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Government watch
Winds of Change
CJ: There are only two things— one has been addressed already, and the other will be addressed when the Second Payment Services Directive goes into e ect next year. I think Robert will agree that in- itially the capital requirement to get a license was set too high—
at €1 million (US$1.08 million). Fintechs couldn’t a ord to have that amount of capital tied up in
a bank account, so few applied. When the capitalization requirement was cut by about two-thirds—it’s now €350,000 (US$376,730)—in recognition of the relatively low risk associated with the activities of licensed ntechs, things took o .
The second situation has a parallel in the States with some MSBs being cut o from banking services. In the
U.S., the DOJ’s Operation Choke Point initiative caused some banks to close accounts of perfectly legitimate MSBs, leaving those businesses unbanked. In the U.K., some banks have refused to do business with ntechs because they see them as competitive threats. That’s been a problem.
RC: But, as you said, next year PSD2 will make it more di cult for banks to discriminate against “banking” ntechs.
Paybefore: OK, let’s get down to it. As European payments and e-money licensing experts, what do you think of the OCC’s exploration of a national bank charter for ntechs in the U.S.?
RC: The ability for a ntech to go through, essentially, one process to be able to do business across the U.S. is, of course, much needed and will spur competition. The current system of acquiring 53 MSB licen- ses to do business across America is a barrier to entry because of the time to acquire all those licenses and the cost, which I understand can be millions of dollars. The bank charter approach also avoids the situation experienced in the U.K., where banks withheld banking services from ntechs on com- petitive grounds.
CJ: Agreed. Protectionism isn’t good for consumers, and sti ing innovation and competition isn’t good for the economy—which is the e ect of the current MSB licensing situation. It favors big
I wonder if a banking license is the right approach. ... I’m a bit concerned that the requirements for this special purpose banking charter in the U.S. might be
too high for any except the very largest ntechs. Will it enable Facebook, Walmart and PayPal, for example, to become banks, while not encompassing smaller innovators?
—Craig James, Neopay
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