Page 63 - Pay Magazine

volume 10 • spring 2017
businesses and doesn’t give a chance for smaller, more innovative competitors to get a foothold.
However, I wonder if a banking license is the right approach. In contrast, the e-money license is clearly not a banking license, but
a new kind of regulated nancial services provider. I’m a bit con- cerned 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 en- compassing smaller innovators?
You probably already know I’m skeptical about banks because their very nature inhibits innova- tion. Is a bank charter misaligned with innovative payments entre- preneurism? Will consumers, especially those who don’t relish doing business with a bank, be confused or turned o ?
Paybefore: So, how might you advise the OCC?
CJ: It would be mindboggling if the OCC consulted the likes of us, but if he or his sta did, I know exactly what I’d suggest:
• Ensure a consistent, predictable chartering process, giving applicants certainty about the requirements, the process and the decision time frame.
• Deal with pushback from banks and others, like state regulators,
whose toes might be stepped on by a national bank charter for ntechs.
• Don’t make the barriers to entry too high. Capitalization and liquidity, for example, must be related to the riskiness of the enterprise, so assessing the real risk of an applicant is extremely important.
RC: I heartily agree with not making barriers to entry too high, including aligning compliance and reporting requirements with the risk assessment. There must be a proportionality between risk and regulation. And, I’d advise, be open to change. You’re not going to get it 100 percent right the rst time, so create a starting point and innovate and iterate as you gain experience. Unless you take the rst step, nothing will happen.
Paybefore: I can’t overlook
this opportunity to bring up Brexit. How will it a ect e-money licensing in the U.K.?
CJ: No one knows—it’s as easy as that. And, we won’t know for at least three years. Leaving the EU isn’t the same as leaving the Single Market, which is the agreement that drives the ability to passport
payments services across Europe. It’s possible for the U.K. to be out of the EU but remain in the Single Market. A lot of things have to happen over which we have no control, so everyone just has to wait to see how it plays out.
But, there are only two possible outcomes: The rst is that agree- ments are kept in place so that an e-money license granted in the U.K. can continue to be passported across Europe. The second is that an e-money license granted in the U.K. won’t be passportable. If this happens, the business would need a second license from an EU mem- ber state, which is hardly the end of the world.
Until we know how things will shake out, I contend that London is the best place for e-money licensing. We have the most experienced regulator and a well worked out process. Three years hence, if a business needs another license,
it’s easily addressed.
Paybefore: Any nal thoughts?
CJ: The sum and substance
of my advice is to put consumers rst. If you do that, you’ll never go wrong.
RC: Technology is moving fast, and banking and payments is moving faster. The U.S. has always been a leader in payments, but, right now, it needs to address its institutional barriers to innovation or risk sitting on the sidelines and watching the rest of the world pass it by.
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