How this blockchain startup plans on helping banks secure your identity

While financial institutions face rising costs related to identity compliance, with anti-money laundering regulations now exceeding $18 billion, blockchain is the buzzword on Wall Street.

The technology has the potential to revolutionize identity security, reducing the costs surrounding compliance and making it easier for financial institutions to protect their customers’ identities.

And local startups like Cambridge Blockchain are taking notice.

Headquartered in the Cambridge Innovation Center (CIC) in Kendall Square, Cambridge Blockchain has designed a digital identity enterprise software to help financial institutions handle growing compliance challenges.

If you’re a little fuzzy about what blockchain technology actually is, you’re not alone. Blockchains are ledgers — kind of like Excel spreadsheets — that accept data input or transactions from many different parties.

What makes blockchains unique is, instead of waiting for a central authority to approve transactions, the spreadsheet can only be changed if there is a consensus among the group. This also explains why financial institutions are so interested in the technology.

In addition to helping banks meet strict new data privacy rules, Cambridge Blockchain uses blockchain tech to eliminate redundant identity compliance checks, as well as reduce the cost financial institutions spend on verifying their customers annually.

According to Cambridge Blockchain’s CEO Matthew Commons (pictured right), managing identities across applications and platforms has become increasingly challenging and cumbersome, with high profile data hacks only highlighting the vulnerability of these systems.

With his company's distributed architecture, however, Commons hopes to resolve many of these transparency and privacy challenges and foster faster customer onboarding, lower costs for banks and enhance compliance through a single and consistent view of customer reference data.

Prior to Cambridge Blockchain, Commons served as the founding CFO and Managing Director of venture-backed energy technology company Ogin.

His work experience, which includes corporate finance and private equity investing, prepared the serial entrepreneur for applying advanced technologies to new fields, he said. Commons also studied blockchain data structures for several years through think-tank and academic programs, with a focus on strategic implications of blockchain technology for businesses.

“The typical problem we might solve is the ‘know your customer’ process,” Commons said. “Some banks spend a few hundred million dollars each year on the onboarding process, which requires banks to get a lot of data on customers or corporations. But data privacy rules are all about restricting access to that kind of data. And as a result, there’s a lot of duplication in this process and it’s very expensive.”

Cambridge Blockchain solves this problem by creating digital identities at a global scale while giving individuals control over their personal identity data through a combination of blockchain tech and an off-chain personal data service.

In February 2017, Cambridge Blockchain raised $2 million in funding from Partech Ventures and Digital Currency Group to accelerate the deployment of its identity software for financial institutions.

Commons said having the support of experienced blockchain tech investors would help the startup expand into new markets.

The company is currently developing its digital identity software with several global financial institutions, with commercial deployments planned for late 2017.

Commons said while there’s some competition from West Coast startups, he’s happy with the community the company has in Boston.

“For us, we like the community here in Cambridge,” Commons said. “We like to be able to tap into that. From a timezone perspective, it’s also easier to do business in Boston with Europe than from the West Coast and we’re also closer to New York and big financial institutions.”