What are the benefits of leveraging existing money-transmitter license holders instead of obtaining a full bank charter?
Banking
Asked by Question Bot12/May/20161 answer
1 Answer
F
Faisal Khan
Answered 12/May/2016
MSBs who have Money Transmitter Licenses (MTLs) have their own set of advantages/disadvantages versus owning a bank (state or national charter).
With MSBs the most immediate advantage is being able to have the ability to appoint an Authorized Delegate (aka Agent), which is an extremely difficult task to do with a Bank Charter (Credit Unions are different, a credit union can appoint an agent).
With a Bank charter, if the primary business is that of money transfer, then needless to say, you pretty much own the entire value chain of processing that transfer. One big factor to consider is that the product has to be owned by the bank to get the 50 States MSB exemption.
However, banking has its own set of challenges that comes from both the State and Federal regulator. Mortgages & Loans is one, adequacy requirement is another. With MSBs the maximum adequacy (in terms of surety bonding) is US$ 2 Million.
On a paperwork and filing mechanism, an MSB would trump a Bank any day of the week and twice on Sunday as far as the volumetric work that goes in reporting is concerned. MSBs get more regulated than Banks (think x50).
MSBs have to rely on banks to move their money, and now with the entire de-risking phenomenon that is taking place with Banks and them onboarding MSB as clients, getting access to banking is a huge issue for MSBs nowadays.
The money (or float) collected from clients, can be utilized in overnight lending by banks, with MSBs, pooled accounts cannot be used for any sort of lending/investments, etc.
With MSBs the most immediate advantage is being able to have the ability to appoint an Authorized Delegate (aka Agent), which is an extremely difficult task to do with a Bank Charter (Credit Unions are different, a credit union can appoint an agent).
With a Bank charter, if the primary business is that of money transfer, then needless to say, you pretty much own the entire value chain of processing that transfer. One big factor to consider is that the product has to be owned by the bank to get the 50 States MSB exemption.
However, banking has its own set of challenges that comes from both the State and Federal regulator. Mortgages & Loans is one, adequacy requirement is another. With MSBs the maximum adequacy (in terms of surety bonding) is US$ 2 Million.
On a paperwork and filing mechanism, an MSB would trump a Bank any day of the week and twice on Sunday as far as the volumetric work that goes in reporting is concerned. MSBs get more regulated than Banks (think x50).
MSBs have to rely on banks to move their money, and now with the entire de-risking phenomenon that is taking place with Banks and them onboarding MSB as clients, getting access to banking is a huge issue for MSBs nowadays.
The money (or float) collected from clients, can be utilized in overnight lending by banks, with MSBs, pooled accounts cannot be used for any sort of lending/investments, etc.