As states continue to play with how they define money transmitters, the payment facilitator is caught in the middle. And one payments advocate suggests that it may force a greater role for processors.

Mike Cottrell, direct of global marketing at ProPay and our guest this week for the podcast series, argues that not only could this encourage PFs to embrace a greater role for processors, but it could also discourage innovation.

In the podcast, Cottrell painted a scenario where PFs—who see themselves as helping merchants do business—will start to pull back on very innovative efforts if it means that they have to spend much more time filling out forms and adhering to different regulations.

“What will companies do that are moving funds instantly, that are accelerating commerce, if they have to take a step back and say ‘We’re in the business of moving data and money just happens to be part of that’?” Cottrell asked.

He envisions a lot of those PFs wondering when creative approaches stop being worth the effort. Those PFs would likely think, Cottrell said, “And if we have to start implementing audits and we have to register” and deliver “the extra validation of who is sending those transactions in or who you’re paying, I think it’s going to become quite burdensome for these payment facilitators to meet the letter of the law, especially if it’s not unified across states. Ultimately, I think you’ll see some changing in some models that may not be the best solutions for what the market needs.”

Cottrell also tells podcast listeners that PFs may also choose to allow processors and banks to handle money transactions that they might have otherwise done themselves. It if means avoiding complying with extensive money transmitter rules, he said, “Let the banks be the ones that are actually holding the money.”

The podcast, which will take up only 6 min., 45 sec. of your life, is worth a listen, even if it only spares you one day of paperwork.

More State Money Transmitter Headaches

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