Customer Categories and Customer Tags
When you are a FinTech startup just coming up with a beta product, the minimum of the minimum customer tags and categories you need are:
- Legal entities vs natural persons
- High risk vs standard risk customers
As you grow, have more customers and add complexity, you can build on it and add the following elements (one at a time):
- Customer support or customer experience flags: VIP customers, high dispute rate customers, customers with pending issues (e.g. promised to send documents, etc).
- Industry category for merchants (I recommend using MCC codes, even if you are not yet in the cards business), based on their business line, because some industries are definitely riskier than others or require certain settings (e.g. airlines or concerts with long delivery times, financial services, sales of alcohol, gambling, adult services...)
- Insider accounts - so that you can tag you insider accounts (including accounts created for training or testing)
- For investment activities you may need to assign eligibility criteria for certain products or services, for example, you may need to tag professional investors, or investors eligible for certain services types
- Linked Accounts (based on shared devices, shared address, shared beneficial owners, or shared payments instruments and some other known shared attributes that you are able to detect).
Your head of product or engineering team may not like this suggestion right away, they would probably feel like it's just bells and whistles. However, I guarantee you, you will definitely thank me for implementing at least some these customer flags before your first AML audit, because you will be able to save a lot of time on generating and processing manual reports or otherwise producing manual evidences of your compliance monitoring program.
Later on, when you build your reporting and analytical capabilities, you would want to know your profitability per customer or "normal" dispute rate, you would want to experiment with tiered pricing and would need to setup reserves requirement. Being able to segment your customer population will be the key to getting it right, and it all starts with tagging.
And in order to be sure you are gathering the right information at the right time from your customers, we have developed the following KYC & Onboarding guide!
