Don’t Bite the Hand that Feeds Millions

MSB Talk 4

Amidst all of the regulatory oversight and compliance scrutiny MSBs are faced with in the United States, it is easy to lose sight of how noble our cause is. Many of the world’s nations rely on money remittances to support their citizens. Our job as industry participants is to provide our niche client base with simple and affordable ways to support the world economy through international money transfers. It doesn’t take long to see the value US money transmitters bring to the underdeveloped nations after spending time within their borders.

A few weeks ago I had the opportunity to visit an underdeveloped region on a trip to setup correspondent partnerships and bank accounts for a money remittance company I’m involved in. I couldn’t have been more impressed by the region and their willingness to work with us. I was also astounded by the genuine gratitude the business and government leaders showed us after discussing our business plan.

Never before had they been approached by a money transmitter focused solely on supporting and growing their economy. Both banks and government entities welcomed us with open arms. Not only were they excited about our partnership, but they wanted to know how they could further help us reach their citizens. Make no mistake, there are other US money transmitters sending funds into their countries, but it was apparent that the perception of these mega companies was that they were extracting more value than providing. It takes more than a capitalistic desire to make money in order to make a positive difference in the lives of others and our new friends saw the difference immediately.

The highlight of the trip was receiving an invitation to present our business at an upcoming banking and economic development association conference for the region. I know my story is not unique, as many of you launched your businesses with the purpose of serving your people, but this experience opened my eyes to the positive impact our industry is making throughout the world. Regulatory, compliance and banking concerns are not going away, but at least we can take pleasure in the service we are providing millions of people across the globe.

~ Brian Nelson

NMTA Logo

As a quick plug, I’m the event coordinator for the upcoming Virtual Currency Compliance Conference (VC3 2014) being hosted by the NMTA in New York on August 13th. We’d love to see you there. We’ll have the event page up shortly on http://www.nmta.us

The Future of Money Remittance

MSB Talk 4

Update: Carter Dougherty released a great article for Bloomberg this morning that better articulates my point. 

The protocol of Bitcoin and other digital currencies provide perfect platforms to disrupt the money transfer industry. It’s no secret that remitting money around the world can be a costly and often times lengthy process. The current financial system requires money transmitters to use antiquated procedures that include multiple touch points.

A Personal Story

I spent 2 years living in the Dominican Republic. While living in the DR I regularly received money from family in the US. Because I was in the country on a service mission, I did not have a personal bank account which made receiving funds very difficult. At the beginning, my family used traditional money transmitters in the US. They would wire money to the company in the US and then the company would use an agent in the DR to issue me the funds. Everything seemed to work smoothly to my family, but to me the process was difficult and costly. It took 3-4 days from the time the transfer was initiated in the US for me to receive the funds and I typically only received 80-90% of the original transferred value.

Things haven’t changed much since my time in the DR, but thanks to digital currency protocols, FinTech entrepreneurs are beginning to address the long standing issues of money transmission. Using a digital currency protocol to transmit funds is a less expensive and faster solution. Transfers made on the Bitcoin network for instance can be done for less than 1% and can be settled in less 15 minutes.

An Example

In a December 2013 article published by Coindesk, Coincove, a California based company, is featured as the poster child for digital currency based money transmitters. Coincove uses the Localbitcoins platform to make remittance easier in Latin America. However, the Localbitcoins platform is built on an in-person marketplace and although it is substantial and growing at a rapid pace, digital currency money transmitters must seek a better long-term solution before they can effectively support the billions of dollars remitted annually.

Conclusion

We are in the infancy stages of digital currencies so we can expect to see major improvements in the digital currency money transmitter space in the coming months and years. Traditional money transmitters should take notice now and begin developing a strategy to leverage digital currency protocols.

If you’re interested in seeing an example, I suggest looking into Ripple. Please let us know of other examples in the comments section.

Full Disclosure: I am not associated with or receive payment from Coincove or Ripple in any way. 

Author, Brian Nelson

IMTC Conference Review – Industry Disruption: New Payment Protocols

MSB Talk 4

Mohr World Consulting along with the NMTA held another great conference for money transmitters in Miami Florida last week. The IMTC Miami conference has become the world’s largest conference dedicated to the money transfer industry and continues to grow year over year. It was great to see old friends and new faces as we all work together in building a more compliant and accepted industry throughout the world.

My main take away: New technologies are beginning to disrupt the money transfer industry.

Bitcoin

Although they are still in their infancy, protocols such as the Bitcoin protocol and Ripple are starting to compete with Swift as a transfer settlement tool. The new technologies are making money transfers easier, cheaper and more secure. However, it is apparent that these technologies still have a long road to travel before they have the traction and volume to make a big impact on the industry.

Traditional money transfer companies are hesitant to make any changes with their operations because of the potential compliance issues associated with using the new protocols. But…that will quickly change if companies like Ripple succeed in landing a couple big name money transmitters.

It was apparent during the Virtual Currency panel, that traditional money transmitters are still not convinced of the power of Digital Currencies. However, a number of individuals in the room later expressed interest in either partnering with Bitcoin companies or using a service that would provide a better settlement tool using the Bitcoin protocol. Now that the ball is rolling, it’s only a matter of time before the industry adopts new protocols to facilitate money remittances.

All in all, I truly enjoyed the conference and look forward to reconnecting with everyone again soon.

– Brian Nelson

The Virtual Currency Compliance Conference (“VC3”) by the NMTA

MSB Talk 4

I am participating in the Virtual Currency Compliance Conference (“VC3”) being held in New York on Wednesday the 14th. The conference is being hosted by the NMTA and will focus on the issue of compliance for virtual currency operators. If you or your company have any interest in virtual currency, then you don’t want to miss VC3. Below is a great article about the conference provided by PRWeb.

– Brian Nelson

Former FinCEN Director Freis to Address the Virtual Currencies Community

On Wednesday, August 14th, at the New York City Bar Association, former Financial Crimes Enforcement Network (“FinCEN”) Director James H. Freis, Jr. will address the first Virtual Currencies Compliance Conference (“VC3”), proudly hosted by the National Money Transmitters Association (http://www.nmta.us)!

Few can speak as authentically as Mr. Freis on the federal approach to regulation of new money transfer technologies. It was during his tenure that FinCEN first issued rules on how the BSA would treat prepaid access (or stored value) products, including mobile and internet money transfer.

Recent guidance from FinCEN further clarified that virtual currency Exchangers and Administrators were also to be considered money services businesses (“MSBs”) under the Bank Secrecy Act (“BSA”). A short time later, Cease and Desist Orders were sent to many Bitcoin operators by the State of California, due to their lack of state licenses.

Some virtual currency entrepreneurs, well aware of their anti-money laundering (“AML”) and state licensing obligations, integrated regulatory compliance into their business plans from the start. Some, however, may not have planned on the expense of compliance. They will now have to implement AML programs, get state-licensed and register with FinCEN, or risk facing criminal charges.

Industry members who come to VC3 will be enlightened by Mr. Freis and seven other compliance experts in interactive sessions, and by a panel of their industry peers at the end of the conference day.

There will be ample time to meet and chat with the experts and each other during a continental breakfast, buffet lunch and two coffee breaks. The day will finish with a networking cocktail mixer from 5:15 p.m. to 7:00 p.m.!

From 7:00 p.m. to 8:30 p.m., VC3 attendees who want to help shape and protect the future of their industry are welcome to attend a discussion of lobbying and self-regulatory strategies.

This meeting will be chaired by Ms. Constance Choi, General Counsel of Payward, Inc., one of the more than seventeen companies that have formed the Digital Asset Transfer Authority (DATA), a new self-regulatory effort that is making rapid progress and has garnered broad support from a large number of important industry players.

Do not miss this intensive learning and networking experience, register now. Early Bird pricing has been extended to August 14, 2013. Please call David Landsman at (917) 921-9529 to see if you qualify for affinity discounts.