Money Transmitter License Coverage Financials

Understanding the financials behind Regulatory Coverage for Money Transmitter Licenses in the United States

The Process

When you submit an application for Money Transmitter License Coverage, your information is collated and then a template is made for circulation amongst various Banks and Non-Banking Financial Institutions.

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Banks and other non-banking license holders will then look at the opportunity resume and determine if they want to work with you or not. In most cases, banks and other license holders have set dates on which they meet up regularly to discuss suggested future business that might be coming their way. Sometimes it is a committee, many-a-times it is the CEO (of the Principal License Holder company) that is making the preliminary decision to explore further, or not.

If they decide Yes, then usually they have a list of questions that they would like to have answered (through me). Most of the time neither does the institution that is willing to provide money transmitter license coverage to you know of your name nor do I disclose to you the name of the license holder. Obfuscated information is exchanged most of the time (albeit, there is no guarantee for that to be the case all the time).

When all the questions have been answered, the Bank or the Principal License Holder may decide to say Yes or No.

In the event of a Yes, then a referral agreement between the entity seeking money transmitter license coverage and I must be in place. To understand how I charge for my consulting when it comes to regulatory coverage, please read: How Do I Charge For Commercial Services?

The Financials

The term sheet that is quoted by the bank or the license holder, varies from institution to institution. It also very much varies on what type of coverage is asked for, what is the business you are in, how much business you will generate, the risk profile, etc.

Generally there are a multitude of fees assigned and they would be something like this.

One-Time Setup Fees

The one-time fees as the name suggests is an NRC (Non-Recurring Charge). It is levied by the institution for establishing the relationship and in most cases is a premium you pay to do business with them. In some cases, there are absolutely zero costs to sign-up, but a premium is levied nonetheless to start the relationship.

One-Time Setup Fees Cost
Minimum $0
Average $5,000 to $7,500
Maximum $15,000
Difficult Cases $20,000 to $25,000

Know Your Customer (KYC) Fees

Institutions have to implement KYC Fees. Typically, KYC fees are valid for 12 months. So if a user signs up on say 8th February 2018, and you have assessed a KYC fee of say $2, then on 7th of February 2019, the KYC must be performed again on the client and the prevailing KYC fee is also applicable. So all KYC rates are one-time, valid for 12 months unless otherwise stated by the term-sheet.

Know Your Customer Fees Cost
Minimum $0
Average $1.50
Maximum $3
Difficult Cases $5

Monthly Recurring Fees

Whether you bring business to the bank/license-holder or not, there is usually an association fee. The institutions have put together a client profile to service you and this costs money. Some institutions absorb the cost, most do not. In some cases, the cost is offset with the number of transactions you are allowed.

Monthly Recurring Fees Cost
Minimum $0
Average $750
Maximum $2,500
Difficult Cases $5,000

Network Charge (Per Transaction)

For every transaction that is handled by the bank/license-holder, there is a network charge applicable. This is the charge that is irrespective of the value of the transaction. The transaction can be for $50 or $300,000, the network charge is the same. It is a culmination of various charges (including fixes costs the bank/license-holder have to pay), compliance costs, screening costs, network access costs, back-office costs, etc. In many instances, this charge is included in the monthly charge. Meaning if a network charge is $0.50 and your monthly recurring charge is $1,000 – then you are essentially allowed 2,000 free transactions before the network charge would be applicable over 2,000 transactions.

Network Charge Cost
Minimum $0.25
Average $0.50
Maximum $0.75
Difficult Cases $1.50

Volume Charge

The volume charge is how the bank/license-holder really makes money. It is a very small percentage of the total Dollar value being processed by the institution. It is always represented in basis points (1% = 100 Basis Points). For example, if the volume charge is 40 basis points, this means, 0.40% or $4,000 for every $1 Million processed.

Volume Charge Cost
Fixed Fees (i.e. no volume charge) 0
Minimum (for high volume) 25 Basis Points
Average 35 Basis Points
Maximum 45 Basis Points
Difficult Cases 80-120 Basis Points

Needless to say, these are indicative prices. Actual prices will be in these Average -to- Maximum range. Minimum range is applicable only when you have a sizable and healthy amount of ready transactions (i.e. you are not a startup but an established incumbent).

Volume charges may also differ on the amount of business you bring to the institution, in which case, slab pricing would be provided to you. Typically, slab pricing would be discussed only when you are providing consistent $10 Million or more worth of business per month of the last 90 consecutive days.

The fixed fees (Zero Volume Charge) is provided under very specialized circumstances. Where existing business volume is very high, margins are low and both parties agree on a higher fixed monthly fees (with slab pricing) to use the license.

Deposits

As with any business, bank/license-holder will require a deposit. Deposits can be used for a multitude of purposes. Pre-funding deposit, Chargeback deposit, Fraud deposit, etc.

In some cases the solution providers may require 1 -to- 3 -to- 5 days of average daily flows as reserves. It all is dependent on the corridor, the risk index, etc.

Deposit Requirements Amount Held
Minimum $15,000
Average $25,000
Higher than Average $50,000
Difficult Cases As per assessment

Chargeback & Returns Fees

This is the fees levied by the solution provider for investigating any chargeback &/or returns fees.

Description Fees
Chargeback & Returns Fees $15

Wire Fees

The Fedwire fee (domestic only) per wire shall be anywhere from $10 to $65 per transfer/type. You will be charged as per actual by the solution provider. Fees vary between providers.

Description Fees
FedWire Fees $10 to $65
Charged as per actual

Get Access to Money Transmitter License Coverage Today.

Fill out this form, and let us help you work with a licensed financial institution that would provide you with state-wide, nation-wide money transmitter license cover.