Paywiser, a longstanding Hong Kong-based fintech, has just launched a new line of business in the U.K.: debit cards. This represents a bold expansion for Paywiser, which has been operating since 1997 as a licensed money operator in Hong Kong, helping clients open bank accounts, facilitate remittances, and support merchant acquisitions, on behalf of companies based in Hong Kong and mainland China.
Going into debit cards represents a leap into serving consumers, says its CTO, Louie Ho. It puts Paywiser in direct competition with giant payment processors, banks, and global fintechs.
“We’re a mid-sized player, but we want to be bigger,” Ho said. (Paywiser can only offer the debit cards in the U.K., as its money-operator license in Hong Kong does not enable this business at present.)
To support this ambitious move required the right infrastructure. One of the biggest costs of customer acquisition is the onboarding process, because of KYC (know your customer) and compliance requirements.
Paywiser turned to another Hong Kong fintech, Digital Transaction, to support is debit-card debut.
DLT for KYC
Digital Transaction is an enterprise blockchain company. It has developed its distributed ledger, called ParallelChain, to enable remote KYC. It has been built to adhere to the European Union’s General Data Protection Regulation (GDPR) rules.
Ian Huang, founder of Digital Transaction, says he built the technology to be fast, so that it could enable remote onboarding right away. His company’s DLT focuses on use cases involving KYC and ensuring prospective borrowers aren’t duplicating their use of collateral.
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That meant designing a blockchain around permissioned protocols in which a handful of nodes can validate information. This is unlike the public, proof-of-work consensus mechanisms of open protocols like Bitcoin, which rely on the entire network to confirm a transaction.
ParallelChain, in a recent test case in Taiwan, processed nearly 145,000 transactions per second. “The next generation of enterprise blockchain infrastructure is finally here,” he said.
(Visa reportedly operates at a speed of around 1,700 TPS, although estimates vary; and Bitcoin at around 7 TPS. Other blockchain protocols such as R3’s Corda and EOS that also limit validating nodes have also notched high TPS scores.)
For Huang, the tradeoff is not just between decentralization versus speed. It’s also about security. “We centralize the data and distribute the verification,” he said. One of the drawbacks of permissionless blockchains is that other participants can see too much; it’s too transparent. So a centralized DLT gives users control over what to share.
The benefit of a distributed system, rather than a traditional database, is that it allows many players to inspect data upon request, while avoiding data leaks. “A company has partners and counterparties. Let’s say you have 10 partners with whom you share data. At a network level, that’s not 10 bilateral relationships: it’s 2 to the 10th power [1,024]. With DLT, you can own your data while letting others inspect it whenever there is a change.”
The technology is now at the point where it can meet the needs of scaling and latency, supporting a high volume of high-speed transactions.
When it comes to KYC, Huang argues DLT offers a superior way to safeguard customers’ privacy while verifying their identity. “People don’t want to give away their images, their photos – they worry about a leak,” he said. “That’s why we built a blockchain that’s GDPR-compliant.”
GDPR includes the “right to be forgotten”, which presents special design challenges for a blockchain-based solution, given one of the technology’s claims is immutability.
But immutability is a problem for enterprises. Imagine, for example, that someone sends you child pornography via a blockchain. If that gets verified and on your records, you can’t delete it, even with a court order. This is one reason why businesses want control over data and counterparties in a network.
Paywiser’s Ho first met Huang when he served as CTO at a garment manufacturer. One of his tasks was to install sensors, to monitor employees in the factories using facial-recognition software. Huang was a vendor who provided the tech, and they developed anti-spoofing measures (spoofing refers to ways people can game a facial-recognition process).
Ho says Paywiser continues to use other KYC solutions for different needs. For example, it uses Refinitiv’s WorldCheck database to verify persons who may be politically sensitive, for its other businesses. Digital Transaction doesn’t have access to such data.
Digital Transaction coded a solution for Paywiser that went live in February, using A.I. and QR downloads to process customer transactions. The system rejects or approves them in near real time, while forwarding any applications that it can’t determine to a customer-service center in Malaysia.
“Our vision is to make onboarding and KYC seamless, so people don’t need to be asked to upload photos again, while we remain confident that it’s a true person,” Ho said, adding that Paywiser’s goal is to onboard 500,000 debit cardholders in the coming 12 months.
Huang, meanwhile, hopes this use case will give Digital Transaction the track record it needs to win bigger financial institutions as clients. Huang is a serial entrepreneur: he’s developed many technologies while working in the U.S., and launched and sold his own businesses. Now he’s looking to land the big fish that will assure Digital Transaction’s future.
“We need a major corporate,” he said. But he is unfazed by competition from giant tech companies operating in the KYC and blockchain spaces. “The winner isn’t always the big guys,” he said. “It’s whoever comes up with the solution that’s low-cost, efficient, and popular.”