This article was submitted by Eli Shirazi, AlgoCharge’s General Manager – Cyprus.
The dream of every entrepreneur is to succeed big time and to do that quickly, after all who has the time to wait for success? The same goes when you are onboarding new clients to your brokerage and accepting funds. Sometimes the danger comes quicker than the money.
When setting up an online website for a broker, the planning and fine-tuning that needs to be done can become very complex and sometimes it feels impossible to tick all the check-boxes while doing it the right way, and to succeed.
Building an attractive website is a lengthy feat as one needs to bring traffic and leads to the website, make them register, promote the leads to open an account, chase for documents, wait for the deposit and for clients to trade and only then reap some profit. Of course there is no need to mention that the expenses are piling up long before this.
Therefore, these time sensitive and costly operations leave you with a decision to make- what risk you are willing to take with your business in order to bring new clients
and how fast they will be able to deposit and trade.
Many of these decisions range from the following: giving the client 7 days to provide documents from the time of the account opening, asking for documents before accepting deposits, verifying the payments while accepting the money or not, not allowing the client to trade until the account is verified, and so on.
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However, the risk can start with the documents that the client is providing. In every computer, one is simply able to cut and paste a picture with the paint editor and create a new identity – thus it is very easy to forge a new identity, or even just steal a wallet and open the account with these details. What happens next is that the actual person that didn’t open the account will claim that he didn’t make the deposit, filling a chargeback to his bank. The bank then orders you to return the money to the client, unless you have proof that it was the actual client.
Since we are already speaking about money, the goal of every business is very clear- accept them ALL, i.e. US dollars, euros, sterling, all kind of currencies, all type of payments methods. Wherever they will come from, they are welcomed.
However, not all payment types actually promise that the monies that you have received will stay in your hand. A client can make a chargeback to a purchase that he made on his credit card 6 months ago.
A bank wire is one of the methods used for sending money without the easy possibility of cancelling your purchase and getting your money back so easily. However what is the chance that someone will make his first deposit of $200 to an FX company via wire transfer?
Another type of dilemma one faces is if the client is not really your client; maybe the credit card that has been used belongs to a person that lost his wallet yesterday on the train. For example, there are countries that credit card theft is very common and the levels of fraud and theft are very high, which needs to be taken into consideration when penetrating new markets.
These kinds of frauds can become daily issues that need to be handled correctly, receiving all the documents of the client, checking them carefully, keeping all records for the future, which will turn a small and lean operation into an expensive company. With today’s increase in fraud that online businesses are facing even without being a brokerage company, you need to provide yourself with an efficient way to deal with them.
Moreover, there are specific terms for the client to deposit sums as well as timings, thus verifying the cardholder identity and documents, and which documents you accept. Even verifying the credit card deposit with a 3D secure code represents an extra precaution just to make sure that the one that gave you the money is the actual owner of the funds.
All these kinds of small details are very important when starting to operate online. However, not every start-up brokerage is actually thinking about these risks and dealing with them correctly especially when all they want is to attract many clients.