E-commerce business are being confronted to a poor understanding of their activities and particular challenges, e-commerce banking needs are neglected in the training process of compliance officers.
So, as a result it’s often difficult to open and maintain a bank account for an E-commerce company.
This is clearly a strategic error from many financial institutions as tomorrow’s money has a strong component of e-commerce and tech related activities.
With compliance officers having little to no knowledge about digital marketing and e-commerce business practices the risk of being abused is important.
E-commerce banking characteristics.
- Systematic use of Paypal and Stripe and other payment gateways
- High usage of credit cards to pay traffic sources such as Facebook and Google
- Weekly payments to goods suppliers and fulfilment centers
- Payments to offshores companies (mostly for traffic sources)
- Payments to freelancers, often developers and designers in Israel, Ukraine, Philippines etc..
- Consumption of Fintech services for better Forex rates
- Large data to extract when analyzing sales and shipments
- Multiples changes of products, pivoting of business models
E-commerce banking, risks exposure
- Sales of regulated products and services
- Counterfeit products, dangerous goods
- Absence of deliveries
Most of the illegal and problematic activities will be detected by the payment gateways, this said what are the elements of controls?
- The traffic source is very relevant, the more legit (facebook, google, bing, Taboola,mgid) the better as the platforms have compliance teams working on their clients activities.
- Screenshots or share screen in real time of shopify, facebook stats etc…
- Metrics CPM, CPC, Conversion rates in line with market competition.
- Pixel tracking, adspy , adplexity tools to identify ads and publishers.
Compliance teams should have a minimal training on E-commerce and digital marketing, they will then ask the good questions, understand the business rapid growth and advise business owners on additional services to match their specific needs.
Opening a bank account in Hong Kong is a good solution, due to the proximity to the Chinese’s suppliers this will allow, hopefully soon, physical controls and in any case will preserve the cashflow by reducing transfer times.
By opening a bank account in Hong Kong, the time saving on T/T will allow to spend faster on ads and to scale up the businesses, in addition to a low tax environment and ease in term of management.