What is a money transmitter? | Stripe (2024)

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  1. Introduction
  2. What is a money transmitter?
  3. What do money transmitters do?
  4. Money transmitter vs. payment processor
  5. Money service business vs. money transmitter
    1. Scope of services
    2. Regulatory requirements
  6. Money transmitter license requirements
  7. Get started with Stripe

Money transmitters facilitate fund transfers between disparate locations and across international borders. The global remittance market, which refers to the total amount of money transferred across borders, is projected to be valued at nearly $950 billion by the end of 2023. Analysts predict that this market will continue to grow and reach approximately $1,250 billion by 2028, with a compound annual growth rate (CAGR) of 5.68%. Businesses or individuals working within this space must understand the intricacies of money transmitters and the regulatory landscape to ensure compliance and expand to new markets.

Below is a guide to the world of money transmitters: what they are, how they work, which customer segments they cater to, the regulatory framework they must adhere to, and important implications for businesses.

What’s in this article?

  • What is a money transmitter?
  • What do money transmitters do?
  • Money transmitter vs. payment processor
  • Money service business vs. money transmitter
  • Money transmitter license requirements

What is a money transmitter?

A money transmitter, also often referred to as a “money service business” (MSB), is a company or individual that facilitates the transfer of funds from one person or entity to another, often between disparate geographic locations and across international borders.

These services typically involve receiving funds from customers and then transmitting them to a designated recipient. Money transmitters offer a variety of methods for transferring money, including via wire transfers and other electronic funds transfers (EFTs), mobile-based transfers, or third-party payment processors.

Money transmitters are subject to regulations and oversight to prevent money laundering, terrorist financing, and other illicit activities. In many countries, including the United States, money transmitters must register with the appropriate regulatory authorities—such as the Financial Crimes Enforcement Network (FinCEN) or state-level agencies—and comply with specific reporting and compliance requirements.

What do money transmitters do?

Money transmitters primarily provide services that enable individuals and businesses to send and receive funds. They act as intermediaries, facilitating the movement of funds between individuals and businesses, both domestically and internationally.

Here are some of the key functions and activities performed by money transmitters:

  • Funds transfer
    Money transmitters facilitate the transfer of funds from one location to another. They accept funds from the sender (also known as the originator) and transmit them to the recipient (beneficiary) using various methods. The exact methods available typically vary depending on where the funds are being sent from and where they are being sent to.

  • International remittances
    Money transmitters enable individuals to send money across international borders. They offer services that allow immigrants and individuals working abroad to send funds to their families or businesses in their home countries.

  • Payment services
    Money transmitters often provide payment services, allowing customers to make payments for goods and services. This can include online payment processing, bill payments, and facilitating transactions through mobile apps or other digital platforms.

  • Currency exchange
    Some money transmitters offer currency exchange services, allowing customers to convert one currency into another. This is particularly useful for travelers or individuals involved in international business transactions.

  • Financial services for the unbanked or underbanked
    Money transmitters often cater to individuals who do not have access to traditional banking services. They provide a means for these individuals to store and transfer money, pay bills, or receive funds, offering financial inclusion and accessibility.

  • Compliance and regulation
    Money transmitters are subject to regulations and oversight to prevent money laundering, terrorist financing, and other illegal activities. They must comply with regulatory requirements, such as registering with the appropriate authorities, maintaining anti-money laundering (AML) and Know Your Customer (KYC) procedures, and reporting suspicious transactions.

Money transmitter vs. payment processor

While money transmitters and payment processors both handle monetary transactions, their specific roles, services, and customer bases set them apart. Here’s an overview of the differences between them:

  • Transaction types
    Money transmitters move money between senders and recipients, but there are a wide variety of reasons why funds are being exchanged in these transactions. They could include person-to-person transfers, remittances, and business payments. Payment processors specialize in processing transactional payments between buyers and sellers, where one party is giving the other party money in exchange for goods and services. This includes online purchases, point-of-sale (POS) transactions, recurring payments, ecommerce transactions, and payments made with credit cards, debit cards, and digital wallets.

  • Regulatory oversight
    Both money transmitters and payment processors operate within regulatory frameworks. Money transmitters are subject to specific regulations and oversight, often requiring registration with regulatory authorities such as FinCEN or state-level agencies. They must comply with AML and KYC regulations to prevent illicit activities. Payment processors also operate under regulatory oversight, although the level of scrutiny and compliance requirements may vary based on jurisdiction and the types of transactions they handle. They must adhere to data security standards, payment network rules, and other industry regulations.

  • Value-added services
    Money transmitters may offer additional services beyond fund transfers. These services can include currency exchange, bill payment services, or tailored financial services targeting unbanked or underbanked populations. Payment processors also often provide different value-added services: fraud detection and prevention, chargeback management, recurring billing solutions, and detailed transaction reporting.

  • Customer base
    Money transmitters cater particularly to individuals and businesses that need to send money across borders or to individuals without access to traditional banking services. Payment processors serve a wide range of customers, including online businesses, retailers, service providers, and ecommerce platforms.

Creating a secure, efficient funds-transfer experience requires understanding the differences between money transmitters and payment processors and making an informed decision about which service best suits business needs.

Money service business vs. money transmitter

Money transmitters are often referred to as “money service businesses,” especially in the US. While some people use these terms interchangeably, there are differences between the two entities. Understanding the distinction between MSBs and money transmitters is important for regulatory compliance and for individuals or businesses seeking specific financial services. Here’s what you should know:

Scope of services

MSBs provide a range of financial services beyond money transmission. They may also offer currency exchange services, allowing customers to convert one currency into another. Additionally, MSBs often provide check cashing services. Some MSBs may offer prepaid cards or issue money orders, which are payment instruments similar to checks. Money transmitters are a subset of MSBs and primarily specialize in facilitating the transfer of funds. They may or may not offer additional services that fall within the scope of MSBs more broadly.

Regulatory requirements

Both MSBs and money transmitters are subject to regulatory oversight and compliance requirements to prevent illicit activities and protect consumers. In the US, MSBs are required to register with FinCEN, a bureau of the US Department of the Treasury. MSBs—including money transmitters—must comply with AML regulations, implement robust KYC protocols, and report suspicious transactions.

Money transmitters must also comply with additional regulations specific to their role in facilitating fund transfers. They are typically required to register with state-level regulatory authorities, maintain adequate capital reserves, and follow specific reporting and compliance procedures. These requirements aim to ensure the transparency, legality, and security of money transmission activities.

Money transmitter license requirements

Money transmitter license requirements vary depending on the jurisdiction and the specific regulations in place. However, there are common requirements that are often included in the licensing process for money transmitters:

  • Registration and application
    Money transmitters are usually required to register with the appropriate regulatory authority. This could be at the federal level, such as FinCEN in the US, or at the state level, where most money transmitter licenses are issued. The application process typically involves submitting detailed information about the business, its owners, officers, and directors, as well as any supporting documentation required by the regulatory authority.

  • Financial requirements
    Money transmitters are typically required to meet certain financial requirements to obtain a license. This may include providing audited financial statements, demonstrating adequate capital reserves, and maintaining a surety bond or other form of financial security to protect customers.

  • Background checks
    Money transmitters and their key personnel, such as owners, officers, and directors, are often subject to background checks. This may involve fingerprinting, criminal record checks, and checks for past regulatory violations or sanctions. Additionally, regulatory authorities may assess the “fit and proper” criteria, evaluating the competence, integrity, and financial responsibility of the individuals associated with the business.

  • Compliance program
    Money transmitters must demonstrate that they have implemented a robust compliance program. This includes having policies and procedures in place to prevent money laundering, terrorist financing, and other illegal activities. Compliance programs typically involve implementing KYC protocols and policies, transaction monitoring systems, staff training, and diligent reporting of suspicious activities.

  • Reporting and recordkeeping
    Money transmitters are generally required to maintain detailed records of their transactions, customer information, and other relevant documentation. They must adhere to reporting requirements, which may include submitting regular reports to the regulatory authority, such as transaction reports, financial reports, or suspicious activity reports.

  • Ongoing compliance and audits
    Once licensed, money transmitters are subject to ongoing compliance obligations. This may involve periodic audits, regulatory examinations, or inspections to ensure continued compliance with licensing requirements and applicable regulations.

The specific requirements for obtaining a money transmitter license can vary significantly, depending on the jurisdiction. Individuals or businesses interested in becoming money transmitters should consult the relevant regulatory authorities in their jurisdiction or seek legal advice to understand the specific requirements and processes that they would be subject to given the scope of services, target customers, and the key jurisdictions involved.

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What is a money transmitter? | Stripe (2024)


What do money transmitters do? ›

A money transmitter is a service that transfers money for businesses. In the United States, they are a category within a larger group of Money Service Businesses, also known as MSBs. Any business that issues money orders, traveler's checks, or other types of monetary value can be classified as an MSB.

Is PayPal a money transmitter? ›

Paypal Payouts services are provided to users in the United States by PayPal, Inc., a licensed provider of money transfer services. All money transmission from in the United States is provided by PayPal, Inc.

Who needs a money transmitter license in the USA? ›

Therefore if your company engages in the business of transferring funds — regardless of the amount — you must obtain a money transmitter license and renew it every two years. In certain instances, re-registration may be required.

Is Airbnb a money transmitter? ›

Airbnb Payments, Inc. is licensed and regulated as a Money Transmitter by the New York Department of Financial Services.

Is Venmo a money transmitter? ›

Venmo is a service of PayPal, Inc., a licensed provider of money transfer services. All money transmission is provided by PayPal, Inc.

Is Uber a money transmitter? ›

Uber's approach to frictionless payments

But Uber is not classified as a money transmitter because its customers pay Uber—as opposed to paying their drivers directly.

Is Zelle a money transmitter? ›

Zelle® is a great way to send money to friends and family, even if they bank somewhere different than you do1. That means it's super easy to get paid back, or split the costs of things like dinner. With Zelle®, the money goes directly into your bank account.

Is Amazon a money transmitter? ›

Amazon Payments, Inc. is licensed and regulated as a money transmitter in a number of jurisdictions as listed below. Residents of certain states may have specific rights related to concerns or complaints about our payment services.

What is the difference between a money transmitter and a payment processor? ›

From the regulatory perspective, Money Transmitters are subject to federal and state regulation, while a Payment Processor is subject to the Payment Card Industry Data Security Standard and any applicable individual payment card network rules (“Payment Card Network Rules”) but is not subject to direct federal or state ...

Is money transfer the same as money transmitter? ›

In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments. Money transmitters in the US are part of a larger group of entities called money service businesses, or MSBs.

What is unlicensed money transmitting? ›

The law, embodied in Title 18 U.S. Code 1960, makes it illegal to conduct financial transactions or provide services related to the transmission of funds at the foreign or interstate level without being duly licensed by an appropriate state or federal agency.

How many states have money transmitter laws? ›

Share: The Money Transmission Modernization Act (MTMA) is a single set of nationwide standards and requirements to modernize the supervision and regulation of money transmitters. To date, twenty-two states have adopted the law in full or in part.

Is Etsy a money transmitter? ›

Companies like Etsy, Airbnb, and Uber that facilitate payments solely for the delivery of goods and services sold on their platforms are examples of incidental transmission.

Is Mastercard a money transmitter? ›

Mastercard Send is the only personal payments service of its kind where you can reach virtually all U.S. debit card accounts. Fund transfers* initiated through Mastercard Send often take seconds 1 from the time a sending bank initiates the transaction to the time a receiving bank receives the transaction.

Is Plaid a money transmitter? ›

Plaid doesn't process money transfers itself — but it does allow you to seamlessly connect your financial accounts with apps that facilitate money transfers, such as Venmo, Wise, Cash App and WorldRemit³.

Is an ATM considered a money transmitter? ›

Basic ATM Services: If the ATM is only dispensing cash and accepting deposits, this typically does not require a money transmitter license. These services are generally considered part of traditional banking activities.

What is the money transmission act? ›

The Money Transmission Modernization Act (MTMA) is a single set of nationwide standards and requirements to modernize the supervision and regulation of money transmitters. To date, twenty-two states have adopted the law in full or in part.

What is the role of electronic money? ›

Electronic money (e-money) is a digital store of a medium of exchange on a computerized device. E-money can be used for payment transactions, with or without bank accounts. The great advantage of course is a cashless payment system that makes money transfers of any size quick and easy.

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