Licensing: Agent vs Program Manager

Now that you know, money transfer business requires a license, so which one will you opt for? There are two easy licensing options: (i) Being an agent of an existing license holder, or (ii) Having an existing license holder be your Program Manager. Learn the difference between the two.


Hello. My name is Faisal Khan. I’m a banking and a payment consultant. And in the how to start a money transfer business YouTube series, we are now discussing about a part of licensing.

There are many ways you can partner up, and you know, with other people and get a license and get license coverage. There are two predominant ways. One is obviously becoming an agent of a principal license holder. That means someone already holds a license and you become an agent. It is not too difficult. There are some regulatory filing etc. But there is something you have to be careful about. I’ve already talked about this in another video.

The PLH agency axioms you have to follow and the first axiom is that, as you know, the client will legally belong to the principal license holder. It’s not your client. The client, even though you’re on boarding the client, the client belongs to the principal license holder. If you walk into a Western Union store, the store owner could be a supermarket. The supermarket doesn’t own the client. Western Union does. Because the license is of Western Union license and store simply happens to be an agent of that. The first axiom is the client legally belongs to the principal license holder.

The second axiom is that the flow of funds has to be as such that it must flow through the principal license holders bank account. If you are collecting money on Western Union’s behalf and you channel without Western Union not knowing about it, needless to say that’s first of all it’s an illegal transfer. And second of all, it will not come under the purview of transfers done by Western Union, because Western Union has no idea that such a transfer occurred. So the flow of funds is such that the agent receives the money but it must traverse through the bank of the principal the license holder.

The third axiom is my favorite and it’s all about pizzas and stereos and let me tell you why. You must be, as an agent, in the same business as the principal license holder. So for example if the principal license holder is in the business of pizza, you can be in the business of pizza box, pizza making, pizza delivery, pizza topping etc. As long as you’re in the same vertical, that micro-niche vertical, you are good to become an agent. However, if you are in, if the principal license holder is in the business of let’s say pizza and you’re selling stereos. that’s clearly a mismatch. And you might have regulatory trouble in trying to become an agent of the principal license holder. It does not mean that if a supermarket, you know, you may say well how can a supermarket that sells food and groceries and vegetables etc. be an agent of Western Union. That’s not the intent. The supermarkets simply happens to be an avenue. The question is why did the supermarket become an agent of Western Union to do money transfer. That is part and parcel of what Western Union does, so money transfers. So again same playing, same playfield, same ballpark, same arena, that makes sense. But if that supermarket became an agent of Western Union to do all 9 e-commerce payments, that would be two separate things and hence a regulatory approval would not be given.

So in order to get the partnerships you can become an agent. The other thing is something called a program manager or a sponsor program manager. Which basically means that an existing principal license holder that already holds a license decides to host and run the program that you wanted to run. So if I wanted to make an app for money transfer well the license holder that I would partner up with, they will host the app, they will run it, they will provide the API, they will do all the banking, they will provide all the compliances and KYC etc. As a partner, I will be doing first level of customer support and marketing. I will not have access to the funds. I will not be touching the funds. All that is the responsibility of the principal license holder.

So you have two avenues, agent or remittance as a service or money transfer as a service or PLH sponsorship. The nomenclature varies but that’s essentially either you become an agent or the principal license holder become the program manager for it and let them run it for you.

I hope that answered the question. If you have any more, please feel free to ask in the comments section below. Till the next video, have a good one.

This page was last updated on September 1, 2022.

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