The Conference of State Bank Supervisors (CSBS) is asking for public comment on new proposed nationwide licensing requirements for money service businesses, including money transmitters.
Currently, requirements for money transmitter licenses vary by state, creating a complex system for applicants to navigate. The standards are the latest effort on the part of state regulators to maintain control over licensing these types of businesses while attempting to modernize and streamline the existing system.
The organization is proposing a set of nationwide requirements, limiting any remaining state-specific requirements to items not covered by the national ones.
“The goal of the proposal is a national standard that allows the state system to operate as a single network while retaining local accountability and local control,” CSBS President and CEO John W. Ryan said in a press release.
Many payment facilitators considering obtaining money transmitter licenses are early-stage companies with limited resources, according to Rob Ayers, CEO of Fintech Advisors, who helps businesses navigate the state licensing process.
For them, the licenses may not be worth the effort, leading them to explore other options. However, Ayers described a set of uniform standards as a “major step” in the ongoing effort by state regulators that could make licensing accessible for more companies.
A set of common standards would result in more efficiency and cost savings for applicants, he said. It would reduce the redundancies of multiple applications and avoid the disruptions caused by information requests from multiple state regulators.
“If they can hammer out the big points, it will probably allow more legitimate companies to participate in the process,” Ayers said.
Previously, CSBS has announced other steps toward more uniformity, such as the program it introduced last year that allows certain payments companies to undergo a single comprehensive exam to satisfy all state exam requirements.
“Creating a standardized licensing process will improve supervision for both industry and regulators,” Ryan said in this week’s announcement.
“Industry input is critical for this effort and for ensuring that the system remains responsive to the wide range of business models under state supervision.”
As that input filters in over the coming weeks, the success of this effort will depend on the ability of states to set aside differences on the details, Ayers noted.
“The biggest challenge is the ability of the various entities to compromise on a program that won’t be perfect but is acceptable to the individual states,” Ayers said.
Doing so would be good for all the players involved, he said.
“It’s about consumer protection and guarding against terrorist activity,” Ayers said of the licensing process. “Hopefully, there’s some widespread enthusiasm for it because, at the end of the day, it’s good for business.”
CSBS is accepting public comments until July 23.