How automated KYC supports PSD2
The Payment Services Directive (PSD2), is a directive that was adopted by the European Union in 2015. Its main objective is to modernise the payments market within the EU by promoting competition and innovation. One of the key provisions of PSD2 is the requirement for banks to provide third-party payment providers (TPPs) with access to customer data. This provision, commonly known as "open banking," aims to make it easier for customers to use different payment providers without the need to create multiple accounts. It also opens up opportunities for new entrants to the market, fostering competition and driving innovation in the financial sector.
Know Your Customer (KYC) regulations are a set of requirements implemented by financial institutions to prevent financial crimes, such as money laundering & terrorist financing. KYC regulations mandate that financial institutions identify and verify the identity of their customers. These regulations are in place to protect customers, ensure the integrity of financial transactions, and safeguard the financial system from being exploited for illicit activities.
The relationship between PSD2 and KYC regulation is closely intertwined. PSD2's open banking provision allows TPPs to access customer data from banks with the explicit consent of customers. This data can be used by TPPs to perform their own KYC checks. By leveraging the customer data obtained through PSD2, TPPs can ensure that they are not facilitating financial crimes and that their services are not being misused by criminals. In this way, PSD2 enables customers to benefit from a wider range of payment providers while maintaining the security and integrity of the financial system through compliance with KYC regulations.
Introducing Togggle Automated KYC
Togggle, a decentralized KYC solution, offers financial institutions a comprehensive tool to comply with both PSD2 and KYC regulation. Togggle utilizes distributed ledger technology, such as blockchain, to securely store customer data. This decentralized approach enhances data security by making it difficult for unauthorized individuals to access and manipulate the information. By leveraging blockchain technology, Togggle ensures transparency and immutability, reducing the risk of data tampering and enhancing customer trust.
Moreover, Togggle provides a user-friendly 1-click KYC solution, simplifying and expediting the KYC process for customers. With just one click, customers can complete their KYC checks, making it convenient and hassle-free. This streamlined approach not only benefits customers but also reduces the burden on financial institutions, enabling them to improve operational efficiency and allocate resources more effectively.
In summary, the Payment Services Directive (PSD2) and KYC regulation share a symbiotic relationship in the modernisation of the payments market and the prevention of financial crimes. PSD2's open banking provision facilitates access to customer data by TPPs, which can be used to perform KYC checks and ensure compliance with KYC regulations.
Togggle, as a decentralized & automated KYC solution, offers financial institutions a secure and efficient means of complying with these regulations. By leveraging advanced technologies and simplifying the KYC process, Togggle enhances customer protection, fosters competition, and contributes to a more innovative and secure financial ecosystem.