But then, your business grew and the number of enquiries and potential customers ballooned. You even started receiving requests for information from far away places. Congratulations.
On the surface this is a nice situation for any new business to be in. In reality this marks the start of a very important process that has far-reaching implications, including whether your business will continue to grow or fall by the side.
Knowing your customers is a critical step that needs to be planned and carefully managed at every step of your growth. In many jurisdictions, getting this wrong will end up annoying regulators and possibly rest in mis-selling services to inappropriate customers.
When it comes to online investment, including equity crowdfunding and crowd investing, many market regulators require you to carry out minimum know your customer (KYC) checks. Here are some basics.
It goes without saying you need to be able to verify the identity of whomever is going to participate in a deal or project. This will often involve submitting proof of ID such as a passport scan or driving license. It may also cover proof of address such as a utility bill or bank statement.
Investor Type & Risk Profiling
As more regulators now specify rules covering the type of investor able to actively invest, it is common to see platforms include questionnaires that must be filled prior to being exposed to deal flow. The questionnaires' main purpose is to classify investor type and to ensure potential participants are aware of the risks inherent in the projects offered. In some markets, it is possible for parts of the screening process itself to be automated using national databases, bypassing parts of the questionnaires altogether.
Bad Actor Checks
While not often regulated, it's of course a good idea to screen for those who may have dubious histories - for their own sake and for the safety and well being of the whole investing community.
Anti Money Laundering
Commonly linked to proof of address and bank account details. These checks are important to help ensure all money trails can be verified and are not linked to any undesirable transactions.
Can you imagine carrying out the above checks for hundreds of new enquiries each week?
We can, which is why at Grow Advisors we help our clients implement highly automated processes that ensure rigorous investor due diligence for crowd investing platforms. This clearly gives clients peace of mind in a fast evolving industry - but also protects investors. The effect is a more robust crowd investing business model which attracts a greater number of investors, as they feel protected and secure within a screened community.
An ofter overlooked but critical area of fintech involves knowing your customer. Technological advances in personal big data handling, as well as the rise of sophisticated social networks allow the processing of business critical information in real time. Find out how we can help you.
Grow Advisors offers consulting and professional services on crowdfunding, crowd investing and p2p finance globally. Our advisors develop platforms that connect startup ecosystems, set up marketplaces and co-investment models, structured investment instruments, and find innovative ways to create finance solutions globally.