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KYB for every stage of a business

A helpful framework for companies entering financial services and adjacent industries involves considering a crawl, walk, run approach to compliance and risk mitigation. Check out our playbook for success for regulated and unregulated companies of all sizes in this guide.

Optimizing user growth while effectively mitigating risk is a delicate balancing act; this challenge is nothing new for operators in fintech. Most risk mitigation techniques involve introducing points of friction to deter bad actors. Friction limits conversion and growth potential. Never has this tradeoff been more prevalent than the current tech market, where there’s pressure from all sides to improve growth rates, reach profitability, and reduce exposure to risk.

Key Takeaways

  • Early-stage startups often struggle with finding consensus on how to approach compliance and risk. There’s pressure from investors to grow fast and find product-market fit, while regulators have increasingly high standards for enforcing controls that effectively limit growth. This leads to natural tension within the company, typically between the compliance function and growth/product teams. 
  • Fraud is growing ever more sophisticated and complex. When executed successfully, fraud attacks are not carried out by lone hackers, but through large-scale, highly technical operations run by professionals who know how to exploit weak points in the financial system. The lines between money laundering and fraud are increasingly blurred, as criminals use social engineering tactics or even threats to convince vulnerable consumers to willingly move the proceeds of crime for a commission. 
  • Every business that processes payments online (not just regulated financial institutions) must be wary of the risks of fraud and other types of financial crime, and develop risk assessments and compliance strategies to mitigate relevant risks effectively.
  • Understanding the nuances of financial compliance - and building products that mitigate risk effectively while maintaining a frictionless customer experience - are massively complex problems to solve. In order to do this well, fintechs and banks need to understand the regulations that govern them and the relevant risks to their business, just as much as they need to understand the needs of their customers. 

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