Improving the Regulatory Onboarding Experience — #regtech
At Funding Societies, we are committed to providing investors with a simple and convenient account opening process. At the same time, as we are a CMS Licence Holder [1] and thus regulated by the MAS, we want to also ensure that we are always fully compliant with the relevant regulations. This means striking a balance between ease of experience for investors and complexities of compliance.
As we rely on the Small Offers Exemption under the SFA[2], we need to pre-qualify [3] investors before we can offer loans to them. Pre-qualification consists of several steps which we need the investor to fulfil. These include:
1) The need to complete a generic and neutral questionnaire
2) Administration of a “Knowledge or Experience Test” or “Suitability Assessment Test”
3) Providing a general risk disclosure statement &
4) Requiring the investor to acknowledge that they have read and understood the statement as well as accepted the risks.
The above raised concerns that onboarding would become cumbersome, discouraging investors. Thus, we deliberated on how we could streamline and simplify the process so that it would not deter investors seeking to open an account, perhaps even make the process more interesting, allow investors to reflect on their appetite for risk while onboarding expediently.
These are some of the concepts we came up with:
1) For a start, we agreed that the entire process would be carried out online via the Funding Societies website in order to keep the process convenient and the investor engaged.
2) The Generic Questionnaire would contain questions regarding the characteristics on the products available through our platform. However, we structured it such that all the questions would require a yes or no answer and that the investor would have to answer yes to all questions to proceed. By organizing it this way, we allow the investor to have a single step to answer all the questions; i.e. accept or decline the full set of questions.
3) For the next step, we had to choose between a “Knowledge or Experience Test” or “Suitability Assessment Test”. Here, we went with a Suitability Assessment Test because we felt that questions crafted in this regard would be easier to understand. From research that we did regarding Suitability Assessment Tests, we realised that there were usually many questions, e.g. sometimes as many as 14 questions; we also realised most of the time, forms had to be printed out. Thus, similar to what we did with the Generic Questionnaire, we looked to make this Test as simple as possible. The entire test would be conducted online and would have a list of suitability questions with 3 sets of answers. The investor would simply have to select one of the 3 sets of answers and this would determine his/her investment profile. Based on this answer, we would determine whether the investor is suitable for investing on our platform or not.
4) Lastly, we still needed to get the investor to read and acknowledge a general risk disclosure statement. This required evidence of affirmative action from the investor and we had several ideas on how we could implement this step. In the end, we realised that including this step as part of the signing of the subscription agreement would give the investor the least hassle since they needed to sign the subscription agreement regardless. Thus, we streamlined overall efforts such that the investor would be able to provide both the subscription agreement as well as the risk disclosure at the same time and both documents could be signed together.
These are just some of the ways Funding Societies is striving to continuously improve the user experience for investors. Regulations are evolving and as crowdfunding and FinTech become increasingly prominent, we can expect more changes along the way. Funding Societies bears this in mind as we keep moving forward. We stand ready to adapt and evolve to changes in the environment to provide world class customer experience.
If you are keen to make the onboarding experience more seamless or lead efforts even more exciting in #regtech, contact us at info@fundingsocieties.com
References:
[1] Funding Societies Pte. Ltd. was granted a Capital Markets Services (“CMS”) Licence under the Securities and Futures Act to conduct the regulated activity of Dealing in Securities by the Monetary Authority (“MAS”) of Singapore on 23 December 2016.
[2] Funding Societies Pte. Ltd. relies on the Small Offers Exemption under Section 272A of the Securities and Futures Act for the crowdfunding of business term loans.
About Funding Societies
Funding Societies | Modalku is the largest digital peer-to-peer (P2P) lending platform in Southeast Asia. It enables small and medium-sized enterprises (SMEs) by providing business financing which is crowdfunded by retail and institutional investors. It is currently licensed and operating in Singapore, Indonesia and Malaysia, and is the most well-funded P2P lending platform in Southeast Asia, backed by SoftBank Ventures Korea and Sequoia India amongst other investors. It is dedicated to the vision of funding underserved SMEs and improving societies in Southeast Asia.
