Traditional law firms keep knowledge off-line and charge for access. Since our founding in the early days of fintech, our firm has opted for an open source approach to legal knowledge and collaborative study with clients, other firms and regulators to produce a quicker and deeper understanding of issues for all. – Open source fintech and crypto information

Atlas Currency and Payments Law Updates – Unique actionable content only

Short book on becoming an MSB – MSB research tool

Payment Processor Family Tree – Everyone you would want to know in U.S. processing

Neobank and other novel models – U.S. case studies in fintech solutions

Fintech, Crypto and DeFi Glossary – For all the jargon



Is there any startup that is not a payments company?

Leave a founder and a calculator alone in a room for 10 minutes and out comes a unicorn payments company. Let’s test this theory.

1. UberDidi Kauaidi, Lyft. Uber and most of its competitors are classic biller models. Some, such as Uber, may actually be going further and becoming MSBs. The Uber Gift Card terms, for example, allow a payer to deliver up to $2,000 of value from one user to another through a promotion code. Uber still has no FinCEN registration.

2. Airbnb. Using classic biller model language, Airbnb terms state: “Airbnb Payments serves as the limited authorized payment collection agent of the Host for the purpose of accepting, on behalf of the Host, payments from Guests […].” Airbnb has had its FinCEN MSB registration since 2014.

3. Palantir. According to Techcrunch reporting, one of the three industries serviced by this big data company is the finance sector, making Palantir payments support business.

4. Snapchat. With Snapcash, a Paypal collaboration, Snapchat hops on the band-wagon of other startups eyeing the presumed billions in P2P transactions.

5. Flipkart. Ebay & PayPal for India? This India-focused platform for sellers and buyers includes the following in itsTerms of Use: “You have specifically authorized Flipkart or its service providers to collect, process, facilitate and remit payments and / or the Transaction Price electronically or through Cash on Delivery to and from other Users in respect of transactions through Payment Facility.”

6. WeWork. WeWork is perhaps the unicorn that best distinguishes itself from a payments company, because its members are tenants of WeWork and actually purchase WeWork services, as per its terms of service.

7. Stripe.  At first blush, Stripe looks like a plain, vanilla PSP.Stripe is, however, registered with FinCEN as an MSB despite the fact that Strip’s terms of use say: ” Stripe is not a bank or a money services business (“MSB”) and Stripe does not offer banking or MSB services as defined by the United States Department of Treasury.”

8. ApplePay. In the inverse of all the other examples, everyone thinks of ApplePay as a payments business except Apple itself which thinks it’s just a gateway. The ApplePay terms refer to it as creating a virtual representation of a card for which Apple is not responsible.

5 Currency and Payments Law Mysteries Solved

1. Can a money transmitter license be rented? No. Licensed MSBs, such as money transmitters are licensed based on their specific business model, financial position, AML procedures and overall compliance profile. Some licensed money transmitters will, however, appoint authorised delegates or agents that assist in operating their licensed business.  Here are money transmitters licensed in New York and California.

2. Can and ISO Aggregate? Sort of. In the old days, ISOs had to treat merchants as stand-alone entities, each getting their own unique merchant account. The new Payment Services Provider (PSP) concept has allowed ISOs to step into the shoes of acquiring banks and actually create sub-merchants and MIDs for each of them.  The PSP remains liable for the transactions of each of the sub-merchants, but the PSP has the ability to quickly board merchants. See, for example, Square, Stripe and WePay.

3. Why isn’t ApplePay an MSB? Good question. It looks like ApplePay has managed to soak up all four corners of a payment transaction, less only the settlement of funds. It stores and tokenizes cardholder data, merchant transaction data within a proprietary gateway. Apple might eventually have to slog through the licensure process like everyone else in at least some states that cast the net wide on what constitutes money transmission, like Maine.

4. How much is your payments business worth? Generally, a multiple of the monthly revenue net of agent payouts. You should also look at the residuals on a static pool of clients. For example, look at the monthly revenue on your clients of one year ago and compare that to the revenue on those same old clients today. The difference between those two numbers is called ‘attrition’. You’ll want attrition to be as low as possible. There are many other factors, but concentration of clients of one kind or another will put downwards pressure on valuations.

5. Is Bitcoin Illegal. No it’s not. Just like other forms of barter, it is not illegal to sell goods or services in exchange for Bitcoin.  For example, a merchant selling computers can sell a computer for Bitcoin and not be in breach of the law. Where legal issues arise is on the accounting and tax treatment of the Bitcoin received and the process by which, if any, the merchant then elects to turn the Bitcoin into ‘real’ currency. Virtual currency exchanges, being businesses that exchange Bitcoin for real currency are also likely to need MSB licensing.

ETA. Our next show is the acquiring industry’s annual gathering, Transact15 March 31-April 2.

Adam Atlas Attorney at Law is licensed in New York and Quebec. Nothing in this e-mail should be construed as a legal opinion or commentary on laws other than in the two jurisdictions where the author is admitted.