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Fintech Market Overview

This article does not constitute legal advice.

Payment services in the USA

Digital marketplaces for goods and services are not regulated as fintech companies in the United States. Most marketplaces are only regulated based on their underlying goods or services. For example, Uber and Lyft are subject to the same regulations as taxis in many US jurisdictions.1

These digital marketplaces are generally not subject to fintech regulations because either the funds for the purchase of goods flow through a separate payments company. For example, payments for eBay purchases have historically been handled by PayPal – or the marketplaces do process payments but do so under an exemption to fintech regulation (such as "agent of the payee") or only accept credit card payments, which do not require fintech licences in the United States.1

Payments services are heavily regulated in the US and are required to both register as a money services business with FinCEN and also obtain state money transmitter licences. As mentioned above, some fintechs mistakenly believe that registering as an MSB with FinCEN is sufficient to operate as a payments service in the United States; that is not the case, as state-level money transmitter licences are also required.1

Payments services must obtain a licence in each state in which they intend to operate because the United States currently lacks a reciprocity or passporting option as in Europe. The lack of passporting or reciprocity in the United States is particularly notable because obtaining all state money transmission licences is extremely burdensome, often taking years and costing hundreds of thousands of dollars.1

Unlike under the EU Revised Payment Services Directive, there is no law or regulation in the United States directly requiring financial institutions to share customer data with fintech entities.1

Section 1033 of the Dodd–Frank requires banks and other financial service firms to make customers' financial data available to the customer in a usable form, no promulgated rules define what "usable form" means or identify sanctions for financial institutions that limit what information they share.1

Notes
  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/usa