Investment Firms Need a New Way to Send Money

Every day, PE and VC firms transfer large sums for capital calls, distributions and new investments. And in most cases, they do so with an increasingly insecure, opaque wire transfer process that is begging to be replaced.

For those inside the actual operation of sending these funds, this isn’t news. The modern wire transfer process isn’t modern at all. In fact, this ‘modern’ method leaves the sender perplexed everytime. Once a wire has been sent, there’s no confirmation until the receiving party informs the sender. As PE and VC firms increasingly become a target for cyberattacks and fraud, this communication dead zone has become increasingly anxious. As a partner from a firm told us recently, “we click and we pray.”

The actual wire transfer - irreversible and limited in transparency - is not the main problem. Firms often need to deploy funds quickly, and for all their limitations, wires remain one of the most expedient ways to send funds. The larger risk is the flow of communication, often including sensitive financial data and personally identifiable information (PII), that precedes most transfers.

‍This information is often sent via email, bound up in various spreadsheets and attachments, and spread outside the boundaries of the firm’s security protocols. When time is of the essence, many transfers receive light security diligence at best. Some firms have turned to encrypted email software, only to find it difficult to deploy and an additional hurdle that slows things down. The value of secure email breaks down further once communication happens with outside parties who have different security protocols (if any).

Firms also have another regulatory burden to manage on the near horizon - the clock is ticking on the Corporate Transparency Act for 2024. Firms have until the end of the year to comply, adding an additional set of tasks to their KYC / KYB needs.

When we talk to partners, many candidly acknowledge their concern with the process. Words like “cumbersome,” “fragmented” and “unsustainable” come up often. But for those who have experienced a fraud attack firsthand - like the 3 firms who wired $1.3M to fraudulent accounts - the need to find a better way to fund could not be more urgent. A recent Lockton study found that financial firms are 300 times more likely to be targeted for cyberattacks. Firms should operate under the assumptions that they’re already on someone’s list of targets.

As our economy grows, PE and VC firms still need to be able to send funds despite their growing visibility as targets for cyberattack. It’s why we created 6lock, an invite-only, payments platform designed specifically to help PE and VC networks send, receive and track their money. With 6lock, firms and their service providers are securely invited, authenticated and fully attested. After connecting accounts, they can transfer funds securely, with real-time visibility and confirmation notifications.

PE and VC firms play a critical role in enabling economic growth and encouraging entrepreneurship. With 6lock, we’re creating the payments tools to help them easily make fully identified, secure payments.