DECENTRALIZED IDENTITY (DID) ARCHITECTURE FOR SECURE KYC IN U.S. BANKING AND FINTECH ECOSYSTEMS

The increasing complexity of identity verification in U.S. banking and fintech ecosystems has highlighted the
limitations of traditional centralized Know Your Customer (KYC) processes, which often involve redundant
data collection, slow onboarding, and increased risk of data breaches. This study explores the design and
implementation of a Decentralized Identity (DID) architecture to enable secure, privacy-preserving, and usercentric KYC. By leveraging self-sovereign identity (SSI) principles, verifiable credentials (VCs), and
cryptographic proofs, the proposed framework allows individuals to control their identity data while banks,
fintechs, and regulatory authorities can authenticate users efficiently and compliantly. The architecture
integrates permissioned networks, identity wallets, credential issuers, and verifier nodes, supporting
interoperability with existing financial systems. Security, privacy, and regulatory compliance—including AML,
FinCEN, and OFAC requirements—are embedded through robust cryptography, zero-knowledge proofs, and
selective disclosure mechanisms. The study concludes that DID-enabled KYC can streamline onboarding,
reduce operational costs, enhance user privacy, and strengthen overall financial ecosystem trust, providing a
viable path for next-generation identity verification in U.S. banking and fintech.