Most Cashless readers are probably familiar with the idea of durable medium. It's what banks should be using to inform their customers about important changes in bank product documents, such as terms and conditions, fees and charges.
Some banks have been sending messages to customers using banking mailboxes. This method was challenged by the Office of Competition and Consumer Protection (UOKiK), and by the EU Court of Justice, because it does not guarantee the immutability of the documents. Banks could in fact change them at any time. The regulations also demanded that customers have access their documents even after their relationship with the bank is terminated. Currently, when customers end their contract with a bank, they lose access to the documents in the electronic banking system.
Durable medium has become one of the biggest regulatory challenges for the financial institutions. Banks are analyzing durable medium options and looking into innovative alternatives. Those include blockchain technology, for example a solution developed by the Polish FinTech Billon and the Credit Information Bureau (BIK). Can this blockchain meet regulatory demands?
Andrzej Horoszczak explains why regulations are very challenging. First test of durable medium solution is to make it technically impossible to modify or delete customers's documents. Horoszczak believes that, if documents are saved in blockchain and distributed ledger architecture (DLT) that is outside of the publisher's control that test is fullfilled. Because documents are written in blockchain, no one can change them after they are published. DLT provides an automated and secured retrieval and redundancy. This is a great evolution from legacy IT document solutions that rely on individuals/administrators to provide for security of all customer data.
Data security is an additional advantages of DLT architecture over legacy IT, because data is protected at more granular level. In Billon and BIK's solution, complete documents are stored across several independent nodes, guaranteeing the highest level of accessibility. Document redundancy guarantees that even when part of the network is down, customers can still retrieve their documents.
GDPR, and especially the right to be forgotten, poses an incredible challenge to data storage solutions. Billon's founder says that it created a lot of additional manual work, because clients request this right selectively across their portfolio. Because documents are stored in multiple copies, bank needs to retrieve and delete them separately. In contrast, Billon/BIK’s DLT/blockchain executes right to be forgotten automatically in all copies. Blockchain requests a customer's and bank authorization and makes document unreadable, while preserving the audit trail.
Horoszczak thinks that it is important that blockchain allows to save all activity of people who have access to the document: publishing, sending, retrieving, right to be forgotten. In case of customer disputes, the moment the user read a given document becomes a legal evidence. His final advice is that durable medium solution should not only serve the current regulatory purpose, but also be flexible to meet the future customer's and regulatory changes.
