FK-A038 — "Understanding SP Fees," Faisal Khan, April 2026 (related: FK-A037). An 18-page explanation of the economics inside a licence sponsorship arrangement: where each charge sits, who keeps it, and which parts of the economics remain available to the sponsored company. All figures are illustrative, not quoted prices. The scenario: a US principal licence holder covering a company under its money transmitter licences for transfers from the US into India, Mexico, Vietnam, the Philippines or Nigeria.
The principal thinks in US dollars
Its commercial relationship with you is denominated in USD. Unless it has specifically agreed to provide FX and payout, it is not focused on the destination currency at all.
The transaction fee, and why volume matters
On a $100 transaction at 50 basis points (0.50%), the principal earns $0.50. Pricing falls as committed volume rises because the principal earns over a larger base:
| Monthly volume | Rate | To the principal |
|---|---|---|
| $1 million | 50 bps | $5,000 |
| $10 million | 20 bps | $20,000 |
A lower rate on four times the revenue — which is why committed volume dominates negotiations.
Processing costs are separate
The principal's fee is not the cost of collecting the customer's money. On the same $100 with an illustrative $1 ACH cost: $100.00 less $1.00 ACH less $0.50 principal fee leaves $98.50 before FX, payout and corridor costs.
Five separate buckets in one transaction
The principal licence holder (regulated US origination infrastructure), the collection processor (taking funds off the sending account), banks and payment networks (their own rail charges), the payout provider (delivering local currency to the beneficiary), and whoever owns the FX (the spread over interbank — decided by contract).
The central question: who gets the FX margin?
In many sponsorship structures the US principal does not want to manage destination-country FX at all — it handles regulated USD origination and settles dollars with an approved licensed payout counterparty. If you or your payout partner handle the beneficiary-side FX, the FX economics may belong to you. This can dwarf the sponsorship charge: the principal may take 20–50 bps for regulatory coverage while an FX margin of 100 bps, still competitively priced, represents significantly more revenue. Hence the paper's strongest claim: "THE DISCLOSED FEES ARE THE SMALL HALF. Whoever keeps the FX spread keeps the business, and that is decided in the contract, not on the rate board."
Two companies using the same US principal can have very different profitability depending on beneficiary-side partner quality, liquidity and FX execution. "The licensing solution is only one part of the commercial equation."
Payout partners
Ask before signing whether the principal already has an approved payout partner in your target country. It may speed launch, but interrogate the exchange rate and payout fee, who controls the FX margin, whether that partner competes directly with you, whether it sees your volume and customer data, and whether you can negotiate or replace it. "Do not discover this after you have already signed."
Bringing your own payout partner is possible but rarely quick: Three to four months would not be unusual, and the principal needs a commercial reason to do the work. At $100,000 a month of expected volume it may reasonably decline; at several million credible dollars a month the conversation changes.
The correspondent tie-up is not an informal arrangement between two regulated entities:
The aggregator model
A licensed aggregator may already hold payout agreements with 20–30 institutions, so instead of the principal building 30 correspondent relationships it establishes one: US principal → approved aggregator → multiple licensed payout partners. "An aggregator is not simply a shortcut around licensing."
Fixed monthly fee vs minimum monthly commitment
A common and expensive error: assuming a $4,000 monthly charge is absorbed by the first $4,000 of transaction revenue. A monthly platform, sponsorship, compliance or programme fee may be a standalone fixed charge — owed in addition to basis points, processing costs and pass-throughs. On a $5,000 monthly charge:
| Transaction fees earned | Fixed monthly fee | Minimum monthly commitment |
|---|---|---|
| $3,500 | $8,500 total | $5,000 total |
| $8,000 | $13,000 total | $8,000 total |
Under a fixed fee, basis points sit on top every month; under a minimum commitment, transaction fees count toward it and only the shortfall is paid. "Ask the question explicitly: is the monthly charge additive, or is it a minimum against transaction revenue?"
The monthly fee exists because maintaining licences has fixed costs regardless of volume.
You cannot usually bring your own vendors
Expect to use the principal's approved payment-processing infrastructure, and the same applies to KYC, KYB, sanctions screening, transaction monitoring, identity verification and fraud systems. "You are buying a regulated stack, not just a licence".
The nine questions to ask every provider
Onboarding (one-time fee and exactly what it covers); monthly charge (fixed or minimum); transaction charge (bps and how it tiers); processing (which fees are passed through — ACH, card, wire); FX (who owns the margin and who sets the customer rate); payout (which partners exist and whether you must use them); your own partner (approval process, minimum volume, timeline, extra charges); aggregators (permitted, and what due diligence); vendors (which you must use, where you may bring your own). "If you cannot answer these questions, you do not yet fully understand the price of the solution you are buying."
Model the whole chain
A 20 bps provider can cost more than a 35 bps one if it forces expensive card processing, poor payout FX and a high fixed monthly fee. The correct question is not "what is your basis-point fee?" but "what is my total cost of completing one successful transaction from the U.S. customer to the beneficiary?" — recomputed at $500,000, $1M, $5M and $10M monthly volume. **