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by theptip 3341 days ago
As anyone with experience in payments will tell you, this is the easy part (and should explain why Google hasn't expanded the coverage in the four years they have been offering this).

The reason that payments systems are all either expensive or inconvenient (usually both) is that the regulatory systems that underpin the international movement of money are very complicated, and are different in each country.

Getting payments to users in the US and UK is relatively easy; you'll need a business entity in each country and you'll also need to register with the regulators in each country (e.g. as a MSB in the USA, requiring a $1m bond in some states). Note the phrase "relative"; this is not something that a couple kids from Stanford can disrupt, you need expensive lawyers and banking contacts. You can run all of that from your office in Mountain View though.

You'll also need to comply with various "know your customer" regulations; the US government will not be happy if you wire money to O. Bin Laden, or anyone else on the OFAC watchlist. And even if you're sending money to a "gmail UK" email address, you will need some way of proving that you're not sending money to countries that have sanctions/restrictions on capital flows like Iran and North Korea.

That's the easy part. If you actually try to make a serious international play, then you'll need a sizable team in each region that you want to do business in. The Eurozone is relatively easy to cover, but your regulatory requirements in South American countries will probably require one or two people per country (that's to keep your bank relationships warm, and to keep up with all of the paperwork that's required to operate a money transmitter business).

This is why Paypal charges merchant fees of 4.4% _plus forex fee_ to receive money from an arbitrary country in the world. This system is hugely complex, and very resistant to change, due to the serious consequences of making a regulatory error.

2 comments

Is the problem that the "stanford disruptors" are sticking to offering value as a payments facilitator/money transmitter and not trying to move up the value chain and get some banking licences? I assume this would be orders of magnitude more difficult but I really want to see it happen somewhere in the world!
Even the money transmitter play is harder than you'd think (all of what I wrote above is applicable to that class; being a bank is even harder). Since Paypal failed to convince the regulators that they were not an MSB, they are much less likely to let a small fry under the radar.
Cards on the table: I work for a money transmitter "app" headquartered in SF (I say "app" because we still operate in a somewhat speculative niche in the industry) as a software engineer - but I have a degree in law as well. To me the regulatory compliance seems to be an issue with the tech people not properly collaborating with the "banking proper" types (financial services/legal/banking professionals) Note: in "easy" jurisdictions we are seeing some progress[0]

Would you be able to take this offline and discuss with me further? I do not know the protocol for off site discussions from hacker news. Do I give you my public key? haha LOL

[0] www.monzo.com (with whom I haveno affiliation whatsoever)

I think you're right about there being a significant collaboration issue; having a lawyer on your founding team makes this a lot easier.

Happy to chat more offline, I've linked a public key in Keybase to my HN profile, you should be able to do the same and message me there, or just use my key to encrypt your contact details and put that on HN somewhere.

Is PayPal being subjected to those laws? After all they are not a bank.
Only in the US. In the EU, they're registered as a Luxembourg-based bank.

http://www.businesswire.com/news/home/20070515005225/en/PayP...

Yes. They are not a bank, but they are a Money Services Business (in the USA). E.g. see http://paymentsviews.com/2012/08/13/so-you-want-to-start-a-p...