In today’s digital era, electronic-Know Your Customer (e-KYC) has emerged as a new paradigm for identity verification in financial institutions. It simplifies existing KYC process, expedites customer onboarding, and addresses the risks of financial fraud, money laundering, unidentified funding, etc. However, the key challenges associated with existing e-KYC systems are redundant KYC verification, inefficient privacy-preserving techniques, lack of secure inter-organization data sharing, human intervention, and scalability. To solve aforementioned issues, this paper presents Smart e-KYC: a privacy-preserving, optimized e-KYC framework built on consortium blockchain integrated with IoT and Improved Identity-based Proxy Re-encryption(IIBPRE). Specifically, IIBPRE in Smart e-KYC is constructed to achieve non-transferability, receiver anonymity, and collusion resistance with less computation overhead. Also, the framework ensures secure and dynamic access delegation of the e-KYC records among different financial institutions. Subsequently, to streamline the e-KYC process by avoiding human intervention and human errors, IoT devices are used. Further, to solve poor scalability issues of on-chain storage, Smart e-KYC imposes synergy between consortium blockchain and IPFS (Interplanetary File System). Moreover, formal security verification through random oracle model validates that Smart e-KYC is resistant against possible threats. The extensive test-bed experiments and comparison with existing schemes reveal that the proposed scheme has more functionality and security features, reduces computation time for encryption and decryption by 52.15% and 73.15% respectively, as compared to primary benchmark scheme.