There are a lot of pieces to building an online lending platform. For the peer-to-peer platforms, there are limits on the types of investors that can invest on the platform. Unless they have gone through a lengthy process with the SEC (Prosper / Lending Club) or they are issuing securities under specific state laws like Reg C or Reg D, which limits retail investors to those states, the platforms are limited to accredited investors.
Most platforms have their own ad-hoc, questionnaire based on the FINRA worksheet, and most of these platforms take the investors word. The SEC Committee Meeting a few weeks ago was focusing on investor limits, not necessarily accreditation verification, but it's not impossible to think that they might take a closer look at how platforms handle this verification process.
To that end, I've stumbled across two platforms that are relatively new that are trying to solve this problem.
Accredited Investor Solutions Their website looks very official (I picture government websites), and they have a number of verification options - much more than just "accredited investor". They will look at income, assets, entity / look through. Basically everything you need to verify that the investor, be it an individual or an entity is accredited. They actually have a very thorough product offering. Their website is a shopping cart. Select a product and add it to your cart and check out. It's a bit old school. It’s not clear if they have and API for the various platforms to use for automatic integration, but I hope they do.
One problem – The investor to buy the verification - which is CRAZY PRICEY. Just absolutely ridiculous, $100 for income verification? I can submit my tax returns for the last two years to a website, or I can submit a letter from a CPA or something, this costs nothing to investors. Most crowdfunding websites need to lower barriers for investor, this seems to just raise it a ton. Many websites don’t even let me look at the details of their offerings until this is complete – this is just a ton of friction.
Accredify.co, clearly shows a nice API for platforms – they even have a nice list of the platforms they are currently connected with. Additionally, it looks like they have a base verification that is free for investors that is short term, with a longer term package that will keep you verified for a year. It’s not clear if you couldn’t always just use the free verification for each platform, but that’s what I’d probably do, I’m not sure why you need to have instant verification all year long for this sort of thing.
The one thing that is nice about these two platforms is that they don’t share your financial information with the platforms, they only share the accreditation and type (ie 200K last two years or 1M investable assets). I’m not sure that investors care – I don’t particularly care.
If I were a platform, I would probably build this system out themselves. It’s pretty straight forward, can be purpose built and provides them a little bit more data about their investor base for product focus purposes.