Payment companies are increasingly moving beyond simply facilitating transfers and into new product spaces such as servicing online retailers and issuing payment cards (see: Revolut). We've tracked this change by looking at the number of electronic money institution (e-money) licenses issued by the UK's FCA each year since 2011.
These licenses allow companies to not only transfer money, but also to hold customer funds and issue payment instruments as well. Think of it as banking-light for transfer companies looking to experiment outside the pure-transfer space.
As our data shows, UK based money transfer companies really started moving to e-money licensing in 2014. Already this year, two more of the largest companies, Currencies Direct and Argentex, have obtained e-money licenses too. We will continue to track this given the potential changes on European passporting.
Is PayPal next?
2017 has brought some interesting developments to the regulation side of the transfer industry, beginning with the Department of Justice’s (DOJ) $586m fine of Western Union in January.
More recently, Paypal reported that it has been subpoenaed by the DOJ, which is "seeking the production of certain information related to [PayPal's] historical anti-money laundering program."
In the Western Union probe, authorities were primarily investigating money laundering at physical agent locations - something PayPal doesn't have. This suggests the DOJ’s investigation may be focused on issues in PayPal's online processes and money laundering safeguards.
The latest in international payments: Our favorite news and articles
Brexit tracker. According to the latest Startup Outlook report from the Silicon Valley Bank, up to 1/5th of startups are planning to set up an office in Europe due to Brexit concerns. However, just 1% say they are going to relocate their HQ. City AM.
Not feeling friendly. Contrary to recent rumours, Target has announced they will not be accepting Apple Pay in stores in the near future. This may have something to do with their own mobile payment ambitions. Mac Rumors.
Betting on bitcoin. Various hedge funds have begun offering to purchase the claims of account holders suing former bitcoin exchange Mt. Gox, due to possible upside between bitcoin's current price and the court valuation agreement. Financial Times.
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