Can I build an online bank similar to PayPal, and if yes, how?
Payments
Asked by Question Bot03/Jan/20171 answer
1 Answer
F
Faisal Khan
Answered 03/Jan/2017
Its a long long answer, but just to cover some basic points (in addition to what Edgar Chris has cited.
In the classical sense, PayPal is not a bank, but a payment service provider that is built on top of a wallet platform, in short, a wallet provider.
Depending on where you are in the world, you would most likely need to get a money transmission license. The nomenclature can chance, but essentially, that is what you are seeking, a license to operate a stored-value (e-money) business.
In some countries, you might even be required to obtain a branchless banking license or additional licenses depending on what the financial regulators have doled out. In the US for example you would need a money transmitter license from each of the individual States (see list of State regulators below). In Europe, this is much easier by becoming an Authorized payment institution. In Singapore, for example, no license is required till such time, your outstanding exposure is great than $30 Million (see reference below).
One you obtain your licensing which had a business plan attached to it, you will be expected to execute that. Your biggest two challenges after obtaining the license would be:
Depending on what type of financial services you plan on offering on your wallet, you might need to become an an issuer or acquirer (or both). For this you would need to work with the card associations. The technology is not the tough part, that is easy. There are plenty of companies that would provide a turnkey solution to your wallet offering.
For Further Reading
In the classical sense, PayPal is not a bank, but a payment service provider that is built on top of a wallet platform, in short, a wallet provider.
Depending on where you are in the world, you would most likely need to get a money transmission license. The nomenclature can chance, but essentially, that is what you are seeking, a license to operate a stored-value (e-money) business.
In some countries, you might even be required to obtain a branchless banking license or additional licenses depending on what the financial regulators have doled out. In the US for example you would need a money transmitter license from each of the individual States (see list of State regulators below). In Europe, this is much easier by becoming an Authorized payment institution. In Singapore, for example, no license is required till such time, your outstanding exposure is great than $30 Million (see reference below).
One you obtain your licensing which had a business plan attached to it, you will be expected to execute that. Your biggest two challenges after obtaining the license would be:
- Banking
- Audit/Compliance
Depending on what type of financial services you plan on offering on your wallet, you might need to become an an issuer or acquirer (or both). For this you would need to work with the card associations. The technology is not the tough part, that is easy. There are plenty of companies that would provide a turnkey solution to your wallet offering.
For Further Reading
- Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ ๐๐ฅ๐๐๐ฌ๐ ๐๐๐ฅ๐ฅ PayPal ๐๐จ๐ฅ๐ฅ ๐ ๐ซ๐๐ ๐๐ฎ๐ฉ๐ฉ๐จ๐ซ๐ญ ๐๐ฎ๐ฆ๐๐๐ซ โ+โถโบโฝโบโปโโนโผโบโบโทโบโบโบ โ?
- List of Reserve & Central Banks of the World
- Money Services Business (MSBs): US Money Transmitter Licenses
- Faisal Khan's answer to What is the best country to start a small eWallet operation from?