As we have noted previously, one of the defining aspects of the payments revolution of the past few years—at least from a regulatory perspective—has been the question of whether a particular payments service is subject to regulation as money transmission. Almost all U.S. states regulate money transmitters under state-specific licensing regimes, and the statutory definitions of money transmission are quite broad and typically cover any entity that “receives” or “transfers” money.

Money transmission licensing laws were crafted to address what today would be called “traditional” money transmitters—i.e., major, well-known brands that sell money orders or stored value cards, or offer domestic and international person-to-person funds transfers. However, there are a number of new and innovative companies that function differently: they facilitate the receipt of payments by merchants and other sellers of goods and services (such as utilities), rather than facilitate the transmission of funds on behalf of a sender. An entity providing this type of service may have a contractual relationship with the recipient under which the entity is appointed as an agent to receive funds on behalf of that recipient (i.e., the merchant).