Arkea hopes the technology will be available in all its branches in 2017 before exploring other use cases for blockchain for ID purposes.