How to get Money Transmitter License coverage for your Startup?


Some practical advice on how to go about it.

In the US, one of the biggest challenges faced by startups in the space, is that of money transmitter licensing. Obtaining money transmitter licenses is no easy feat. It involves a large amount of paperwork, money and time. It can take up to two years to amass all 50 state licenses.

Needless to say, not every fintech requires money transmitter license coverage. For most, licenses would not be a requirement, but for those who do touch money as part of their business model, getting money transmitter licenses from the states in which their clients are based is important.

While there is a lot of legal documentation and opinions on who is classified as a money transmitter, the basic tenets are:

  • You are neither the originator of the transaction, nor the beneficiary of the transaction.
  • You are a financial intermediary.
  • You can apply a fee for processing such a transaction, even if it is a de minimischarge.
  • As part of processing the transaction, you get to touch the funds, i.e. the funds collected on behalf of the parties traverse through your bank account (even if only for a little while).

If you are meeting one or more of the tenets above, chances are you might be considered a money services business and be required to have money transmitter licenses (or MTLs for short).

MTLs are issued by the financial regulators of each state. You can click here to see a list of all the financial regulators for all 50 States and US territories.

MTL Options

I’ve written extensively regarding the various options pertaining to MTL coverage (Read: US Money Transmitter Licensing). However, there is another option that many are not aware of.

It is called the Bank Sponsorship, i.e. a bank handles the money movement and channeling on your behalf. You don’t get to touch the money and the bank provides license coverage on their license.

The Sponsoring Bank works with an entity called the Program Manager (PM). In this scenario, you have two contracts: one with the bank and one with the Program Manager that manages the entire sponsorship program with the bank and provides the APIs, etc.

The way the arrangement works is that the bank handles your money. You are not allowed to touch the funds. You simply instruct the bank how to move / process funds. These instructions are sent via the API, which the bank then acts upon.

Program Manager’s core responsibilities include:

  1. Provide the API that is specifically geared to/for the payments industry. This means implementing additional ID verification, AML controls, accounting, filters, customization, etc. (remember there are two components to a transaction, the US side and beneficiary side. The PM stitches it all together in a compliant manner for not only the Bank, but also from the State/Federal rules regarding money transmission (eg: Reg E, etc.)
  2. Aggregates other technologies and processors, for example if you bring in a card processor who you would be allowed to work with, then this processor is integrated with the PM.
  3. Overall monitoring and ensuring everyone is playing by the rules, anomaly detection etc.

Finding a Sponsoring Bank for you.

In order to find a sponsor bank, a mini business plan is required from you. The mini business plan (or dossier) is then realigned to the template/format that the – that I work with – require.

As there is a pool of banks at the back end who would like to win your business, they don’t want to be made known immediately, hence the proxy through my company.

The business plan allows them to discreetly look at the opportunity and determine if they want to proceed ahead. The dossier contains basic information about the fintech business (or startup), your photo ID information for background check, your business plan, your website, LinkedIn profiles, your compliance program, projected volume for the next 12 months and the foreign countries you will be terminating in (if applicable).

Based on the interest received from the bank(s) a further engagement between two parties is established (after signing off a referral agreement for myself naturally).

Once the bank has shown interest, the entire process takes between 60–120 days to get approved. Average time consideration is 90 days.

A time-motion flow-of-funds diagram is required. This would be needed in the final form when submitted to the bank, however, in the interim period you are free to send across your flow of funds diagram. You can find an example of the flow of funds here and edit this diagram on

Under the agreement, the bank sponsors the product and any/all accounts opened by your customers are actually bank accounts being opened at the bank. It is imperative to note that you cannot bring in your own AML/KYC, etc. You must follow the bank’s AML/KYC guidelines.

Secondly, to work with the bank, you have to use one of their basic/core services. You cannot just unilaterally rely on the bank to provide you coverage. That is not the intention the bank is looking at. What the bank wants to do, in order to sponsor you, is to go into a revenue share agreement with you. By doing so, you have to subscribe for one of their core services, like ACH, Card Processing, etc. You cannot bring 3rd party payment processors into the equation, until and unless the bank approves of it.

The bank is not interested in a flat-fee model, as that is indicative of a license rental and is wrong and looked down upon by the regulators.

For providing you with FBO (For Benefit Of) Coverage for your funds and in turn licensing under their umbrella, the bank wants to go into a revenue share partnership with you. The bank is always looking to increase the number of accounts it has as well as increase the overall number of dollar volume that flows through it.

With the bank sponsoring you, and providing you umbrella coverage, you’re not bound to invest in heavy and expensive licensing that can take up to 2 years to obtain and not to mention, cost in excess of US$ 1 Million (including paid-up capital).

Please kindly fill out the application on the following link:

Please also note, the following information would be required to do basic due diligence.

  • A copy of your passport (for the person who would be the signing authority in your company)
  • 12 months projections
  • List of countries you would be seeking permission for
  • Average ticket size for each corridor
  • Currently monthly volume on your existing license

If you have any further questions, please do not hesitate to ask.

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About The Author: Faisal Khan is a passionate fintech expert, cross-border money transfer specialist and certified speaker & moderator. He is the CEO of Faisal Khan & Company, a boutique firm specializing in banking and payments consultancy. He also serves as the co-host of a weekly podcast called Around The Coin.

He has received extensive acclaim for his achievements and has been 1 on the Top 38 Fintech Blogs and even is one of the 38 Most Influential People to Follow in Fintech in Asia. In addition to financial , Faisal Khan loves to help people and does this through volunteering his time and writing on the popular Q&A website, Quora. His efforts have earned him the title of Quora Top Writer2013, 2014, 2015, and 2016.