DEVELOPING PARTNERSHIPS WITH US LICENSED MONEY TRANSMITTERS
We all know that technology and the creativity surrounding the tech revolution is inspiring a vast number of payment innovations. Online financial services, mobile payments, eWallets, bitcoin & the virtual currencies explosion, smarter ATMs, tools such as contactless chips, beacons, geo-location, are seeking to make payments more inclusive, easier to use, to track and to market, safer, faster, more efficient, more tailored to every user, etc.
But where moving money is concerned there are always a number of issues that are continuously haunting the payments world, from the use of its methods, protocols, networks and tools for illegal activities to the possibility of scams and fraud. For a number of innovators all the regulatory and compliance supervisory schemes developed by government systems in the world are mostly obsolete, designed for a world that is not the one we live in now. When I meet with these innovators I explain that most of us, the entrepreneurs of the existing non-bank financial companies, have always been very frustrated with the system. And that is true in most countries in the world. I do understand that the problem is extremely complex: the state control of money mentality, the need for democratization of payments and financial inclusion, the consumer protection ideals, the regulator mistrust mindset, the bank-government balancing act and the politics that surrounds it – aggravated by their role in the past economic crisis.
Amidst all of this, I insist that for innovation to keep on pushing boundaries we all need to be more open and creative. The traditional companies need to make changes, evolve, plan, invest, partner. The regulators need to think outside of the box. Innovators must make an effort to understand why we are where we are and think that maybe they can’t do it alone. In the United States, because of the state licensing laws, you need to obtain different licenses in 48 states which is an immense burden. That is unreal for most payment professionals in other parts of the world.
But when I read Judie Rinearson’s article in the American Banker “Surprise: State Licensing Laws Could Help Payments Innovation”, I was immediately inspired. There it was, the leader of at Bryan Cave’s prepaid and emerging payments team expressing very clearly: “How can smart, talented entrepreneurs possibly develop and launch innovative new payment programs and still remain compliant in this environment? This issue is particularly critical [in the US] because of the opportunities presented by cryptocurrencies and the block-chain structure that has the potential to revolutionize payments globally.”
I could quote the whole article but it is important that you click this link, http://bit.ly/1yd0FLW, and read it yourself even if you are not US based. If you are a payments innovator or a MTO in any place in the world, thinking that you should avoid the US Market because of its complexity, this article is also for you.
Judie will be presenting her views on this subject at IMTC USA 2015 in Las Vegas in March; see the latest agenda update here. Judie adds: “Most importantly, establishing an authorized delegate relationship between an innovative new payments company and a licensed money transmitter can create a “win-win-win-win” situation that benefits everyone. The consumers’ funds are fully protected. The startup company can safely pursue its product development efforts, furthering payments innovation.” I think everybody agrees with the benefits, but many do not see any willingness of State Regulators to allow this or being open to consider innovative agreements. And that makes licensees weary and prevents them from even consider proposals. Or they are pricing themselves too high.
Recently, Judie testified at the January 2014 Virtual Currency Hearings before the New York State Department of Financial Services regarding regulation of virtual and crypto currencies. This hearing was widely followed and is available for viewing online: http://www.youtube.com/watch?v=4OEJiWhCOEk. You can also read the PDF version here: http://on.ny.gov/1wuCxE0 . Will traditional Licensees consider AD agreements with virtual currency money transmitters in the US?