One of many challenges that FinTech companies have faced in the past is that they’ve had to apply for licensing in each individual state they hoped to operate in. A solution to this had been proposed to allow businesses to apply to be “Special Purpose National Banks,” although that plan has seemingly been delayed as regulators fear such a move could pose a problem for consumer protections. In the meantime seven states are now banding together in an effort to make the licensing process a bit easier for these firms.
Reuters reports that Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington state will share a licensing standard when it comes to money service businesses. This move should help FinTech companies save them both time and money during the process of obtaining licenses in these states. In a statement about the change, John Ryan of the Conference of State Bank Supervisors said, “This [money services business] 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.”
While this is a positive development for FinTechs — especially startups that have not already gone through the licensing phase — it does once again highlight just how cumbersome the process has been up to this point. Furthermore there hasn’t been much in the way of relief as of late with the long overdue “special purpose national banks” announcement happening more than a year ago without further action coming to bear. As for the seven states involved in this pact, it would appear that they now have a competitive advantage over those who impose greater restrictions on incoming and upcoming companies. Perhaps if all goes well this with this arrangement it could help further the argument for a national solution and get that debate back on track.