Greetings to all innovators in the Web3 space! We’re all familiar with the excitement that Blockchain technologies like cryptocurrencies, NFTs, DeFi, and the Metaverse bring. However, as a Web3 company, we must address the not-so-pleasant side of our operations — the Know Your Customer (KYC) process, often seen as an obstacle in the onboarding journey.
The ‘Why’ Behind KYC
KYC, in its simplest form, is a mandatory process where businesses verify the identity of their clients. This step is essential, particularly in our sector, to ensure that we’re dealing with legitimate entities.
Companies don’t enforce KYC because they want to; it’s a necessary legal and regulatory requirement. This procedure is crucial to prevent unlawful activities like money laundering and financial fraud.
KYC serves as an important safeguard to ensure the integrity of transactions in our rapidly growing Web3 industry. It’s about building a trustworthy ecosystem where every player is verified.
The Customer’s Side of the Story
However, a significant number of potential customers are lost during the KYC step. It’s as if they’ve encountered a hurdle they can’t or don’t want to cross. And this isn’t a small problem.
40% of customers drop-off from onboarding when being asked for KYC.
Let’s try to understand and relate for a moment. Imagine the fatigue of repeatedly proving your identity, not only to us but also to countless other platforms. In simple terms, it’s exhausting.
The bitter truth is that individuals are required to prove their ‘humanity’ to the internet multiple times. Whether it’s name, surname, address, age — you name it, you’re often asked to provide it.
From the Crypto KYC Provider’s Perspective
Just like every story has two sides, let’s understand why crypto KYC providers collect user information.
Imagine owning a successful bakery in town. The law requires you to keep detailed records of customers — their names, contact details, and favorite pastries. It may seem strange, but you have to follow the law.
Similarly, Web3 businesses asking for KYC information aren’t trying to bother customers. They’re obligated by law to collect it. It’s like a mandatory recipe for them to operate. They want to onboard you quickly, but regulations demand identity verification.
Consider the upcoming MiCA Regulation for crypto-assets in the EU. Crypto businesses must comply with these rules, obtain licenses, and meet regulatory requirements. Whether making offers to the public or trading on platforms, they must abide by these regulations. It’s not a choice; it’s a legal obligation.
Understanding the Cause
Imagine going to a café every day, where they keep asking for your name, address, and ID. It gets tiring, right? The same happens when users try to join web3 platforms. Repeatedly proving their identity becomes a hassle, causing a problem we can’t ignore: User Dropoff.
People start the onboarding process excitedly, but Web3 KYC (identity verification) becomes a roadblock. Here’s why:
- Constant Information Requests: Online, users are asked for their personal details over and over again. It feels like there’s no end to it. They share their name, age, and more, but it doesn’t stop there.
- The Breaking Point: Just when users think they’re done, more requests appear. “Verify your address.” “Upload your ID photo.” “Confirm your date of birth.” It’s exhausting. After facing this multiple times, users give up. They want to join, but the repetitive process frustrates them.
Understanding the Implications
- The Economic Effect: This obstacle has significant consequences for the economy. It makes acquiring new customers more expensive, as the Web3 KYC requirement hinders potential conversions and increases costs.
- Worries About Data Protection: Every time the KYC process is carried out, personal information is shared and stored, which poses potential security hazards. It’s like giving your house keys to multiple people. It’s not just about the inconvenience; it also raises concerns about the associated risks.
Swipelux’s Solution to the Problem
At Swipelux, we’ve been closely watching this situation and are developing an exciting solution called ZeroID to address this problem.
Swipelux's solution involves creating on-chain kyc or digital identity tokens with the user’s KYC data. Once set up, these tokens stay in their wallet, allowing them to pass through KYC checks without re-verifying or sharing the data again.
Through ZeroID, we aim to save users from the recurring hassle of Web3 KYC processes.
For businesses, it opens up a smoother and more efficient onboarding process, reducing dropout rates. In terms of security, sharing less data means low risks. So, it enables businesses to be:
- More user friendly
- Comply with regulations
Together, we can revolutionize the way we prove our ‘humanity’ to the internet, making the journey into the world of Web3 a seamless experience.
Stay tuned!
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