- Key insight: AI-driven automation consolidates 50-state licensing workflows into a single checklist.
- What's at stake: Nationwide licensing inefficiency risks higher costs and slower fintech market expansion.
- Expert quote: Jo Ann Barefoot: state-based licensing remains "an extremely heavy lift" for nationwide firms.
Source: Bullets generated by AI with editorial review
When Rita Stephenson joined BitGo in 2017, acquiring money transmitter and lending licenses in all 50 states was a slog.
"Everything was done very mechanically," Stephenson, BitGo's regulatory licensing manager, told American Banker. She would have to fill out a form, sign it or get it notarized, create a PDF, log into the Nationwide Multistate Licensing System portal that banks and fintechs use to manage licensing and registration, upload the PDF into the system and keep print copies for her records.
"One task can pretty much take an hour and a half and imagine if you have 50 states with 20 to 30 tasks you need to do," she said. "It's a full time job, literally."
A year ago, BitGo, a Palo Alto-based digital asset custody and services provider, started working with the fintech startup Brico to use AI to automate the process of applying for and maintaining state licenses.
"Fast forward to today, and Brico has consolidated all of these tasks and requirements into a single licensing checklist that has made my life so much easier in regards to simplifying the process, being organized, and not having to do so many extra steps," Stephenson said. "Their API plugs into the NMLS and everything is done in a seamless way, in one place. You don't have to go back and forth in between emails and the NMLS."
BitGo is one of several fintechs that rely on Brico for such licensing work; others include Better, Marqeta, Bilt and Tilt (formerly known as Empower). This traction has led to 600% year-over-year revenue growth, according to Brico co-founders Snigdha Kumar and Edward Swiac, as well as investor interest.
This week, Brico closed $13.5 million in Series A funding led by Flourish Ventures, with participation from existing investors Restive Ventures and Pear VC.
"What struck us when we heard Snigdha present was her personal passion and energy for this," Kabir Kumar, Flourish Ventures partner, told American Banker. "She understood the pain point because she had worked through the licensing maze herself at Digit." (Brico CEO Snigdha Kumar, who is not related to Kabir, worked at savings app fintech Digit for five years.) "When I spoke to her, I instantly knew I was talking to someone who understood deeply how challenging it is."
He also liked Snigdha's goal of making licensing joyful.
"She said she wants the folks that are unseen and unspoken who are doing this work, which is so critical – without your license, you cannot operate – doing this hard work, I want them to have some joy," he said.
The new funding will let Brico expand its license coverage, launch predictive compliance tools and build licensing agents to handle regulatory workflows, the company said. It also plans to double its team over the next year to meet surging customer demand.
What it does
Obtaining state licenses is a notoriously onerous process. Crypto firms have called out New York's BitLicense, for instance, for being excessive. Jesse Powell, CEO of Kraken, which moved out of New York and is now based in crypto-friendly Wyoming, in 2018 called the BitLicense "a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth." Since then, New York regulators have softened their approach and dropped their paper-based process to join the NMLS.
"Our state-based regulatory system has plenty of merits, but it's an extremely heavy lift to get those licenses, not just because the standards are high, but because to build a nationwide business, you have to do it 50 times," said Jo Ann Barefoot, CEO and co-founder of the Alliance for Innovative Regulation. "The process is expensive, time-consuming, and filled with potential to make paperwork errors that trigger more delays and more costs. There's a lot of room to use technology to increase efficiency, which in turn can benefit consumers by reducing costs and expanding competition."
Brico helps "navigate a lot of ambiguity about what does this regulator need versus that regulator, and then create documents by just knowing a few pieces of information," Snigdha Kumar explained.
Brico's software uses AI to help gather regulations, requirements and statutes from all 50 states for fintech and banking licenses, including money transmitter, lending, collection, mortgage and crypto licenses. It helps customers create documents and automate form filling and notarizations. It creates first drafts of the quarterly and annual reports state commissioners ask for.
But it also uses AI conservatively in its tech stack, Kumar said, "because we are building for a regulated entity, and if you get something wrong, it's a massive erosion of trust, and can have a big impact on the company."
Brico automates the ongoing work needed to maintain licenses and to stay in compliance with state requirements. It handles integration with whatever financial reporting and transaction monitoring systems companies already have.
"Because we are integrated, every quarter, you have to do less and less and less," Kumar said. "That's actually what the biggest value prop is: faster speed to market, less effort on the side of the team, and then honestly, one-tenth of the cost people have to pay right now."
Normally, applying for a money transmitter license would cost $1.5 million to $3 million, Kumar said.
"It's mostly legal time helping you fill forms, navigate portals, do signature pages for you," she said. "And we took a view that all of that is admin stuff. It can all be automated with some experts in the loop."
At BitGo, Brico saves about 50% to 60% of Stephenson's time, she said.
Like TurboTax, Brico helps users understand legal and regulatory terms that might be baffling.
"It definitely cuts down on second guessing what regulators' meaning is behind a certain requirement," Stephenson said. "You could ask 10 attorneys and get 10 different answers. Oftentimes the statutes are vague. They don't necessarily spell things out, particularly in a regulatory landscape that has not been developed, and there's a gray area. Brico simplifies it and spells out what it means."
Attracting investment
Flourish Ventures is an $850 million global early stage venture firm that has invested in Chime, GrabFinance, Mantl (which was acquired by Alkami), SeedFi (acquired by Intuit) and United Income (acquired by Capital One).
Along with leading Brico's Series A this week, Flourish also participated in Brico's seed round last year. The startup fits within Flourish's view that the fintech applications that will be most successful are those that "go deep in niche workflows and reinvent them on these foundational models," Kabir Kumar said. "And this is as niche as it gets. For all of those reasons, we are doubling down, and all the investors are doubling down." He declined to say how much Flourish is investing.
Demand for financial licenses has been growing and the process is expensive, Kabir Kumar said.
One Brico customer told him obtaining and maintaining licenses could cost $9 million to $10 million over three years.
"You're not going to replace law firms, you're not going to replace the relationship with the regulators, but there's a whole lot of this process that's effectively documentation and orchestration of all the pre-requirements for the license and making sure that you are compliant with that license," he said.
New categories of financial licenses are still emerging, Kumar said. For instance, California recently came out with a license for earned wage access providers.
Brico is not handling bank charters right now, because they are difficult to automate and involve a lot of human effort. Snigdha Kumar said this could change if bank regulators make these charters easier to get.
"I don't think bank charter applications would be easily automated, because they are much more complex and bespoke," Michele Alt, co-founder and managing director of Klaros Group, told American Banker.
Kabir Kumar said it's highly likely that Brico will be able to automate the bank charter process in the future, and take on cumbersome parts of the process.
"There's documentation. You have to aggregate internal company documents to apply for a license," Kumar said. "Why can't software handle that? You need to gather fingerprints. Why can't software handle that? You need to fill in the application based on the internal company data. Why can't software handle that? Fundamentally, those functions remain the same regardless of the license type."
