Remember way back in 2016 when the OCC advanced a proposal to create a special banking charter at the Federal level aimed at providing banking privileges to fintech companies? (A copy of that proposal is here.) Several states were not happy with that approach, believing that it encroached on their state banking powers and sued the OCC. In addition to the questions around which entity should have the power to regulate, the Federal government or the states, the other concern is the difficulty that fintech and other financial service providers have to offer products throughout the US. Today, to offer certain banking products, businesses need to seek permission of each states’ bank regulator. This is time consuming, not to mention expensive. In a recent development, some states are working together to make their banking approval process similar, making cross-state approvals more efficient. Reuters reported:
Banking regulators of seven U.S. states have agreed to simplify the way financial technology companies can apply for licenses, in a bid to make it easier for businesses to offer their services nationwide.
The states of Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington, will recognize each other’s findings when assessing the suitability of companies applying for money service business licenses, the national organization of state bank regulators said on Tuesday.
Money business licenses are used by a wide range of young digital companies that provide financial services, from money transfer startups to bitcoin exchanges.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
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