State regulators launch joint multistate licensing process for fintechs, MSBs
WASHINGTON — A group of state regulators will soon begin offering a simpler licensing process for money-services businesses, including fintech firms, to operate across multiple states.
The pilot for licensing money servicers will initially be offered by seven states including Washington, Georgia, Texas and Illinois, the Conference of State Bank Supervisors announced Tuesday. The move is mainly in response to fintech firms that have long argued that the main route to doing business is by getting a license in each state, which can be a cumbersome and repetitive process.
“This is something that we can do to create licensing efficiencies with these companies, hopefully help get them off the ground and it doesn’t sacrifice consumer protection,” Charlie Clark, agency deputy director and director of consumer services at the Washington Department of Financial Institutions, said in an interview.
Kansas, Massachusetts and Tennessee are the other state regulators that are part of the pilot. The Conference of State Bank Supervisors plans to launch a pilot program in April, when regulators will begin identifying companies as potential candidates, Clark said.
“Our goal is that this will be a model for an agreement that other states can adopt and sign onto,” he added.
Creating a more uniform licensing process is a part of a larger strategy launched last May called Vision 2020 in which the state regulators are trying to streamline state regulation to help fintech firms and other nonbank money-services businesses, called MSBs.
Each state will keep its own differences in licensing laws, but there are ways of using the same paperwork and sharing exams, for example, that regulators are currently reviewing. The Conference of State Bank Supervisors aims to have all 50 states agree to a uniform licensing process by 2020.
“This MSB licensing agreement will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broad participation by other states across the country,” John Ryan, the president and CEO of the bank supervisor group, said in a press release.
The pilot program could also help make a state license more attractive to fintech firms that are debating whether to do business by state or wait for a federal regulator to create a national charter.
For roughly two years, the Office of the Comptroller of the Currency has been considering whether to offer some form of a national charter for fintech firms.
The state bank supervisor group has a pending lawsuit to block the OCC from chartering any nonbanks. However, it’s unclear what direction the OCC will take with the project under the new leadership of Comptroller Joseph Otting, who took office in late November.
“I’m not sure what it looks like, and how it's funded, but I do think there’s a space there that a technology solution can solve,” Otting, speaking during a press conference in December, said of a potential fintech charter.
Clark said the pilot licensing process will be broken into two phases for applicants. The first phase combines the initial licensing requirements and documents, such as background checks, into one process under the same turnaround time so the applicant does not need to repeat the same process for each state. The second phase includes any additional requirements that an individual state might have. State regulators will also consider more changes to the pilot as other regulators participate, Clark said.
“We’re always trying to improve and make the process of state licensure more beneficial,” he said.