askmint

Why Does a Solution Provider Want an MSA Signed Before the Bank Approves Me?

Mon, 19 Oct 2026 08:50:37 +0000

We like the solution provider you introduced us to. We think they can deliver what we need. But they want us to sign a Master Services Agreement (MSA) before they will take our case to their bank or upstream financial institution. They will not submit our application without it. Why can't they get the approval first? Once we have the approval, we will gladly sign the MSA.

Faisal KhanAnswered Oct 19, 2026

We hear this often, and the reasoning behind it is simple once you see the bank's side.

Can central banks regulate cryptocurrencies to the same extent as fiat currencies?

Thu, 08 Jan 2026 18:34:17 +0000

Faisal KhanAnswered Jan 8, 2026

Central banks primarily regulate the currency that they issue, which is their own fiat currency. When it comes to cryptocurrencies, the situation is more complex. While central banks cannot directly regulate cryptocurrencies themselves, they can impose restrictions or mandates on how cryptocurrencies are used within their jurisdiction, especially if these cryptocurrencies are recognized as assets with economic value.

For instance, a central bank can work with the country's Securities and Exchange Commission (SEC) and other regulatory bodies to implement rules that restrict the use of the national fiat currency in relation to cryptocurrencies. They might prohibit the use of fiat currency for on-ramping (buying crypto with fiat) or off-ramping (selling crypto for fiat). Alternatively, they could require that anyone using the fiat currency to interact with cryptocurrencies must obtain a special license.

What type of license is required if acting as an intermediary in an FX transaction between two parties?

Thu, 18 Dec 2025 19:25:18 +0000

Faisal KhanAnswered Dec 18, 2025

Yes, you would need a money transmitter license. This requirement arises because you are acting as a financial intermediary between Party A and Party B. Under federal law—and likely state laws as well—this classifies you as a money services business (MSB).

Furthermore, you would need a money transmitter license (MTL) in every state where Party A and Party B are located or where the transaction is facilitated. There is no separate "escrow license" in the traditional sense. Instead, escrow is simply one of the functions that a licensed money transmitter can perform.

Do large banks and institutions have enough physical cash to handle multi-billion-dollar cash transactions (e.g., cash-based M&A), or is it mostly an accounting mechanism?

Tue, 16 Dec 2025 18:23:33 +0000

Faisal KhanAnswered Dec 16, 2025

It is accounting bookkeeping entries.

If the banks/institutions in question have enough cash-on-hand, i.e. ledger balance large enough to do the transaction it is simply a double-entry accounting done between both institutions who have decided to partake in the trade. If there are intermediary banks involved, then same principal:

Extremely crude way of showing it:

Example: A wish to pay C, via B. A will Debit their Account Corresponding Credit will exist with B. B will Debit their Account Corresponding Credit will exist with C.

How does the US government send money to other countries—by check, bank transfer, or cash?

Tue, 16 Dec 2025 18:23:29 +0000

Faisal KhanAnswered Dec 16, 2025

Allow me to give a simpler example, of how the US pays other countries and vice versa.

Let’s say you are three friends, and each friend will be designated as a country, make belief of course.

Harry (UK)
Tom (US)
Lucy (Germany)

So the three friends decide to all buy a register. A ledger if you will.

Each one takes a marker and writes their name of their country on the outside of the ledger.

Why doesn’t Coinbase allow instant USD withdrawals to bank accounts or PayPal after selling crypto?

Mon, 08 Dec 2025 18:34:16 +0000

Faisal KhanAnswered Dec 8, 2025

Coinbase's business model thrives when users keep their money—whether in the form of cryptocurrency or fiat currency—within their platform. This situation is advantageous for several reasons:

Liquidity: When funds are held within Coinbase, it boosts the platform’s liquidity, allowing them to operate more efficiently. High liquidity is crucial for ensuring that transactions can be processed smoothly, and it gives Coinbase greater flexibility in managing their overall operations.
Interest-Based Income: Funds held in fiat or stablecoin can be used by Coinbase to generate interest-based income. They can invest these funds or lend them out, earning interest, which becomes a significant source of revenue. The longer users keep their funds with Coinbase, the more income the company can potentially generate from these activities.
Balance Sheet Improvement: Having a large amount of customer funds on their balance sheet is beneficial for Coinbase’s financial health. It not only signals financial strength to investors and stakeholders but also helps in building strong relationships with banking partners. A robust balance sheet, filled with customer assets, makes Coinbase a more appealing client to banks, which can lead to better terms and services from these financial institutions.

Because of these benefits, Coinbase is not incentivized to facilitate immediate withdrawals of funds to external sources like personal bank accounts or platforms like PayPal. Their primary interest is to retain these funds within the Coinbase ecosystem for as long as possible.

I want to get into the remittance business for Nigeria – how do I get started?

Mon, 27 Oct 2025 12:52:52 +0000

Faisal KhanAnswered Oct 27, 2025

May we suggest the following on YouTube: A nostro account and a vostro account are two different types of bank accounts that are used in international trade and finance. Nostro and vostro are terms that are used to indicate which bank is holding the account, with nostro meaning “our” in Latin and vostro meaning “your” in Latin. A nostro account is a bank account that is held by one bank in another bank’s currency. For example, if a bank in the United States has a nostro account with a bank in the United Kingdom, the account will be denominated in British pounds. The bank in the United States can use this account to hold funds in the local currency, which can then be used for transactions with the bank in the United Kingdom or other banks in the local market. A vostro account is the opposite of a nostro account. It is a bank account that is held by one bank in another bank’s currency, but is designated as belonging to the other bank. For example, if a bank in the United Kingdom has a vostro account with a bank in the United States, the account will be denominated in US dollars and will be designated as belonging to the bank in the United Kingdom. The bank in the United States can use this account to hold funds in the local currency on behalf of the bank in the United Kingdom. Nostro and vostro accounts are used extensively in international trade and finance, as they allow banks to hold and transfer funds in the local currency of the country in which they are operating. This can help to reduce the risks and costs associated with foreign exchange transactions, and can make it easier for banks to conduct business in foreign markets. A nostro account and a vostro account are two different types of bank accounts that are used in international trade and finance. Nostro and vostro are terms that are used to indicate which bank is holding the account, with nostro meaning “our” in Latin and vostro meaning “your” in Latin. A nostro account is a bank account that is held by one bank in another bank’s currency. For example, if a bank in the United States has a nostro account with a bank in the United Kingdom, the account will be denominated in British pounds. The bank in the United States can use this account to hold funds in the local currency, which can then be used for transactions with the bank in the United Kingdom or other banks in the local market. A vostro account is the opposite of a nostro account. It is a bank account that is held by one bank in another bank’s currency, but is designated as belonging to the other bank. For example, if a bank in the United Kingdom has a vostro account with a bank in the United States, the account will be denominated in US dollars and will be designated as belonging to the bank in the United Kingdom. The bank in the United States can use this account to hold funds in the local currency on behalf of the bank in the United Kingdom. Nostro and vostro accounts are used extensively in international trade and finance, as they allow banks to hold and transfer funds in the local currency of the country in which they are operating. This can help to reduce the risks and costs associated with foreign exchange transactions, and can make it easier for banks to conduct business in foreign markets. A vostro account is the opposite of a nostro account. It is a bank account that is held by one bank in another bank’s currency, but is designated as belonging to the other bank. For example, if a bank in the United Kingdom has a vostro account with a bank in the United States, the account will be denominated in US dollars and will be designated as belonging to the bank in the United Kingdom. The bank in the United States can use this account to hold funds in the local currency on behalf of the bank in the United Kingdom. [embed]https://www.youtube.com/watch?v=yenuEuLCvug[/embed]

How does Correspondent Banking work?

Tue, 21 Oct 2025 18:13:03 +0000

Faisal KhanAnswered Oct 21, 2025

Correspondent banking is a type of banking relationship in which one financial institution (the “correspondent bank”) provides services on behalf of another financial institution (the “respondent bank”). These services can include access to financial products and services, foreign exchange transactions, and the clearing of checks and other financial instruments. Correspondent banking relationships are typically established between banks in different countries or regions, although they can also be established between banks in the same country. The correspondent bank acts as an intermediary, allowing the respondent bank to offer its customers access to a wider range of financial products and services. There are several ways in which correspondent banking relationships can be established. One common method is through the use of a “correspondent banking agreement,” which outlines the terms and conditions under which the two banks will work together. This may include details on the types of services that will be provided, the fees that will be charged, and any risk management measures that will be put in place. In order for a correspondent banking relationship to be effective, both the correspondent and respondent banks must have strong reputations and be well-regarded in the financial industry. This helps to ensure that the services provided are reliable and trustworthy, and that the financial instruments being cleared or traded are of high quality. Overall, correspondent banking is a key component of the global financial system, as it allows financial institutions to offer their customers access to a wider range of products and services, and facilitates the smooth flow of financial transactions between countries and regions.

Does the Bank Account Verification also include ID verification?

Tue, 21 Oct 2025 18:11:54 +0000

Faisal KhanAnswered Oct 21, 2025

Yes. It does. However, it is recommended to do ID verification for higher limits. Lower limits do not require a photo ID verification. Mileage will vary as per the solution provider.

Do we need a correspondent tie-up agreement, if there is a licensed financial entity involved, like an exchange, or another Money Services Business?

Tue, 21 Oct 2025 18:11:01 +0000

Faisal KhanAnswered Oct 21, 2025

In the event you are receiving money (as an intermediary) from Exchanges or other non-banking financial institutions, you would need to have some sort of a correspondent tie-up agreement, else, you would be aggregating or better known as, nested transactions. Accounts on crypto exchanges would have to be in your name also.

Can offshore accounts be traced?

Tue, 21 Oct 2025 18:09:11 +0000

Faisal KhanAnswered Oct 21, 2025

The answer is yes, but it is not easy. Every account can be traced, but it can be difficult to identify all of the people involved in a transaction. For example, if person A gives money to bank B, and bank B gives it to bank C, and bank C gives it to bank D, and bank D gives it to bank E, and bank E gives it to bank F, and you finally get it from bank F, it may be difficult to find out who all of the people involved are. You would need to have a relationship with bank F, and then somehow get bank F to tell you that the relationship came from someone at bank E, and then bank E to tell you that the relationship came from someone at bank D, and so on. Even if you have a legal subpoena, it may be difficult to serve it in the court of law in the jurisdiction where the bank is located. And even if you are able to serve the subpoena, the bank may still be bound by secrecy laws that prevent them from telling you who owns the account. So, while it is possible to trace offshore accounts, it is not easy.

Can a state-chartered bank operate in another state in which it is not licensed?

Tue, 21 Oct 2025 18:08:31 +0000

Faisal KhanAnswered Oct 21, 2025

It depends on the specific laws and regulations of the states involved. In general, state-chartered banks are licensed to operate in the state in which they are chartered, but may be able to operate in other states through a process called “interstate branching.” Interstate branching refers to the ability of a bank to establish branches in other states, either through acquiring an existing bank or by opening a new branch. However, not all states allow interstate branching, and the rules and requirements can vary depending on the state. In addition, banks that operate across state lines are subject to the laws and regulations of each state in which they operate, as well as federal banking laws and regulations. This can create a complex regulatory environment that requires careful management and compliance. Overall, if a state-chartered bank wants to operate in another state, it will need to carefully research the laws and regulations of that state and comply with all applicable requirements. In some cases, it may be more efficient or practical to obtain a federal charter or partner with an existing bank that has a presence in the desired state.

How long does it take to transfer the money to the bank?

Tue, 21 Oct 2025 17:24:17 +0000

Faisal KhanAnswered Oct 21, 2025

One business day. Friday processing after 3 PM will be credited on the next working day.

Is nationwide coverage guaranteed?

Fri, 17 Oct 2025 16:56:03 +0000

This is bothering SUmbul?

Faisal KhanAnswered Oct 17, 2025

No, nationwide coverage is not guaranteed. We have to still present your case to the solution provider for approval. Based on which solution provider takes your case, that is the offer you will be presented with and any restrictions or deficiencies in the proposal.

As a fresh startup, what is the probability of being sponsored by a bank or an exchange company?

Fri, 17 Oct 2025 16:47:19 +0000

Faisal KhanAnswered Oct 17, 2025

Yes, if you incorporate you can get a USD account, you can also get a CAD account. But you cannot sign up customers. The account will be used for transactions happening outside Canada and the USA. You cannot sign up a Canadian or US customer.

Does MSB in Montana has the same value as MSB in Canada?

Fri, 20 Jun 2025 18:19:15 +0000

Faisal KhanAnswered Jun 20, 2025

Montana does not have a Money Transmitter License; it is simply an MSB Status. You can use it within the state of Montana, or for transactions either originating or terminating from the state of Montana and the rest of the world, or simply the rest of the world. In reality, most banks & MTOs do not recognize it as a valid license, as there is no license. It is an exemption status.

Do banks maintain records of the total deposits made into an account over a specific time period?

Sun, 08 Jun 2025 18:34:14 +0000

Faisal KhanAnswered Jun 8, 2025

Yes, you can obtain a one-year bank account statement specifically for deposits into your account. Here's how:

1. Online banking: Many banks offer this feature through their online platforms. You may be able to generate the statement yourself.

2. Customizable filters: Some banks allow you to apply filters based on transaction types. For example, in the US, you might be able to filter for:

Can bitcoins be sent directly from one wallet to another without using an exchange?

Sun, 08 Jun 2025 18:34:13 +0000

Faisal KhanAnswered Jun 8, 2025

Yes, it is absolutely possible to send Bitcoin directly from your wallet to another wallet without going through an exchange or marketplace. Most wallets have the built-in functionality to transfer Bitcoin between wallets. However, it's crucial to ensure that the recipient's address is correct before making the transfer.

A good practice is to first send a very small amount of Bitcoin to confirm that the other person has received it. This can help you avoid mistakes, especially since once a transaction is sent to the wrong address, there’s no way to reverse it or get your Bitcoin back.

What are standard AML and KYC compliance requirements for crypto exchanges?

Sun, 08 Jun 2025 18:34:11 +0000

Faisal KhanAnswered Jun 8, 2025

In addition to the standard KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance requirements, one of the key concerns for cryptocurrency exchanges is understanding the source of your funds. Whether you're depositing fiat currency or cryptocurrency, exchanges want to verify where the money originated.

For fiat deposits, exchanges need to know the source of the funds. If you're depositing cryptocurrency, they will ask where you obtained it. For example, if you claim the funds came from trading, the exchange may ask you to provide trading logs as proof. Exchanges like Bitstamp, Coinbase, and Kraken are known to request such documentation, especially Bitstamp. They might ask you to retrieve these logs from the exchange where you traded, which can be problematic if those logs are only retained for a short period, such as three months.

Are international wire transfer fees fixed amounts or percentage-based charges?

Sun, 08 Jun 2025 18:34:10 +0000

Faisal KhanAnswered Jun 8, 2025

When banks handle international transfers, particularly through correspondent banks, there are typically two types of transfers to consider: same-currency transfers and cross-currency transfers.

1. Same-Currency Transfers (e.g., USD to USD):

In this case, the funds are received and sent in the same currency. The intermediary bank charges a fixed fee for these transfers, which can range from $10 to $20, regardless of the transaction amount. This fee structure is possible because these banks process a large volume of transactions, allowing them to price each transfer at a low, flat rate. For example, an intermediary bank might charge $20 to move $6 million, as they've predefined the fee structure based on their bulk processing capabilities.

Why do some US banks restrict or block international wire transfers?

Sun, 08 Jun 2025 18:34:08 +0000

Faisal KhanAnswered Jun 8, 2025

Predominantly risk exposure. Person-to-person (P2P) transfers are seen as high-risk transactions for most banks (albeit this is not the case). To suppress that risk, they refuse to provide international bank transfers.

In the US, however, most small banks do not have the facility to do international transfers. They are not members of SWIFT and also do not have an intermediate relationship with the FX banks (mostly in NY) to aid international transfers.

How do authorities trace and prosecute money laundering activities involving cryptocurrencies like Bitcoin?

Sun, 08 Jun 2025 18:34:07 +0000

Faisal KhanAnswered Jun 8, 2025

Law enforcement agencies have access to specialized tools provided by various compliance companies in the AML (Anti-Money Laundering) and cryptocurrency spaces. These tools allow agencies to query the entire blockchain to identify different types of wallet addresses—those associated with criminal activity, those that are under suspicion, and those that are considered safe. The companies that offer these tools have already programmed in data from global law enforcement agencies, making it easier to track illicit activities.

Is Bitcoin better understood as a payment network, a currency, or both?

Sun, 08 Jun 2025 18:34:05 +0000

Faisal KhanAnswered Jun 8, 2025

This is a nuanced question. Is Bitcoin an innovative payment network and a new kind of money? Yes, in many ways, it is. However, it's not something that everyone is using right now. Those within the cryptocurrency space may use it for payments, but not typically on the main Bitcoin network itself—more often, they use the Lightning Network, which is designed for faster and cheaper transactions.

What alternatives exist to PayPal and Payoneer for international online payments?

Sun, 08 Jun 2025 18:34:04 +0000

Faisal KhanAnswered Jun 8, 2025

Tl;dr: Wise, ElevatePay, USDC, USDT.

About a decade ago, platforms like PayPal and Payoneer were essential for many developing or emerging economies. However, the landscape has changed significantly since then. While global alternatives to PayPal and Payoneer are still somewhat limited, viable alternatives have gained traction.

For instance, Wise is an excellent alternative, offering efficient and cost-effective international money transfers. ElevatePay is another strong contender, along with a few other emerging options. PayPal’s market share decline is partly due to its unavailability in several countries, such as Pakistan, Turkey, and Bangladesh, making sending payments to these regions impossible.

How can someone send money to another person without revealing all personal details?

Sun, 08 Jun 2025 18:34:01 +0000

Faisal KhanAnswered Jun 8, 2025

The question is quite broad and the answer can vary depending on your country and whether you're making a local or international transfer. However, cryptocurrency would likely be your best option if your goal is to send money internationally from one person to another without revealing any of your personal information. It's the fastest and offers a degree of semi-anonymity—though not full anonymity.

Are there services that allow Bitcoin to be exchanged for cash and then transferred via PayPal or similar platforms?

Sun, 08 Jun 2025 18:34:00 +0000

Faisal KhanAnswered Jun 8, 2025

There are numerous services available that facilitate such transactions, though whether they operate legally is something you would need to verify on your own. Platforms like LocalBitcoins have users who support a variety of payment methods, including cash, PayPal, Venmo, Zelle, and other localized options.

How much money do you need for a new banking license in the United States?

Thu, 03 Apr 2025 18:16:42 +0000

Faisal KhanAnswered Apr 3, 2025

It is difficult to provide a specific dollar figure for the minimum amount of money that is required to apply for a new banking charter in the United States, as the amount can vary significantly depending on the type of charter you are seeking, the type of banking activities you plan to engage in, and the location of your bank. Banks are generally required to maintain a certain level of capital, or financial resources, in order to operate safely and meet regulatory requirements. The amount of capital you need to maintain will depend on the size and complexity of your bank, as well as the type of banking activities you engage in. In general, the larger and more complex your bank is, the more capital you will be required to maintain. In addition to capital requirements, you may also need to cover the costs of preparing and submitting your application for a new banking charter, as well as any fees associated with regulatory approval and ongoing supervision. These costs can vary depending on the specific circumstances of your bank. It is important to carefully consider your financial needs and resources as you plan to apply for a new banking charter. You may need to secure funding from investors or other sources in order to cover the costs of the application process and meet regulatory requirements. Seeking the advice of an attorney or financial professional who has experience with the process can be helpful. If a figure must be imposed, it is would be US Dollars 50 Million.

Are there any restrictions on MSB licenses that we should know about?

Thu, 03 Apr 2025 18:16:40 +0000

Faisal KhanAnswered Apr 3, 2025

The restrictions are provided to you by the MSB PLH themselves (Principal License Holder). Depending on who is going to take your case, the PLH will let you know of the prohibited products &/or services that you cannot engage in when you sign up with them. This is inclusive of zones and territories worldwide where you cannot sign clients up from, depending on your flow of funds and licensing outside the United States (or lack thereof).

What are some common misconceptions regarding MTL?

Wed, 19 Feb 2025 18:19:13 +0000

Faisal KhanAnswered Feb 19, 2025

MTL wouldn’t have prevented high-profile fraud anyway, so why bother?

While it may not stop every fraud, regulators use high-profile cases to justify more oversight. Being licensed also demonstrates proactive compliance—beneficial if you ever face a complaint or inquiry.

My employees sign an agreement that they understand we’re not responsible for their wages.

Contractual disclaimers do not override state law. If your business model falls within “receiving funds for transmission”, disclaimers won’t exempt you from MTL.

What are MTL Bonding and Financial Requirements?

Wed, 19 Feb 2025 18:19:12 +0000

Faisal KhanAnswered Feb 19, 2025

What is a “bond” in the MTL context?

Many states require money transmitters to post a surety bond—essentially insurance guaranteeing you can cover claims or liabilities arising from mismanagement or fraud.

How costly can bonding be?

Bond amounts vary by state and can range from tens of thousands to several million dollars, depending on your transaction volume. Smaller bureaus might face higher premium rates if they have less financial history.

How do fines or penalties typically work?

Tue, 18 Feb 2025 18:19:11 +0000

Faisal KhanAnswered Feb 18, 2025

If a state determines you’ve been transmitting funds without proper licensing, they can:

Impose a fine (sometimes retroactively for previous years),
Issue a cease-and-desist order,
In extreme cases, pursue criminal charges (misdemeanor or felony, depending on severity).

Which states have stricter MTL penalties?

Penalties vary widely:
i. Maine: Has specific statutes for payroll, but is reportedly more cooperative if you voluntarily register once you realize you’re subject to the law.
ii. Texas: Known for strict enforcement and possible retroactive penalties, making noncompliance potentially expensive.

What is the Model Money Transmitter Law?

Tue, 18 Feb 2025 18:19:10 +0000

Faisal KhanAnswered Feb 18, 2025

It’s a standardized framework intended to unify and streamline MTL requirements across different states. It aims to reduce inconsistencies among state statutes and close gaps that fraudsters could exploit.

Do all states automatically adopt the model law?

No. Each state decides whether and how to implement the model law. Some may adopt it fully, others partially, and some may have their own statutes but may incorporate similar language from the model.

Why are payroll processors suddenly concerned about MTL?

Tue, 18 Feb 2025 18:19:08 +0000

Faisal KhanAnswered Feb 18, 2025

Although payroll processing was often overlooked, a few high-profile fraud incidents have increased scrutiny. Regulators realized that, in many cases, payroll companies physically handle or control client funds (employer remittances for employee wages, taxes, etc.), fitting the definition of “money transmission”.

What triggers MTL obligations for a payroll provider?

Generally, if you receive, hold, or control client funds before distributing them to employees or tax authorities, you may be considered a money transmitter. The exact threshold depends on a state’s statutory language.

What is Money Transmitter Licensing (MTL)?

Tue, 18 Feb 2025 18:19:07 +0000

Faisal KhanAnswered Feb 18, 2025

Money Transmitter Licensing (MTL) is a regulatory framework that governs the transfer of money by non-bank entities. States require such entities to register or obtain a license to move funds on behalf of others. The overall purpose is to protect consumers from fraud and ensure proper oversight of financial transactions.

What is the historical background of MTL?

MTL dates back decades, primarily targeting traditional money services (wire transfers, check cashing, money orders). Over time, its scope expanded to include emerging technologies, fintech services, crypto platforms, and now more explicitly, certain payroll processors.

What are Rollups

Fri, 14 Feb 2025 18:19:05 +0000

Faisal KhanAnswered Feb 14, 2025

Definition

Rollups are Layer 2 scaling solutions for blockchain networks that process transactions off-chain and then "roll up" the data into a single batch to be recorded on the main chain (Layer 1). They aim to improve scalability, reduce fees, and increase transaction speeds while maintaining the security of the underlying blockchain.

Background / Backstory on Rollups

Rollups emerged as a response to the scalability limitations of Layer 1 blockchains like Ethereum, which faced congestion and high gas fees during peak usage. The concept gained traction around 2020, with Optimistic Rollups and zk-Rollups (Zero-Knowledge Rollups) becoming the two primary types. These solutions allow blockchains to handle more transactions without compromising decentralization or security.

What happens to cryptocurrency once it is converted back into fiat currency?

Sun, 02 Feb 2025 18:33:45 +0000

Faisal KhanAnswered Feb 2, 2025

Usually, there is someone else, who wants to do the reverse transactions, i.e., provide fiat and get cryptocurrency. So an exchange would try to pair match you two.

In the scenario where the trades are not even, it will keep on trying to match you up to other traders until your trade is completed, and the cryptocurrency is taken away from you and is now owned by others. In return, you have your fiat balance.

Is there typically a fee for receiving an incoming wire transfer?

Thu, 02 Jan 2025 18:33:43 +0000

Faisal KhanAnswered Jan 2, 2025

It can. Depending on the payment network and the banks involved, you could be charged for the wire fee and the correspondent banking fee. In some cases, it could be a taxation levied by the local government in receiving the fee.

How Much Money is Needed to Apply for a New Banking Charter?

Wed, 18 Dec 2024 18:19:00 +0000

Faisal KhanAnswered Dec 18, 2024

The amount of money that is required to apply for a new banking charter in the United States will depend on a range of factors, including the type of charter you are seeking, the type of banking activities you plan to engage in, and the location of your bank.

Generally, banks are required to maintain a certain level of capital, or financial resources, in order to operate safely and meet regulatory requirements. The amount of capital you need to maintain will depend on the size and complexity of your bank, as well as the type of banking activities you engage in.

Who coined the term "Remittance-as-a-Service" or RaaS?

Tue, 17 Dec 2024 18:18:59 +0000

Faisal KhanAnswered Dec 17, 2024

In 2013, Faisal Khan, a prominent figure in the financial services industry and CEO of Faisal Khan LLC, introduced the innovative concept of "Remittance-as-a-Service" (RaaS), also known as Money Transfer as a Service. Recognizing a crucial void in the remittance market, Khan pinpointed the challenges faced by businesses, especially startups and established entities, in providing international money transfer services.

Khan's insight into the industry's needs led him to conceptualize RaaS as a comprehensive, ready-to-use package. This solution was designed to cover the entire spectrum of remittance services, including critical aspects like regulatory compliance, technological infrastructure, and payment processing. The aim was to eliminate the necessity for companies to invest extensively in developing their own systems.

What does it mean when someone says they are "farming us" (or “farm us”) in the crypto space?

Tue, 10 Dec 2024 18:18:58 +0000

Faisal KhanAnswered Dec 10, 2024

In the crypto community, the phrase "to farm us" often refers to exploitative practices where a person or entity manipulates or uses a group of individuals (e.g., retail investors or a community) for personal or financial gain. This can manifest in several ways, including:

1. Liquidity Farming Exploitation

A person might encourage others to deposit funds into a liquidity pool or yield farming protocol with promises of high returns. However, the project might be designed to benefit the individual or team disproportionately, leaving others at a loss when rewards diminish or the project collapses.

2. Pump-and-Dump Schemes

The person could be building hype or artificially inflating the value of a token to "farm" unsuspecting investors. Once enough people invest and the price increases, they dump their holdings, causing the token's value to plummet.

3. Airdrop Exploitation

A community might be encouraged to interact with a project (e.g., providing liquidity, staking, or engaging on social media) to qualify for an airdrop. After the community builds the project's value or visibility, the creators may "farm" the benefits by capitalizing on the work and then leaving the project.

A person or group might build a community's trust by fostering engagement (e.g., Twitter, Telegram, Discord), only to later monetize the community through paid promotions, shady token launches, or other self-serving activities.

5. Rug Pulls

This is a direct form of farming where a project owner or developer attracts investors, collects funds, and then exits (rug pulls), leaving participants with worthless assets.

Signs Someone Might Be "Farming Us"

Overhyped Promises: Unrealistic returns or guarantees.
Lack of Transparency: Unclear team identities, tokenomics, or roadmaps.
Pressure to Invest Quickly: "Act now before it's too late" tactics.
Unequal Rewards: Tokenomics or mechanisms that disproportionately benefit the founders or whales.

Being cautious, performing due diligence, and understanding the risks of any project or community interaction can help avoid falling victim to such schemes.

Are hawala brokers regulated by governments, and why are hawala systems tolerated despite misuse risks?

Mon, 02 Dec 2024 18:33:41 +0000

Faisal KhanAnswered Dec 2, 2024

In a few countries, Hawala brokers are regulated. But all in all it still remains to be an undocumented transfer. I did a recent video on What is hawala money? than can be seen here.

Governments cannot 100% clamp down on a hawala transaction. The nature of it is as such, that there is no mechanism to stub it out. Yes, it has been associated to terrorist financial and illegal usage, but so have regular banking transactions. It is only when you decipher the true nature of the payment, do you actually know the reason why.

What are Authorized Push Payment (APP) Scams?

Mon, 11 Nov 2024 18:18:56 +0000

Faisal KhanAnswered Nov 11, 2024

TL;DR:

Authorized Push Payment (APP) scams occur when fraudsters deceive victims into making payments willingly from their own bank accounts. These scams involve tricking individuals or businesses into authorizing transfers to the scammer's account by posing as legitimate entities, such as trusted companies or government agencies. Since the victim authorizes the payment, recovering the stolen funds can be difficult. APP scams are increasingly common in digital transactions and require awareness and prompt action to avoid losses.

How to Verify Investment Advisor Credentials

Mon, 14 Oct 2024 18:18:55 +0000

Faisal KhanAnswered Oct 14, 2024

TL;DR:

Always verify that your investment advisor is licensed and reputable. Learn how to check credentials and avoid falling victim to fraudulent or unqualified advisors.

Introduction: Why Verifying Your Investment Advisor Matters

Choosing the right investment advisor is a critical decision for your financial well-being. Unfortunately, not all advisors are legitimate, and some operate without the proper qualifications or credentials. Fake or unqualified advisors may offer fraudulent schemes or provide poor financial advice, potentially leading to significant financial losses. Verifying an investment advisor’s credentials is essential for ensuring that they are trustworthy, experienced, and operating within the law.

What free resources are available for learning about AML regulations?

Mon, 02 Sep 2024 18:33:40 +0000

Faisal KhanAnswered Sep 2, 2024

The FATF (Financial Action Task Force) has a lot of recommendations that FATF member countries have to follow else they are ejected from the global banking system. They are a great resource to read (especially country-specific policies and recommendations, even though the recommendations are non-binding).

The resource is the ACAMS website; specifically, the “Explore Resources” section is worth reading. Also worth a read-through is the 5th AML Directive by the European Union. Almost all countries have their central bank that publishes some regulation on AML so that you can search that for localization awareness and check the guidelines on local FIU (Financial Intelligence Unit).

Is it acceptable to request donations on a website by publicly listing personal bank account details?

Fri, 09 Aug 2024 18:33:58 +0000

Faisal KhanAnswered Aug 9, 2024

Yes, it is generally acceptable to take donations on your website, but it’s important to consider local regulations and the policies of your financial institution. If you are accepting donations directly for yourself, it’s usually permissible. However, if you are collecting donations on behalf of someone else, this could classify you as a financial intermediary or provider of escrow services, which typically requires a license.

If a Pakistani citizen launches a crypto exchange, can it operate locally without SBP regulation?

Fri, 09 Aug 2024 18:33:56 +0000

Faisal KhanAnswered Aug 9, 2024

No, you're not correct. While you can certainly create a crypto exchange that operates solely within the crypto world, the situation changes the moment you involve the Pakistani rupee or provide intermediary services.

As soon as you start dealing with the Pakistani rupee, your exchange falls under the jurisdiction of the Pakistani government and the State Bank of Pakistan (SBP). Additionally, if your exchange allows others to sign up and trade, you're also subject to regulations by the Securities and Exchange Commission of Pakistan (SECP).

Why are intermediaries like PayPal or Venmo still needed if Bitcoin transactions can be pseudonymous?

Fri, 09 Aug 2024 18:33:55 +0000

Faisal KhanAnswered Aug 9, 2024

It's not that we necessarily need PayPal or Venmo to send money; these platforms are essentially their own ecosystems. Think of PayPal and Venmo as dedicated apps that allow users within their networks to send money to each other seamlessly, instantly, and with an excellent user experience. However, PayPal benefits by charging transaction fees, making money as funds move internally within their system or ledger. It's an efficient process.

What is the safest and most efficient way to move large sums of money between two European countries?

Wed, 07 Aug 2024 18:33:53 +0000

Faisal KhanAnswered Aug 7, 2024

SEPA transfers work well. If you consider the amount significant, it would be a good idea to visit your bank branch and let them know of the transfer request. It would also be a good idea to read up on the answers of others here to be 100% sure you’re not doing the transfer because of some pig-butchering scam or something similar.

But to answer your question, a SEPA transfer is pretty secure.

Can a wire transfer be stopped or recalled after it has been sent internationally or out of state?

Wed, 07 Aug 2024 18:33:52 +0000

Faisal KhanAnswered Aug 7, 2024

The ability to cancel a wire transfer depends on the country and the type of transfer sent. Generally, you can cancel or recall a wire transfer, but there is often a very short window for doing so, and there may be associated costs. It is a common misconception that if a wire transfer is credited to the recipient’s account and they haven't used the funds, it can be recalled. Once a wire transfer is credited, the transaction is typically complete. Exceptions include cases of erroneous transfers or anti-money laundering (AML) and counter-terrorism financing (CFT) issues, where banks may collaborate to cancel and return the transfer, but such instances are rare.

What information does a typical remittance slip contain?

Tue, 06 Aug 2024 18:33:50 +0000

Faisal KhanAnswered Aug 6, 2024

Generally speaking, a remittance slip will contain the following information as a minimum (albeit results can vary depending on the jurisdiction, method, and transfer entity involved):

Sender Name
Date
Amount being sent
Receiver Name
Receiver (address, telephone, email)
Method (cash, pick-up, account credit, etc).
Confirmation/Tracking Number (affectionately called the WUCN - Western Union Control Number).
Company Name (the name of the entity sending the money)

Can the source and destination of a wire transfer be tracked by third parties?

Tue, 06 Aug 2024 18:33:48 +0000

Faisal KhanAnswered Aug 6, 2024

Not anyone.

It is possible to track a payment (both origin, destination, and transit) in each given network, provided you are a participant in that network.

As the end customer, it is very difficult to have access to such. As an operator (bank, payment system) such visibility is available.

Is it possible to transfer funds from Europe to the US without involving banks at all?

Tue, 02 Apr 2024 18:33:38 +0000

Faisal KhanAnswered Apr 2, 2024

If you are implying fiat, then yes, the method would be Hawala. In a Hawala system, assuming you adopt a cash-based transfer, you would pay someone in cash in the country of origin, and in the payout country, your beneficiary would be paid in the equivalent amount in local currency in cash also.

Alternatively, if you wish to send funds (value) across, you can do it via Crypto only.

How do you get a Forex trading license in the UK, and what does it involve?

Wed, 27 Mar 2024 18:18:53 +0000

Faisal KhanAnswered Mar 27, 2024

In the United Kingdom, forex trading is regulated by the Financial Conduct Authority (FCA). The FCA is a non-governmental body that operates independently and is financed by the firms it regulates. It is accountable to a Board appointed by the UK Treasury. The FCA's primary objectives are to protect consumers, ensure the stability of the financial industry, and promote healthy competition within the financial services sector.

How common is it for law enforcement to investigate wire transfer transactions?

Sat, 02 Mar 2024 18:33:46 +0000

Faisal KhanAnswered Mar 2, 2024

No. It is not. In most cases, wire transfers are usually investigated by the compliance and/or investigative units within the bank. In the event, the bank seems a crime has been committed the compliance department has a legal responsibility to report it to the relevant authorities. The LEAs (Law Enforcement Agencies) then determine on how to investigate it further, (if at all), based on the information provided by the bank, or the related financial/non-financial institution. But it is not common for Police to investigate money wire transfers. This usually comes under the White-Collar Crimes and there, within such LEAs is a dedicated unit (usually) that can further handle this case.

In what ways could cryptocurrencies potentially replace or bypass SWIFT?

Sat, 02 Mar 2024 18:33:37 +0000

Faisal KhanAnswered Mar 2, 2024

Theoretically, they can. In reality, it won’t happen. What might happen is that SWIFT will embrace blockchain technology (perhaps build their own L1) and use that. But it already has a fantastic connection to 25,000+ banks in the world, which took years and years to build. These connections are highly compliant and have been through quite a few regulatory iterations. It is not as if one day, something much more efficient will come along, and it will dethrone SWIFT.

Who has the authority to issue fiat currency?

Sat, 02 Mar 2024 18:33:35 +0000

Faisal KhanAnswered Mar 2, 2024

The Government does.

The word "fiat" refers to a decree or an order issued by an authority or government with the power to do so. In the context of fiat currencies, the term "fiat" refers to the fact that these currencies are not backed by a commodity such as gold or silver but are backed by the government's guarantee of their value.

How many Layers are in a Blockchain?

Fri, 16 Feb 2024 18:18:52 +0000

Faisal KhanAnswered Feb 16, 2024

In the blockchain ecosystem, the concept of "layers" is used to describe different levels of the technology stack, each with its specific purpose and functionality. The most commonly referenced layers are:

1. Layer 0: Infrastructure Layer

Layer 0 acts as the foundational infrastructure of the blockchain. It includes the underlying technologies and protocols that enable the existence, interoperability, and scalability of Layer 1 blockchains. Layer 0 solutions focus on creating a network that can support multiple Layer 1 blockchains, ensuring they can efficiently communicate and transfer value between one another.

Why is understanding IRS Title 31 Audit crucial for BTM operators?

Fri, 16 Feb 2024 18:18:50 +0000

Faisal KhanAnswered Feb 16, 2024

Entering the Bitcoin ATM (BTM) business necessitates a deep understanding of the IRS Title 31 Audit requirements due to the regulatory environment governing financial transactions, especially those involving cryptocurrencies. Here are several reasons why knowledge of Title 31 and compliance with its regulations are crucial for BTM operators:

1. Regulatory Compliance:

BTMs, like traditional financial institutions, fall under the purview of the Bank Secrecy Act (BSA) and are considered money service businesses (MSBs). As such, BTM operators must comply with Title 31 requirements, including implementing anti-money laundering (AML) programs, reporting certain transactions, and keeping detailed records.

Is it possible to wire money directly between banks in Russia and the United States?

Fri, 02 Feb 2024 18:33:34 +0000

Faisal KhanAnswered Feb 2, 2024

At present, the answer is no. The Russian banking system has been sanctioned by the United States Government (at the time of writing this answer). So no correspondent banking or proxy banking services with respect to the US Dollar or any other multi-currency associated with the United States Financial Institution &/or Non-Banking Financial Institution and the Federation of Russia is not possible and is prohibited by the sanctions in place.

Why does the gas fee in the cryptocurrency world fluctuate while transaction fees in the fiat world remain fixed?

Thu, 01 Feb 2024 18:18:49 +0000

Faisal KhanAnswered Feb 1, 2024

The fluctuation of gas fees in the cryptocurrency world, particularly on networks like Ethereum, as opposed to the fixed transaction fees commonly found in traditional (fiat) banking systems, stems from several fundamental differences in how transactions are processed and validated in each system.

1. Dynamic Pricing Based on Demand and Supply

Cryptocurrency Networks: Gas fees in networks like Ethereum are determined by demand for block space and the supply of network bandwidth. When more transactions are requested than the network can accommodate in a block, users must bid higher gas fees to prioritize their transactions. This demand-supply dynamic leads to fluctuating gas fees.
Fiat Systems: Traditional banks and electronic payment systems typically charge fixed fees for transactions or services. These fees are set by the institution and do not change with demand. They cover the service costs and include a profit margin for the bank but are not directly affected by the number of transactions waiting to be processed.

2. Decentralized vs. Centralized Systems

Decentralization: Cryptocurrency transactions are processed and validated by a decentralized network of nodes. This process requires consensus and consumes resources, with costs (gas fees) varying based on the computational complexity and network congestion.
Centralization: Traditional banking systems are centralized, with transactions processed through a controlled, proprietary network. This allows for standardized processing costs, which the bank can average out over transactions to offer fixed fees.

3. Market Dynamics and Speculation

Cryptocurrency: The cryptocurrency market is highly speculative and volatile, affecting not just the value of cryptocurrencies but also the perceived cost of transactions. Gas fees can spike with market movements, network upgrades, or increased activity (e.g., during a popular ICO or NFT drop).
Fiat Systems: While the broader economic factors can influence service fees in the traditional banking sector, such changes are relatively infrequent and are typically announced in advance by the institution.

4. Transaction Complexity

Cryptocurrency Transactions: In networks like Ethereum, different actions (transferring tokens vs. interacting with a smart contract) require varying amounts of computational power, affecting the gas fee. The more complex the transaction, the higher the fee.
Fiat Transactions: Most traditional banking transactions are standardized (e.g., wire transfers, ATM withdrawals), leading to fixed fees that can be easily anticipated by customers.

5. Network Capacity and Scalability

Blockchain Networks: Blockchain networks have a limited capacity for processing transactions per block. As usage increases, so does competition for block space, driving up transaction fees.
Traditional Banking Systems: Banks and electronic payment networks can adjust their infrastructure and processing capacity to handle increased demand, maintaining stable fees.

In summary, the dynamic and fluctuating nature of gas fees in the cryptocurrency world is a direct consequence of the decentralized, demand-driven model of blockchain networks, contrasting with the centralized, controlled model of traditional fiat banking systems.

Do we need to be licensed in any capacity, such as a money transmitter?

Tue, 30 Jan 2024 18:18:47 +0000

Faisal KhanAnswered Jan 30, 2024

Yes, if you are collecting and distributing money on behalf of others, you would be classified as a Money Services Business, which requires a money transmitter license. This is based on the functions your Kiosk would be operating under.

Is a money transmitter license required for the operation of closed-loop cards in the United States?

Mon, 29 Jan 2024 18:18:46 +0000

Faisal KhanAnswered Jan 29, 2024

In the United States, the need for a money transmitter license for closed-loop cards depends on various factors, including the specific features of the card, the way it's used, and state laws. Here's a general overview:

Definition of Money Transmission: Money transmission typically involves the transfer of funds between people or locations, often through a third party. Money transmitter licenses are required for businesses that engage in the activity of transmitting money for customers, which is regulated at both the federal and state level.
Closed-Loop Cards: These cards are generally limited to purchases of goods and services from a specific retailer or a limited network of retailers. They do not usually enable users to transmit funds to another individual or entity outside of that closed system.
Regulatory Exemptions: Closed-loop cards often fall under certain exemptions from money transmitter regulations. For example, they might be classified under gift card or stored value card exemptions, as they typically do not involve transferring money outside of the issuing retailer's network.
State Laws: The requirement for a money transmitter license varies by state. Each state has its own regulations regarding money transmission and the exemptions that apply. Some states may require a license or have specific regulations for certain types of closed-loop cards, especially if they have features that resemble traditional money transmission services.
Federal Regulations: At the federal level, closed-loop cards might not be classified as money transmission, especially if they do not enable the transfer of funds to third parties. However, issuers still need to comply with other relevant federal regulations, such as those related to anti-money laundering (AML).
Changes in Usage or Features: If a closed-loop card system evolves to include features such as allowing users to transfer funds to others or withdraw cash, it may then fall into the category of money transmission, necessitating a license.

It's important for businesses dealing with closed-loop cards to consult with legal experts and review both federal and state regulations to determine if their specific card program requires a money transmitter license. The regulatory landscape can be complex and varies based on the exact nature and features of the card program.

Does the tax authority know exactly how much money individuals hold in bank accounts?

Fri, 05 Jan 2024 18:32:56 +0000

Faisal KhanAnswered Jan 5, 2024

In almost every country, the answer is no. The tax office does not know how much is in your account, but they can request a response from the bank (if the law) allows requesting the financial institution to let the tax collecting authority know of the balance.

Unless there is a gag order precisely, the client would be informed by the bank in most cases (in most geographic locations).

Why is Bitcoin priced higher in emerging markets?

Fri, 05 Jan 2024 18:32:54 +0000

Faisal KhanAnswered Jan 5, 2024

tl;dr: due to capital outflow controls.

Well, the answer is pretty simple. It's not that complicated to understand Emerging markets; most of them have capital controls, which means you can bring money into the country by taking money out, there's usually a cap or a limit, or it's tough to take money out.

Let's say you start an exchange in some country like Pakistan, Nigeria, Bangladesh, India, etc. and you have some bitcoins that you want to sell. So, you go on the exchange, place a Bitcoin for sale, and someone will pay using fiat to buy those bitcoins. They could have INR, PKR, Naira, etc. At some point in time, that supply will finish off. Now, where do you get liquidity?

Is a license required to operate crypto-related services in the US?

Fri, 05 Jan 2024 18:32:53 +0000

Faisal KhanAnswered Jan 5, 2024

Disclaimer: I am not a lawyer. I'm going to give you my opinion of what I think is correct.

So if you are doing a crypto to crypto play in the US, no license is required, provided you do not touch the US dollar or you do not touch any other fiat or other asset that is issued by a government or an entity like that. I cannot comment regarding anything to do with SEC or FINRA etc. So I'm only going to talk about money transmission law, but specifically from what my understanding is, if you're doing crypto to crypto if you want to launch a wallet service, for example, and you're not touching any fiat and it's pure crypto play, no license is required.

What are the costs involved in registering as an MSB or money transmitter in the United States?

Tue, 02 Jan 2024 18:33:32 +0000

Faisal KhanAnswered Jan 2, 2024

The costs for a money transmitter license (MTL) vary from state to state. Money Services Business (MSB) is a classification and usually doesn’t have a license per se. If you are an MSB, then the question arises, does the business activity you engage in make you a money transmitter, and if so, do you need to get money transmitter licenses for each state you intend to work in/with?

What does an anti-money laundering certification typically cost?

Tue, 02 Jan 2024 18:33:30 +0000

Faisal KhanAnswered Jan 2, 2024

Depends from free to $99 to $5,000. There is no standard anti-money laundering certificate. ACAMS costs about $2,000 (or thereabouts), Typical awareness training for anti-money laundering costs about $99, and specialized courses can be priced much higher.

There is also plenty of material available on YouTube to digest for free as well, though it won’t result in being given a certificate.

How can someone check if their identity has been used in a fraudulent wire transfer?

Tue, 02 Jan 2024 18:33:29 +0000

Faisal KhanAnswered Jan 2, 2024

You honestly cannot. If your name &/or credentials have been used for a fraudulent money wire transfer that is not originating from your account, it becomes next to impossible to check.

If the origination is from your account, that should be obvious, considering the withdrawal (drawdown) from your account.

One of the most significant sources in the world for fraudulent credentials is photocopying (xerox) machines, which have an internal memory and can store whatever is being copied. Be cognizant of where you give your government-issued documents to be copied/xeroxed, etc.

What defines a RaaS (Remittance-as-a-Service) Provider, and how does it differ from a traditional money transfer company?

Sun, 31 Dec 2023 18:18:45 +0000

Faisal KhanAnswered Dec 31, 2023

A RaaS (Remittance-as-a-Service) provider and a traditional money transfer company offer similar services — facilitating the transfer of money, particularly across borders — but they differ significantly in their business models and operational approaches.

RaaS Provider:

Service Model: A RaaS provider offers remittance services based on the 'as-a-Service' model. This means they provide the infrastructure and technological platform for remittance services, which can be used by other businesses.
Target Clients: Their primary clients are often businesses or entrepreneurs who want to offer remittance services to their customers but do not wish to build and maintain the required technology and regulatory framework from scratch.
Infrastructure and Compliance: RaaS providers handle the complex aspects of the remittance process, such as compliance with international financial regulations, security, and the technological framework.
Flexibility and Scalability: They offer a more flexible and scalable solution for businesses to provide remittance services without the significant upfront investment and ongoing operational complexities.

Traditional Money Transfer Company:

Direct Service Provider: These companies directly offer money transfer services to customers. They are not intermediaries but the end service providers.
Own Infrastructure: They build and maintain their own transfer network, technology, and comply with all relevant financial regulations.
Customer-Focused: Their operations are designed to directly serve individuals or businesses wanting to send money, often involving physical locations for sending and receiving money.
Comprehensive Operations: They handle every aspect of the money transfer process, including customer service, marketing, compliance, and the actual transfer of funds.

In summary, a RaaS provider is like a backend service provider for businesses wanting to offer remittance services, offering the necessary infrastructure and compliance framework. In contrast, a traditional money transfer company is the entity that directly interacts with the customer to facilitate the transfer of funds.

Who coined the term Money Transfer-as-a-Service or MTaaS?

Sun, 31 Dec 2023 18:18:44 +0000

Faisal KhanAnswered Dec 31, 2023

Money Transfer as a Service (MTaaS) is an innovative concept in the financial technology sector, pioneered by Faisal Khan, CEO of Faisal Khan, LLC. Khan introduced MTaaS around 2013, adapting the 'as-a-Service' model commonly used in technology and software industries to the field of international money transfers.

This model, conceptualized by Khan, has been a game-changer for the way money transfer services are provided. It enables a diverse range of businesses, not just traditional financial institutions, to offer international money transfer services. MTaaS does this by simplifying the complex infrastructure and processes typically associated with such services, making them more accessible and less cumbersome for businesses to implement.

What is payment clearing?

Mon, 11 Dec 2023 18:18:42 +0000

Faisal KhanAnswered Dec 11, 2023

Payment clearing is a crucial process in the world of banking and payments, involving the transfer and settlement of funds between parties. Here's a detailed explanation:

Definition:

Payment clearing is the process of reconciling a transaction between two parties (such as individuals, businesses, or financial institutions) and ensuring the correct movement of money from the payer to the payee. This process involves validating the transaction details, verifying the availability of funds, and ensuring the proper crediting and debiting of respective accounts.

What is trade finance?

Mon, 11 Dec 2023 18:18:41 +0000

Faisal KhanAnswered Dec 11, 2023

Trade finance is a crucial aspect of international business, facilitating cross-border trade and money transfers. Here's an overview tailored to your request:

1. Definition: Trade finance refers to the financial instruments and products that businesses use to facilitate international trade and commerce. It encompasses a range of activities, including lending, issuing letters of credit, factoring, export credit, and insurance. Trade finance aims to reduce the risk associated with global trade transactions.

What is factoring?

Mon, 11 Dec 2023 18:18:40 +0000

Faisal KhanAnswered Dec 11, 2023

Factoring in the context of banking, remittances, and cross-border payments is a financial transaction where a business sells its accounts receivable (invoices) to a third party (a factor) at a discount. Here's a detailed explanation:

Definition: Factoring is a financial service where a business sells its invoices to a factor (usually a financial institution) for immediate cash, typically at a discount. The factor then collects the payment from the business’s customers.
How It Works:

A business sells its outstanding invoices to the factor.
The factor advances a percentage of the invoice value to the business, often 70-90%.
The factor then takes on the responsibility of collecting the payments from the business's customers.
Once the invoices are paid in full, the factor pays the remaining balance to the business, minus a fee for the factoring service.

Who Does Factoring: Factoring is typically provided by financial institutions or specialized factoring companies.
Who Utilizes It: Businesses that need immediate cash flow and have a substantial amount of money tied up in accounts receivable often use factoring. It's common in industries with long invoice payment cycles, like manufacturing, wholesale, or textiles.
Benefits:

Immediate Cash Flow: Businesses get immediate access to cash, improving their liquidity.
Outsourcing Collection: The burden of collecting receivables is transferred to the factor, saving time and administrative costs.
No Collateral Required: Unlike traditional loans, factoring does not require collateral.

Dangers:

Costs: Factoring can be more expensive than traditional financing due to fees and discounts.
Customer Relationships: The factor's approach to collecting payments might affect the business’s relationship with its customers.
Dependency: Reliance on factoring can mask underlying financial issues in a business.

Examples:

What is collateralized pre-funding?

Mon, 11 Dec 2023 18:18:38 +0000

Faisal KhanAnswered Dec 11, 2023

Collateralized pre-funding in the context of banking, payments, and cross-border money transfers is a financial mechanism where funds are provided in advance for international transactions, with the security of collateral. Here's an overview of how it functions:

What It Is: Collateralized pre-funding involves securing an advance of funds with assets pledged as collateral. This approach is used to mitigate risk for the lender in international payment scenarios.
How It Works: In this arrangement, a business or individual seeking to make cross-border payments must provide assets as security for the funds they receive in advance. The collateral could be in various forms, such as property, financial instruments, or other valuable assets. If the borrower fails to repay the advance, the lender has the right to seize the collateral to recover their funds.
Types of Collateral: Common types of collateral include real estate, stocks, bonds, commodities, and sometimes even future receivables or invoices. The nature of the collateral depends on the agreement between the lender and the borrower and the lender's willingness to accept certain types of assets.
Providers: Banks, financial institutions, and some specialized fintech companies offer collateralized pre-funding. These entities have the requisite infrastructure to assess the value of collateral and manage the associated risks.
Users: Businesses engaged in international trade often utilize this form of funding, especially those that may not have a strong enough credit history to qualify for non-collateralized options or who prefer lower interest rates that often come with collateralized loans.
Example: Consider a manufacturing company in Country A needing to purchase raw materials from Country B. The company could approach a bank for collateralized pre-funding, pledging its factory or machinery as collateral. The bank assesses the value of the collateral and agrees to provide the necessary funds. The company then uses these funds to pay the supplier in Country B. If the company fails to repay the advance, the bank has the right to seize the collateral.

Collateralized pre-funding is particularly significant in international business transactions where large sums are involved, and the risk is higher. By providing assets as collateral, businesses can secure the necessary funding for their international transactions, while lenders mitigate their risk in the deal. This mechanism is a vital part of global trade financing, enabling businesses to expand their operations across borders.

What is non-collateralized pre-funding?

Mon, 11 Dec 2023 18:18:37 +0000

Faisal KhanAnswered Dec 11, 2023

In banking and payments, particularly in the context of cross-border transactions, "non-collateralized pre-funding" refers to a financial arrangement where funds are advanced for transactions without requiring collateral as security. Here's a breakdown of the concept:

What It Is: Non-collateralized pre-funding is a way of providing liquidity or capital for international transactions without the need for the recipient to offer any collateral. This contrasts with collateralized loans or advances where assets must be pledged to secure the funding.
How It Works: In this scenario, an entity (like a bank or financial institution) provides funds upfront to facilitate cross-border payments. These funds are extended based on trust and the creditworthiness of the recipient, rather than secured against specific assets. The recipient uses these funds to complete their transactions, such as paying suppliers or settling invoices in another country.
Who Provides It: Typically, these arrangements are offered by banks, financial institutions, or fintech companies specializing in cross-border payments. These providers assess the risk associated with the transaction and the recipient's creditworthiness before agreeing to offer non-collateralized pre-funding.
Examples:

Fintech Solutions: A fintech company specializing in cross-border payments might offer non-collateralized pre-funding to a business needing to pay an overseas supplier. The fintech company assesses the business’s credit history and transaction details before advancing the funds.
Bank Facilities: A bank might provide a non-collateralized line of credit to a company for international trade. This line of credit allows the company to draw funds as needed for cross-border transactions, relying on the company's overall financial health rather than specific collateral.

In practice, non-collateralized pre-funding is particularly valuable in international trade and finance, where swift and efficient transactions are crucial and businesses may not always have readily available or appropriate collateral. It's an example of how financial services are evolving to meet the needs of global commerce, emphasizing creditworthiness and trust over traditional asset-based security.

If you're a billing aggregator and you're simply providing billing information but not handling the payments, are you considered a money services business?

Sun, 10 Dec 2023 18:18:36 +0000

Faisal KhanAnswered Dec 10, 2023

No, if you're a billing aggregator in the United States that is solely providing billing information and not handling the payments, you are not considered a money services business (MSB). Consequently, you do not require a money transmitter license.

The key factor for requiring a money transmitter license is the actual handling of funds. Since the billing aggregator in this scenario is not processing payments but merely consolidating billing information, they are not engaging in money transmission. Therefore, they are not subject to the same regulatory requirements that apply to MSBs.

How can someone control impulsive spending habits?

Tue, 05 Dec 2023 18:32:51 +0000

Faisal KhanAnswered Dec 5, 2023

For a lot of people, the following has worked:

Leave your wallet at home when going out; take bare minimum cash and a pre-paid debit card with a small amount of funds loaded onto it.
When shopping, instill the seven days rule, i.e. you are to wait seven days before buying it. Chances are, the desire will no longer be there to buy.

What is an Online vs. Offline Transaction?

Sat, 02 Dec 2023 18:18:34 +0000

Faisal KhanAnswered Dec 2, 2023

Online Transactions

Definition: An online transaction, in the realm of banking and finance, refers to any exchange or transfer of funds that is conducted over the internet. This involves the use of digital platforms like online banking systems, mobile apps, or websites.

Key Characteristics:

Digital Platform Usage: These transactions are executed through electronic devices like computers, smartphones, or tablets.
Real-Time Processing: Online transactions are often processed in real time, meaning the transfer of funds or payment confirmation happens almost instantaneously.
Wide Accessibility: They can be conducted from anywhere, provided there is internet connectivity.
Examples: Online shopping payments, electronic fund transfers, bill payments through banking apps, and digital wallet transactions.

How It Works:

What happens when the government raises the borrowing rate to curb inflation?

Thu, 23 Nov 2023 18:18:33 +0000

Faisal KhanAnswered Nov 23, 2023

When the government raises interest rates to curb inflation, it typically influences a range of borrowing rates. Here's how it impacts different types of loans:

Credit Card Borrowing Rate: Credit cards usually have variable interest rates that are often linked to the prime rate, which is directly influenced by the central bank's rates. Therefore, when the government raises interest rates, credit card borrowing rates are likely to increase. This means that carrying a balance on your credit card could become more expensive due to higher interest charges.
Car Lease Payments: The effect on car lease payments depends on the structure of the lease agreement. If your car lease has a variable interest rate, then your payments might increase in response to a rise in government interest rates. For leases with fixed interest rates, there won't be an immediate impact, but new or renewed leases might come with higher rates.
Mortgage Payments: Mortgages are significantly affected by changes in government interest rates. If you have a fixed-rate mortgage, your payments will remain unchanged until the mortgage is up for renewal. However, for variable-rate or adjustable-rate mortgages, an increase in government rates will likely lead to higher interest rates on your mortgage, which means higher monthly payments.

In essence, raising the borrowing rate is a tool used by governments to reduce inflation by making borrowing more expensive. This reduces consumer spending and investment, which in turn can help to slow down inflation. However, it also means higher costs for those with variable-rate debts like some credit cards, car leases, and mortgages.

What is Product-Market fit?

Tue, 21 Nov 2023 18:18:32 +0000

Faisal KhanAnswered Nov 21, 2023

Product-Market Fit is a concept that's really important in the world of business, especially for startups. Imagine you've created something, like a new app or a gadget. Product-Market Fit is about making sure that what you've created is something people actually want and will buy. It's like making sure a puzzle piece fits perfectly in its place.

What is Product-Market Fit?

Product: What you're offering, like an app, a gadget, a service, or anything else you're trying to sell.
Market: The people or businesses who might buy what you're selling.
Fit: This means your product meets the needs or wants of your market. People are excited to use it, and they think it's valuable.

Is it Just for Products?

Not at all! It applies to services too. Whether it's a physical product, a digital product, or a service like a cleaning service or a tutoring service, it's all about finding the right market that needs what you're offering.

How Do You Achieve It?

Understand Your Customers: Know who they are, what they need, and what problems they have that your product or service can solve.
Feedback: Talk to your potential customers. Get their opinions on your product or service. Do they like it? What would they change?
Adjust and Improve: Use the feedback to make your product or service better. Make sure it solves the problems your customers have.
Test and Learn: Try selling your product or service. See how people respond. Are they buying it? Are they happy with it?

How Do You Know You've Got It?

Sales: People are buying your product or service, and sales are growing.
Feedback: Customers are giving positive feedback and maybe even recommending it to others.
Repeat Customers: People come back to buy your product or service again.
Less Need for Marketing: You don't have to push as hard to sell; people are coming to you because they've heard good things.

Is There a Specific Method?

There's no one-size-fits-all method. It's about trying different things, learning from your customers, and being ready to change your product or service to better fit what they want.

Conclusion

Achieving Product-Market Fit is like finding the sweet spot where what you're offering is just what a specific group of people are looking for. It's not always easy, and it often requires listening, adapting, and sometimes even starting over with a new idea. But when you find that fit, it's a big deal because it means your business is much more likely to succeed.

What are the state requirements for authorized delegates in terms of managing funds?

Sat, 18 Nov 2023 18:18:30 +0000

Faisal KhanAnswered Nov 18, 2023

Is it obligatory to send funds through a Payment Service Provider (PSP), or is it permissible to use our own bank account?

It's important to clarify that we do not deal with Payment Service Providers (PSPs), but rather with Money Services Businesses (MSBs) in the United States that possess the necessary Money Transmitter Licenses. Regarding your question from an MSB standpoint, as an Authorized Agent, you are required to have a Bank Account. However, all funds from your Bank Account must be processed through the Bank Account of the Principal License Holder (PLH), under whom you are an authorized agent.

Do I need a license for a private USDT transaction in Florida?

Tue, 14 Nov 2023 18:18:29 +0000

Faisal KhanAnswered Nov 14, 2023

I am in Florida and have an arrangement with a trusted associate who will buy $25k worth of USDT from me daily (on banking days). He will make payments from his personal account to mine, and I will transfer the USD to Kraken, sending him the USDT. This trade is exclusive between us. Do I need any type of license for this?

A: Most likely not.

Why don't some US banks offer international wire transfers?

Mon, 13 Nov 2023 18:18:27 +0000

Faisal KhanAnswered Nov 13, 2023

Risk Management: The primary concern for banks, especially in the context of international transfers, is risk exposure. Person-to-Person (P2P) transfers, often involved in international transactions, are perceived as high-risk by banks. This perception isn't always accurate, but it influences their decision-making. To mitigate these risks, many banks choose not to engage in international wire transfers.
Infrastructure Limitations: Smaller banks in the U.S. frequently lack the necessary infrastructure to conduct international wire transfers. This limitation stems from two key factors:
- Non-Membership in SWIFT: The Society for Worldwide Interbank Financial Telecommunication (SWIFT) network is crucial for international banking communication. Many small banks are not members of this network, which is essential for executing global transactions.
- Lack of Intermediary Relationships: Successful international transfers often require relationships with foreign exchange (FX) banks, which are predominantly located in financial hubs like New York. Smaller banks often do not have these relationships, which hampers their ability to facilitate international transfers.
Cost-Benefit Analysis: For a bank, offering international wire transfer services requires a significant investment in technology, compliance, monitoring, and reporting. When a bank only anticipates handling a small volume of international transfers, the return on such an investment may not be justifiable. Consequently, if the expected business volume from these services does not align with the high investment and operational costs, a bank may deem it financially imprudent to offer these services.

In summary, the decision not to offer international wire transfer services is influenced by a combination of risk management considerations, infrastructural limitations, and a cost-benefit analysis based on expected transaction volume. Smaller banks, in particular, face challenges in each of these areas, leading many to opt out of providing such services.

What is Know Your Transaction (KYT)?

Sat, 04 Nov 2023 18:18:25 +0000

Faisal KhanAnswered Nov 4, 2023

Know Your Transaction (KYT) is an anti-money laundering (AML) and compliance procedure that focuses on understanding the nature and pattern of customer transactions. Its purpose is to monitor and assess the risk levels of the transactions that take place through a financial institution. This process helps in detecting and preventing fraudulent activities, money laundering, and other financial crimes.

How KYT Differs from KYC and KYB:

What is the difference between an Authorized Delegate and an Authorized Agent?

Sat, 14 Oct 2023 18:18:24 +0000

Faisal KhanAnswered Oct 14, 2023

In the context of USA Money Services Businesses (MSBs) and associated licensing, "authorized delegate" and "authorized agent" are related terms, but they are not necessarily the same thing. These terms are often used in the context of businesses like money transmitters, check cashers, and currency dealers, which are considered MSBs and are subject to federal and state regulations.

Authorized Delegate:

An authorized delegate is a term commonly used in the context of money transmitters. When a money transmitter (like a Western Union or MoneyGram agent) wants to extend its services to other locations or entities, it may appoint authorized delegates. These authorized delegates are essentially third-party agents or partners that are authorized to conduct money transmission activities on behalf of the licensed money transmitter.
Authorized delegates typically have to go through a vetting and approval process by the licensed money transmitter and regulatory authorities to ensure they meet compliance and security standards.
Authorized delegates operate under the authority and supervision of the licensed money transmitter and are required to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.

Authorized Agent:

The term "authorized agent" can have a broader application and is not limited to money transmitters. It can be used in various contexts, including financial services and other industries.
An authorized agent is an entity or individual authorized by another entity to act on its behalf or represent it in certain business activities or transactions.
In the context of MSBs, an authorized agent could refer to a business or individual that acts on behalf of an MSB for specific functions, such as conducting customer verifications or performing other related tasks. The specific roles and responsibilities of authorized agents can vary depending on the arrangement between the MSB and the agent.
Authorized agents, like authorized delegates, may also be subject to regulatory oversight and compliance requirements depending on the nature of their activities.

In summary, while both "authorized delegate" and "authorized agent" involve one entity acting on behalf of another in the context of MSBs, "authorized delegate" is a more specific term often associated with money transmitters appointing third-party agents to provide money transmission services. "Authorized agent" is a broader term that can apply to various business relationships in the financial services industry and beyond. The specific legal and regulatory implications may vary depending on the specific roles and responsibilities of these entities. It's important for businesses involved in such arrangements to understand the regulatory requirements and compliance obligations associated with these roles.

How do you open a wire transfer-enabled bank account?

Tue, 05 Sep 2023 18:32:50 +0000

Faisal KhanAnswered Sep 5, 2023

A wire transfer is a service that is offered by your bank. Depending on where in the world you may be, you would typically open a regular account (checking/current, etc.) and ask your bank if wire transfer services are available.

Even for some countries, the term wire-transfer is too broad. It may imply local transfers, SWIFT, SEPA, FedWire, etc. so be sure to ask for an explanation of what sort of wire-transfer services are being provided for.

What is the difference between stored value and top-up?

Fri, 04 Aug 2023 18:18:23 +0000

Faisal KhanAnswered Aug 4, 2023

In the context of electronic money institutions (EMIs) and money services businesses, "stored value" and "top-up" are terms often used to describe different aspects of the same process, which is the electronic storage and management of money. Here's a brief explanation of each:

Stored Value: This refers to the monetary value represented in digital form, which is stored on an electronic device or system. It's a pre-paid amount that users can access to make payments or transactions. Stored value can be found in various forms such as prepaid debit cards, digital wallets, or electronic money accounts. The value is already paid for in advance and is stored for future use.
Top-Up: This is the action of adding more funds to an existing stored value account or device. When the stored value is depleted or runs low, users can "top-up" or refill their account with more funds. This can often be done via various methods, such as bank transfers, credit/debit card payments, or even physical cash deposits at designated locations.

In summary, "stored value" refers to the digital representation of prepaid funds, while "top-up" is the process of adding more funds to the stored value. Both concepts are fundamental to the operation of EMIs and other money services businesses.

Is it possible for Pakistan to recover looted funds held in European banks?

Fri, 09 Jun 2023 18:32:41 +0000

Faisal KhanAnswered Jun 9, 2023

Yes, it is, but it is a complex process. The government of Pakistan would have to file a case and then be prepared to show, i.e. the burden of proof would lie on the government to show beyond a reasonable doubt that the money was stolen from the national exchequer and deposited abroad.

If the money is siphoned locally and then funneled through a series of companies and people locally before being deposited abroad, then all the layered elements would need to be part and parcel of the legal case.

How does today’s banking system differ from banking 25 years ago?

Fri, 09 Jun 2023 18:32:39 +0000

Faisal KhanAnswered Jun 9, 2023

Very simple: 25 years earlier, there was no concept of phone banking, mobile banking, or online banking. Everything was to be done at the branch. Sure in some countries, the facilities were slowly coming online to check balances, etc. but the bulk/majority of transaction-related services were all offline.

You pretty much had to go to the branch for everything related to authenticating yourself and getting a signature on a transaction.

Why is pre-funding required in the money transfer world?

Tue, 23 May 2023 18:18:21 +0000

Faisal KhanAnswered May 23, 2023

Pre-funding is a financial arrangement that is commonly used in the world of international money transfers, particularly in the remittance industry. Here's a more detailed explanation:

Why is Pre-funding Required?

Risk Management: Pre-funding helps to manage financial risk. Given that money transfers often involve transactions across different countries with varying levels of financial stability, pre-funding helps to ensure that funds are available before the transaction is initiated. This mitigates the risk of insufficient funds or default by the sender or their bank.
Regulatory Compliance: In many jurisdictions, regulators require money transfer services to pre-fund accounts in receiving countries. This ensures that the funds are indeed available when the recipient goes to collect them, thereby increasing the reliability and credibility of these services.
Speed of Transaction: When funds are pre-funded, transactions can be processed faster because there is no need to wait for funds to be moved from the sender's account to the recipient's account.

What is it Used For?

Pre-funding is used to guarantee the availability of funds for international money transfers. Money transfer operators (MTOs) often need to have accounts with local banks in both the sender's and recipient's countries. The account in the recipient's country is pre-funded, i.e., money is deposited into it ahead of time, to ensure that the transferred funds can be immediately disbursed to the recipient.

Is prefunding considered trapped capital?

Tue, 23 May 2023 18:18:20 +0000

Faisal KhanAnswered May 23, 2023

In a money services business, prefunding might indeed be viewed as a type of "trapped" capital. Prefunding refers to the practice where the service provider must set aside or transfer funds in advance to ensure that the money is available for disbursement at the designated location. This is common in industries like remittances or other money transfer services.

While this is a necessary part of doing business, prefunding can tie up significant capital that could be used for other things, like expanding the business, investing in new technologies, or other operational expenses. In this sense, it's "trapped" because it can't be used for these other purposes until the transactions it's allocated to are completed.

What are the implications of the US proposal to report transactions over $600 to the IRS?

Tue, 09 May 2023 18:32:37 +0000

Faisal KhanAnswered May 9, 2023

Ludicrous.

It just happens to be happening under the Biden Administration, the way it works is how the IRS and Department of Treasury work. They set out long-term goals and objectives they would like to achieve. Just happens to be Biden’s bad luck to be the sponsor of it now.

However, I do agree with the comments, why not just have everything be reported to the IRS then. Heck, let IRS have visibility in all the transactions a financial institution may do on behalf of its customers.

Are international financial institutions still necessary today?

Tue, 09 May 2023 18:32:36 +0000

Faisal KhanAnswered May 9, 2023

This is a very broad question, and since the exact vertical within the financial system was not asked, will answer broadly.

International financial institutions usually enable trade, commerce, and banking across various geographies. This is done predominantly by having book balances with other banks (correspondent banking) as well as access to local markets thus being able to comply with local laws and provide access to markets.

Is a digital wallet legally the same as a bank account?

Sun, 09 Apr 2023 18:32:34 +0000

Faisal KhanAnswered Apr 9, 2023

Not necessarily. It depends on how the digital wallet is set up. In all instances, the fiat balances of the wallet(s) will always be in a chartered/licensed banking institution. Whether the digital wallet it offered by a mobile money operator, an app, a banking app, an e-money issuer, that statement will always hold true for fiat balances. The money will reside in a bank account.

What lessons has real-world experience revealed about Bitcoin?

Sun, 09 Apr 2023 18:32:32 +0000

Faisal KhanAnswered Apr 9, 2023

That the government machinery all over the world will find ways to brand it as something negative.

The sink of illicit wealth, the method by which terrorism and money laundering are facilitated. The instrument which is causing corruption and aiding undeclared wealth, the currency of the underworld and dark web, etc.

Experience has taught me, despite it being an amazing solution, bitcoin represents a clear and present danger to the financial system that has been consciously, wrongly juxtaposed on us, to subdue and control the masses.

What value does Nigeria’s e-Naira bring to the economy?

Sun, 09 Apr 2023 18:32:31 +0000

Faisal KhanAnswered Apr 9, 2023

Despite being a huge economy, the Nigerian Naira is still considering an exotic currency, i.e. its tradeable pairs (both ways) are not easily accessible. For lack of a better word, the Naira-to-USD market is illiquid. If you wanted to trade your Nairas for US Dollars, the demand is huge, and thus the premium that goes with it, because of capital controls is equally huge.

Why would a country ban private use of cryptocurrencies?

Sun, 09 Apr 2023 18:32:29 +0000

Faisal KhanAnswered Apr 9, 2023

tl;dr: Taxation, Control, and Flight of Capital.

There are many arguments and stories that can substantiate why a country would ban cryptocurrencies, but it all boils down to financial independence. The ability for individuals to take capital into their own hands and take it anywhere without any government control.

Let’s take an example, circa 2005 (before Bitcoin), where let’s say you are in Country X and you want to take your own money, which is worth about US$ 100,000 out of the country, and take it with you, where ever you want. The problem is, the government controls who can and cannot take money out of the country and how much. Let us also assume you want to take a small bar of gold (that is worth US$ 100,000) outside, and again, the government here would have a say. You would also have to inconvenience yourself to book a flight and take the physical gold bar with you, thus creating more problems for yourself.

What would be some red flags for a KYB audit?

Fri, 31 Mar 2023 18:18:19 +0000

Faisal KhanAnswered Mar 31, 2023

Red flags for a KYB audit can vary depending on the nature of the business and the jurisdiction in which it operates. However, here are some common red flags that may indicate potential money laundering or terrorist financing risks:

Lack of documentation: If the business cannot provide the required documentation for KYB due diligence, this may be a red flag that the business is not operating legitimately or that it is attempting to hide something.
High-risk industries: Some industries, such as money services businesses, casinos, and precious metal dealers, are considered higher risk for money laundering and terrorist financing. If the business operates in one of these industries, this may be a red flag that additional due diligence is required.
Unusual ownership structures: If the business has an unusual ownership structure or there is a lack of transparency about who owns and controls the business, this may be a red flag that the business is attempting to hide its beneficial owners.
Unusual financial activity: If the business engages in unusual financial activity, such as large, unexplained cash deposits or withdrawals, this may be a red flag that the business is engaging in suspicious activity.
Transactions with high-risk jurisdictions: If the business conducts transactions with countries or jurisdictions that are considered high risk for money laundering and terrorist financing, this may be a red flag that additional due diligence is required.
Lack of internal controls: If the business does not have effective internal controls in place to prevent money laundering and terrorist financing, this may be a red flag that the business is not taking these risks seriously.
Reputation risk: If the business has a poor reputation or has been associated with illegal or unethical activity, this may be a red flag that the business is engaging in suspicious activity.

It's important to note that these red flags are not definitive proof of money laundering or terrorist financing, but they may indicate that additional due diligence is required. As a compliance officer, it's important to conduct a risk-based assessment of the customer and tailor the KYB due diligence process accordingly.

How is an Exchange-Traded Fund (ETF) and its NAV calculated?

Fri, 31 Mar 2023 18:18:17 +0000

Faisal KhanAnswered Mar 31, 2023

Here's an example of how the NAV of an ETF can be calculated using a hypothetical portfolio of five stocks:

Let's say the ETF holds the following stocks:

Company A: 1,000 shares, trading at $50 per share
Company B: 2,500 shares, trading at $75 per share
Company C: 1,500 shares, trading at $25 per share
Company D: 3,000 shares, trading at $30 per share
Company E: 2,000 shares, trading at $60 per share

To calculate the NAV of the ETF, we first need to determine the total value of the portfolio. This is calculated by multiplying the number of shares of each stock by its current market price, and then summing the results:

What is the difference between a Community bank and a Credit Union?

Fri, 31 Mar 2023 18:18:16 +0000

Faisal KhanAnswered Mar 31, 2023

Community banks and credit unions are both financial institutions that serve local communities, but there are some key differences between the two:

Ownership: Community banks are owned by shareholders, who may be individuals or institutional investors. Credit unions, on the other hand, are owned by their members, who are also their customers.
Membership: Community banks are open to anyone who wants to become a customer, regardless of where they live or work. Credit unions, on the other hand, are typically restricted to members who share a common bond, such as working for the same employer, belonging to the same organization, or living in the same community.
Structure: Community banks are structured as for-profit corporations, while credit unions are structured as not-for-profit cooperatives. This means that credit unions are generally exempt from federal income taxes and may be able to offer certain benefits to their members, such as lower fees and higher interest rates on deposits.
Products and services: Community banks and credit unions offer similar products and services, such as checking and savings accounts, loans, and credit cards. However, credit unions may offer additional services, such as low-cost or no-cost financial education, and may be more likely to offer specialized products for specific groups, such as student loans or small business loans.
Regulation: Community banks are regulated by the Office of the Comptroller of the Currency (OCC) or the Federal Reserve, while credit unions are regulated by the National Credit Union Administration (NCUA). Both types of institutions are subject to regulatory oversight and must adhere to certain rules and requirements.

Overall, community banks and credit unions serve similar functions in local communities, but have different ownership structures, membership requirements, and regulatory frameworks. Which type of institution is best for a particular individual or business may depend on factors such as location, membership eligibility, and financial needs.

Can a federally chartered bank open a branch in any state?

Fri, 31 Mar 2023 18:18:15 +0000

Faisal KhanAnswered Mar 31, 2023

Yes, a federally chartered bank can open a branch in any state without needing to obtain a separate state charter. This is one of the advantages of having a federal charter, as it allows banks to operate across state lines more easily than state-chartered banks.

However, even though a federally chartered bank can operate in any state, it must still comply with the laws and regulations of each state in which it operates. In addition, a federally chartered bank is subject to federal banking laws and regulations, as well as oversight by the Office of the Comptroller of the Currency (OCC), which is the primary regulator for federally chartered banks.

Which blockchain can you deploy an exchange-traded fund (or EFT) on?

Fri, 31 Mar 2023 18:18:12 +0000

Faisal KhanAnswered Mar 31, 2023

Exchange traded funds (ETFs) can be deployed on various blockchain platforms, but one of the most popular platforms for doing so is the Ethereum blockchain. This is because Ethereum provides a number of features that make it well-suited for creating and managing ETFs, including:

Smart contracts: Ethereum allows developers to create smart contracts, which are self-executing contracts that can automate the creation, management, and trading of ETFs. Smart contracts can help to reduce the administrative costs of managing an ETF and improve transparency for investors.
Programmability: Ethereum is a programmable blockchain, which means that developers can write custom code to create and manage ETFs. This flexibility allows for a wide range of investment strategies to be implemented within an ETF, such as rebalancing based on market conditions or social sentiment.
Interoperability: Ethereum has a large and growing ecosystem of decentralized applications (dapps) and protocols that can be integrated with an ETF. For example, an ETF could use a decentralized exchange (DEX) to facilitate trading, or use a decentralized oracle to get price feeds for assets in the ETF.
Community support: Ethereum has a large and active community of developers and investors who are working on building and improving the platform. This community provides a wealth of knowledge, resources, and support for creating and managing ETFs on Ethereum.

In summary, while there are other blockchain platforms that can be used to deploy ETFs, Ethereum's smart contract functionality, programmability, interoperability, and community support make it a popular choice among developers and investors.

How does one define a hedge fund in detail?

Fri, 31 Mar 2023 18:18:11 +0000

Faisal KhanAnswered Mar 31, 2023

A hedge fund is a type of investment vehicle that pools money from a group of investors and invests that money in a variety of assets, such as stocks, bonds, currencies, and commodities. However, hedge funds differ from mutual funds in a number of ways:

Accredited investors: Unlike mutual funds, which are available to the general public, hedge funds are generally only available to accredited investors, who are individuals with a high net worth or income.
Investment strategies: Hedge funds often use complex investment strategies that are designed to generate high returns. These strategies may involve short-selling (betting that a stock's price will go down), using leverage (borrowing money to invest), and investing in derivatives (financial instruments that derive their value from an underlying asset).
Fees: Hedge funds typically charge higher fees than mutual funds, often taking a percentage of the profits as well as an annual management fee.
Regulation: Hedge funds are generally less regulated than mutual funds, which means they have more freedom to pursue riskier investment strategies. However, this also means that there is less protection for investors if something goes wrong.

Because of these differences, hedge funds are generally considered to be riskier investments than mutual funds. While they may offer the potential for higher returns, they also come with a higher level of risk.

How does one structure an ETF (exchange-traded fund)?

Fri, 31 Mar 2023 18:18:09 +0000

Faisal KhanAnswered Mar 31, 2023

Structuring an ETF involves a few steps:

Creation: An ETF is created by an authorized participant (AP), who is usually a large financial institution. The AP assembles a basket of securities that reflects the composition of the ETF's target index, and delivers those securities to the ETF issuer in exchange for ETF shares.
Listing: Once the ETF shares have been created, they are listed on a stock exchange and can be bought and sold by investors just like stocks.
Trading: The ETF shares trade on the exchange throughout the day at market prices, just like individual stocks.
Net asset value (NAV): At the end of each trading day, the ETF issuer calculates the net asset value (NAV) of the ETF by adding up the value of all the underlying securities and dividing by the number of outstanding ETF shares. This NAV is then published on the ETF's website.
Redemption: If an investor wants to redeem their ETF shares, they can usually do so by delivering them back to the ETF issuer in exchange for the underlying securities in the ETF's basket.

ETFs can hold a variety of securities, including stocks, bonds, and commodities, and can be designed to track a particular index, sector, or investment strategy. By investing in an ETF, investors get exposure to a diversified portfolio of securities, which can help to reduce risk and provide long-term growth potential.

What is the difference between a hedge fund and a mutual fund?

Fri, 31 Mar 2023 18:18:08 +0000

Faisal KhanAnswered Mar 31, 2023

Both hedge funds and mutual funds are investment vehicles that pool money from multiple investors to invest in different assets. However, there are some key differences between the two:

Regulation: Mutual funds are regulated by the government and have to follow certain rules to protect investors, while hedge funds are generally not as tightly regulated and can take on riskier investments.
Access: Mutual funds are open to anyone who wants to invest, while hedge funds are typically only available to accredited investors, who are people with a high net worth or income.
Investment strategies: Mutual funds are typically managed passively, meaning that they aim to track the performance of a specific index, like the S&P 500. Hedge funds, on the other hand, use more complex and active investment strategies, like short selling or leverage, to try to beat the market.
Fees: Hedge funds typically charge much higher fees than mutual funds, often taking a percentage of the profits as well as an annual management fee.

In summary, while both hedge funds and mutual funds are investment vehicles that pool money from multiple investors, hedge funds are generally riskier and more exclusive, while mutual funds are more regulated and accessible to the general public.

What is Hawala Money?

Fri, 24 Feb 2023 18:18:06 +0000

Faisal KhanAnswered Feb 24, 2023

Understanding the Informal Money Transfer System

Hawala money is an informal system of transferring money or value between individuals or groups of people without involving any formal financial institutions. The word "hawala" comes from the Arabic word "hawala" which means "transfer" or "exchange". This system has been used for centuries and is still prevalent in many parts of the world.

Do you think an ACH can be rejected (incurring reject fees) if we verify the balance ahead of time?

Thu, 23 Feb 2023 18:18:05 +0000

Faisal KhanAnswered Feb 23, 2023

Of course, it can. Let’s say a couple has US$ 2,000 in the account. The husband decides to send US$ 1,000 to his parents in India. You do a balance check and it shows you US$ 2,000. Unbeknownst to the husband, the wife earlier wrote a check for US$ 1,200 that was cashed later on that day. Now the available balance would be US$ 800. When the ACH file is sent for processing later in the evening. It will be an NSF (Non-Sufficient Funds). This is just one example.

Is a License Necessary to Start a Money Transfer Business?

Wed, 22 Feb 2023 18:18:04 +0000

Faisal KhanAnswered Feb 22, 2023

Yes. The business of moving money is a regulated business. This means, that you would require a license that would be issued from the local financial regulator in your country (from where the transaction is originating) and also require a license in the country in which the transaction is being terminated.

Banking institutions that do money transfers for themselves, do not require a money transfer license, as their banking charter covers this already.

What criteria distinguishes an MSB from an FMSB?

Wed, 22 Feb 2023 18:18:03 +0000

Faisal KhanAnswered Feb 22, 2023

Below you will find more information about an MSB, or Money Services Business and an FMSB, or Foreign Money Services Business.

Money Services Businesses (MSB)

An MSB is a business that:

Offers one or more of these services to the public
Has a place of business in Canada

You can learn more about MSBs or use this to complete the Pre-registration form.

How can there be fraud in the money transfer business? I don’t know about the business and want to know if it comes with some kind of chargeback or fraud protection for us.

Fri, 17 Feb 2023 18:18:01 +0000

Faisal KhanAnswered Feb 17, 2023

No business is fraud-free. To understand why there is a fraudulent transaction, you have to understand that by law in the United States you are allowed to do reversals up to 180 days from the date of transaction (you can read up on Consumer Financial Protection Bureau).

Some people simply have nefarious intent. They will do the transaction, make the payout happen in the beneficiary country, and then claim that the transaction was a fraud, etc. Sometimes customers don’t understand the charge on their statement and do a reversal without thinking it through. Sometimes, a joint-account is operated and the balance in the account may be $1,800 and the wife has written a check for $1,200 whilst the husband is trying to send $1,500 back home and an NSF (Non-Sufficient Funds) charge occurs. Regardless, the chargeback onus falls on you, as neither the bank wants to take it nor the sponsor, i.e. principal license holder.

Can a company registered in Barbados as a licensed MSB operate (send/receive money) from/in Florida?

Thu, 16 Feb 2023 18:18:00 +0000

Faisal KhanAnswered Feb 16, 2023

No, the US government does NOT recognize a license outside of the United States to be consumed/used within the United States in lieu of a money transmitter license.

We have established a money transfer company in Canada and now we are looking for a bank in the US and want to be its Authorized Delegate in the USA for money transfer services.

Thu, 16 Feb 2023 18:17:58 +0000

Faisal KhanAnswered Feb 16, 2023

You would need to have been operating for over 3 years with excellent audit recommendations to even be considered for an Agent status application with a US bank. Without three years of audit, no US bank will be providing you sponsorship services under an Agent agreement.

Can we get the US multi-currency accounts without being licensed in the US yet?

Wed, 15 Feb 2023 18:17:57 +0000

Faisal KhanAnswered Feb 15, 2023

If you have a Canadian account in the US, then you can pick up a Canadian customer if you are licensed with FINTRAC.
If you have an AUD account in the EU, then you can pick up an Australian customer if you have an AUSTRAC license.

Do OTC services require a license?

Wed, 15 Feb 2023 18:17:56 +0000

Faisal KhanAnswered Feb 15, 2023

OTC services very much require a license if the “intent” is to buy from others and sell on to others, where your eventual role would be that of an intermediary.

Can we work under a Trust’s Money Transmitter License?

Wed, 15 Feb 2023 18:17:54 +0000

Faisal KhanAnswered Feb 15, 2023

Trusts have a charter, they do not have a money transmitter license. However, as a Trust company, they can offer “limited” custody services within their services realm. Also, understand that Trust Companies are recognized in certain states and are not recognized by others. This depends on where the original charter of the trust company is and you can ask (legally) if a reciprocity agreement between the trust company’s original state (from where the charter was issued) and the state in which it is doing business, as valid reciprocity and is recognized.

Do Trust Companies provide money transmitter license coverage?

Wed, 15 Feb 2023 18:17:53 +0000

Faisal KhanAnswered Feb 15, 2023

This is widely debated. The short answer is that they can provide limited money transmitter license coverage, for their own products/services and that too in a limited number of US states that recognize the charter of the Trust company in question.

For example if you want to start an over the counter bitcoin trading services, OTC services very much require a license if the “intent” is to buy from others and sell on to others, where your eventual role would be that of an intermediary.

Montana does not require a money transmitter license, so if I register a company there am I exempt from money transmitter licenses?

Wed, 15 Feb 2023 18:17:52 +0000

Faisal KhanAnswered Feb 15, 2023

You may be exempt from money transmitter licenses only in the state of Montana. Because you have an exemption in the state of Montana, does not mean that you can offer your financial services nationwide. The exemption is only valid for the state of Montana and Montana alone. This means that the transaction must originate within the state and terminate within the state of Montana. It cannot traverse or transit outside the state of Montana without additional licensing.

Is there an advantage of getting the EMI license in Lithuania vs Ireland?

Tue, 14 Feb 2023 18:17:51 +0000

Faisal KhanAnswered Feb 14, 2023

The biggest advantage is that of issuance and operational cost. Barring the UK (which is no longer the epicenter for EMI licenses in Europe), the competition is essentially between Ireland and Lithuania. Lithuania is by far the most preferred choice for EMI license issuance (and then also for digital banking license) in Europe. It surpasses Ireland (for the issuance of EMI licenses) many times over.

What is the difference between an agent and non-agent of an EMI in Europe/UK?

Tue, 14 Feb 2023 18:17:49 +0000

Faisal KhanAnswered Feb 14, 2023

There are a couple of differences between an agent and a non-agent in the European EMI licensing regime.

A non-agent, for starters, is commonly referred to as an operator-led model. Where the operator of the license is handling all the facets of custody of funds, compliance, reporting, etc. The non-agent is essentially responsible for marketing & sales, including the first level of customer support.

Since our company is about to obtain a Labuan Money Brokering license, may I know whether it is sufficient to use this license to apply to be a Registered Agent (RA) under an EMI holder?

Tue, 14 Feb 2023 18:17:48 +0000

Faisal KhanAnswered Feb 14, 2023

Under an RA model, your license outside doesn’t count per se. You would need an EU-registered entity to be able to get a Registered Agent (RA) approval from an EMI. The registered entity (simply a company) can be anywhere in the EEA (European Economic Area).

Isn’t the idea of ‘renting’ a license considered wrong? Could it have legal ramifications if we rented a license?

Mon, 13 Feb 2023 18:17:47 +0000

Faisal KhanAnswered Feb 13, 2023

Allow us to explain here (in brief):

We don’t rent the license per se, we use that term so the client understands what is being offered.
The PLH (Principal License Holder) sponsors the project of the client.
The project has to be in the same vertical and business, in which the PLH is in. If the PLH is in the business of pizza, the client can be in pizza delivery, pizza boxes, etc. The client cannot sell stereos. That is literally tangential to the vertical the PLH is licensed for.
The PLH is the Program Manager. They handle everything, including funds, processing, compliance, etc. Think of the PLH launching another project/product.
We’ve been vetted, and given a clean bill of health by various regulators (think North Carolina, Illinois, Florida, Texas, California, and Washington state).
We’ve used these past experiences to further better the model.
The Client that is seeking to ‘rent’ the license essentially ONLY does 1st level of customer support, pre-funding, and sales/marketing.
The signups, KYC, customer ownership, legal contract, etc. are all with the PLH.
In certain cases, where the match is 100% between the PLH and the Client, the Client may opt to become an authorized agent/delegate of the PLH.
We’ve worked with over 20+ PLH
We also work with many banks, credit unions, community banks, and trusts to do the FBO arrangements as well.

Are banks legally required to perform AML and KYC checks when opening new accounts?

Sun, 12 Feb 2023 18:33:27 +0000

Faisal KhanAnswered Feb 12, 2023

Absolutely. Anti-Money Laundering (AML) checks and Know Your Customer (KYC) or Know Your Business (KYB) checks are now a standard part of any account opening process. You might not be able to see what is happening, but on the backend/back office all efforts are being made to identify you and the risk you may pose to the institution.

When I cite that it is a standard feature, it is not optional but rather mandatory.

How can I confirm whether a bank transfer was successful if the funds were deducted from my account?

Sun, 12 Feb 2023 18:33:26 +0000

Faisal KhanAnswered Feb 12, 2023

Just because money was deducted from your account does not mean the transfer was successful. So many things can go wrong. Until the money is not credited to the end beneficiary, assume the transaction is still in progress.

Some of the reasons why your transaction may not go through or be delayed can include wrong beneficiary information, AML flag, source of funds clarification required, and more information on the reason for the transfer. Flagged by the correspondent bank (if any), etc.

What happens if a wire transfer is sent to a bank account that does not exist?

Sat, 11 Feb 2023 18:33:24 +0000

Faisal KhanAnswered Feb 11, 2023

Pretty much the same thing you would expect trying to deliver a parcel to an address that doesn’t exist. At some point in time, someone will try to find an account to credit the amount. When such an account cannot be found, the last institution to send them the money is notified that the credit cannot be done, and hence, standard operating procedures are looked at what needs to be done to ‘reverse’ the transaction and send it back to the sender.

What are the eligibility requirements for a money transmitter license, and must a company actually hold customer funds?

Sat, 11 Feb 2023 18:33:23 +0000

Faisal KhanAnswered Feb 11, 2023

The requirement for a money transmitter license is that your business is classified as a money services business (MSB). Within the MSB umbrella, your Flow of Funds (FOF) is as such, that you would be considered doing money transmission and hence require a money transmitter license (MTL) in that particular US State in which you are conducting business.

The definition of money transmission will vary from State to State, and then naturally, there is the federal definition as well put out by FinCEN.

Why do US banks require the full legal name of foreign beneficiaries for international wires?

Thu, 09 Feb 2023 18:33:21 +0000

Faisal KhanAnswered Feb 9, 2023

This is needed to run the name (and its associated information) against the various sanctions screening lists that, by law, they have to do. One example is the Specially Designated Nationals list (or SDN) published by the OFAC (Office of Foreign Assets Control).

There may be other lists that the financial institution would be screening the name against. A partial name like “John,” “Peter,” “Lee,” “Patel,” “Khan,” “Kim,” “Sara,” etc., is too broad a match to be able to screen the name accurately.

What exactly are AML and KYC checks?

Thu, 09 Feb 2023 18:33:20 +0000

Faisal KhanAnswered Feb 9, 2023

This is a pretty broad question. AML, which stands for anti-money laundering, is part of the Compliance Program that any regulated entity needs to implement. A regulated entity would be licensed and governed by a financial regulator.

Part and parcel of any AML manual are to have a decent understanding of KYC, i.e. Know Your Customer. This implies that you have to have as part of your onboarding process a methodology to correctly identify and authenticate a customer (KYC usually implies an individual). For business, the correct terminology is KYB (Know Your Business).

What laws and regulations govern international remittances, and how do they differ across countries?

Thu, 09 Feb 2023 18:33:18 +0000

Faisal KhanAnswered Feb 9, 2023

Every country has its own set of laws and regulations related to money transmission/money transfer. There is no singular form or template. Most of them relate to licensing, consumer protection, counter-party risk, anti-money laundering, cmobatting the financing of terrorism, KYC/KYB, reporting, thresholds, violation, etc.

There are guidelines that FATF publishes that almost all the countries of the world follow (even though they are recommendations), it basically says, if you don’t implement these guidelines, you will be excommunicated from the international banking and payments networks.

What does it mean to acquire a Money Transmitter License (sponsorship)?

Thu, 09 Feb 2023 18:17:44 +0000

Faisal KhanAnswered Feb 9, 2023

You’re not actually getting a money transmitter license, but rather an umbrella coverage for the license in the US with the solution providers we work with. These solution providers will essentially give you regulatory coverage (i.e. money transmitter license coverage) for the United States. Simply put, a white-label solution, or in alternative legal speak: You’re renting a license.

This process is true for all sorts of services we provide. Whether it is access to banking, payment processing, licensing in other territories, the process is the same: https://faisalkhan.com/money-transmitter-license-application-process/

Can we apply for a Lithuanian license if we are already incorporated in Ireland? That would be our preferred option given that we’ll need to staff operations in whatever country we do get our license.

Thu, 09 Feb 2023 18:17:43 +0000

Faisal KhanAnswered Feb 9, 2023

You can. There is no specific advantage per se. You can still be an Irish company, that is domiciled physically in Ireland and still have full ownership and operational control of your license. The only requirement as posted by the Bank of Lithuania (BOL) is that the CCO/MLRO (Chief Compliance Officer / Money Laundering Reporting Officer) has to be a Lithuanian native, ability to speak the Lithuanian language, and be physically based inside of Lithuania for reporting and operational purposes. The rest of the office/crew/ops can be outside of Lithuania.

Can we also market in the African corridors we are licensed in and send/receive payments between the African corridors?

Thu, 09 Feb 2023 18:17:41 +0000

Faisal KhanAnswered Feb 9, 2023

You can market this anywhere, where allowed by law. It is always a good idea (strongly suggested) to obtain an NOE (No Objection Email) from the PLH, notifying them about your intent to market the services in the very specific geographies, so that you may obtain approval on your marketing material so that you do not use any words or phrases or market a service that is either incorrect, partially true or not quite phrased correctly, etc. The solution (depending on the package you opt for), is US to CountryX. Where Country X is denoted by the country/countries you provide to PLH for approval for payout, based on the number of countries allowed as per the RaaS package you have chosen.

There is no crypto-license sponsorship option in the EU, am I right?

Tue, 07 Feb 2023 18:17:40 +0000

Faisal KhanAnswered Feb 7, 2023

Not sponsorship. But you can apply for your own crypto license and we do offer that service. If you are interested in those details we can provide you with information.

Can cryptocurrencies realistically support real-time micropayments and peer-to-peer transactions?

Sat, 04 Feb 2023 18:33:17 +0000

Faisal KhanAnswered Feb 4, 2023

It absolutely can. One of the beautiful features of cryptocurrency is the ability to send across small values worldwide. There are a couple of points to be cognizant of.

Gas fees. Trying to send $0.10 worldwide and paying $15 as gas fees serve no purpose. Some L1 blockchains, like Ethereum, Bitcoin, etc., have high gas fees; you might be better off using other L1 blockchains.
General acceptance and liquidity. There may be an L1 blockchain that has low fee for sending money, but if it becomes challenging to on-ramp and off-ramp money from this particular blockchain, then it is something you need to take into consideration.
Price volatility. If the currency value itself w.r.t. to fiat currency, is fluctuating wildly, then it might not be the best method for micropayments or P2P transactions.

Why might a US bank reject an incoming international wire transfer?

Sat, 04 Feb 2023 18:33:15 +0000

Faisal KhanAnswered Feb 4, 2023

An incoming international wire transfer can be rejected for various reasons. It mostly has to do with risk & compliance. The bad news is that in 99% of the cases, the reason why an incoming transaction was rejected would not be made known to you or the sender. That is just how the world of banking works. They do this because letting you know the reason would presumably let the outside world figure how what transactions are flagged and how. With such discovery, loopholes can be found and abused.

What is the process for obtaining a money transmitter license in the US?

Sat, 04 Feb 2023 18:33:14 +0000

Faisal KhanAnswered Feb 4, 2023

You can obtain a money transmitter license in the US from each of the US states in which you wish to work. For example, if you plan on signing up businesses or individuals as customers from Florida, you would need a license in Florida. The same would hold true if you were signing up businesses or individuals as customers from, say, Texas or Illinois. You must apply for a money transmitter license from the state regulator (see a complete list of US State Regulators here).

Why do many P2P money transfer companies eventually pivot toward B2B payments?

Thu, 02 Feb 2023 18:33:12 +0000

Faisal KhanAnswered Feb 2, 2023

Well, the answer is simple. Cost of customer acquisition is very high. It is not cheap. If you have to acquire direct customers, you know, you'll have to pay a pretty penny for that. And then it's the volume number, the value being transferred, it's very small $500, $1,000 at best, $2000, $3000. And the margins are being squeezed because everyone is in the P2P game. On the B2B side, a single invoice could be $80,000, $90,000, which could correspond to I don't know what $600, $500, $200, $300 transfers of small money transfer operations. So it's the volume of the transaction in the B2B business that is really of interest over here.

If I want to launch a crypto wallet, how can I secure a sponsoring bank for a crypto money transfer license?

Thu, 02 Feb 2023 18:33:11 +0000

Faisal KhanAnswered Feb 2, 2023

The answer to this question is if you want to start a crypto wallet in the United States that will handle just crypto (and only crypto), you don't need a money transmitter license; you don't need a bank to sponsor you. But the caveat is so far as in today; you don't need a money transmitter license. Will that change tomorrow? Possibly can most likely well, but as of today, you don't need a money transmitter license just for a crypto wallet.

Can settlement funds be redirected to a bank account in a country different from the payout country?

Wed, 01 Feb 2023 18:33:09 +0000

Faisal KhanAnswered Feb 1, 2023

The answer is yes, you can provide it provided a couple of certain conditions are met. There are essentially three conditions that should be met. First, the US money transmitter and the payout partner must have a correspondent agreement. In that agreement, there should be a provision saying that that money can travel outside and they will not be breaking any law in the country, meaning the payout countries.

Can a money transfer agent outlet legally operate from a consulate or embassy location?

Wed, 01 Feb 2023 18:33:08 +0000

Faisal KhanAnswered Feb 1, 2023

The answer is no.

When we look at making a consulate or an embassy, as a money-transfer agent location, you have to understand that the consulate or the embassy itself is not US Territory (assuming this question was being asked of the US) in fact this can be applied to any other licensed jurisdiction.

With the regulator, you would have to define an address as an agent location, but a consulate address or an embassy address would not be valid, as these are considered not part of the country they are in, but rather the territory of the country whose flag they are under.

Where can I find a detailed breakdown of money transmitter license costs in the United States?

Wed, 01 Feb 2023 18:33:06 +0000

Faisal KhanAnswered Feb 1, 2023

Typically, the financial regulator of each state puts out some kind of information on how much it costs to get a money transmitter license.

The NMLS (Nationwide MultiState Licensing System) also provides information packets on each state, and is usually well updated.

It just remains a bit of a spaghetti mess to browse through it all.

Here is a Summary Table of US Money Transmitter Licenses with respect to:

What is cryptocurrency-as-a-service?

Thu, 26 Jan 2023 18:17:37 +0000

Faisal KhanAnswered Jan 26, 2023

Crypto-as-a-service or cryptocurrency-as-a-service (CaaS) has not yet fully been defined. It can literally mean any sort of Software or Platform as a service related to the crypto world. In the broader sense, Crypto-as-a-Service, is the ability to launch a crypto related product/service, with the service provider providing not only the platform rails, but also the regulatory (read: licensing) and compliance rails as well.

Is a money transmitter license adequate for launching crypto-related services in the US?

Thu, 26 Jan 2023 18:17:36 +0000

Faisal KhanAnswered Jan 26, 2023

No. In certain US States like New York for example, a BitLicense is required to trade in Cryptocurrency related services. In addition to the NY Money Transmitter License, you would require a NYDFS issued BitLicense to operate within the crypto domain in the state of New York.

Other US states are also slowly putting a fence around crypto related activities in their state. It is expected that most US States will require some form of additional licensing in the near future, when you apply for a money transmitter license from them. Whether it is embedded within the license or as an added extension, remains to be seen, however, with strict guidance coming from the Department of Treasury to regulate crypto, it is only a matter of time that additional licensing would be required for crypto related activities.

Would a US Bank Account (Nostro) via Fedwire be held in a foreign country? Would that be classified as Nostro accounts?

Wed, 18 Jan 2023 18:17:33 +0000

Faisal KhanAnswered Jan 18, 2023

There are two scenarios in which this can be played out:

(a) You are a licensed payout partner with a direct correspondent tie-up agreement with the US solution provider (i.e. the license holder). In this case, you, as the payout partner, ‘may’ have (on your own arrangement) a bank account in the United States, held with a licensed bank to receive money in. This account is designated as a Nostro account for you, the licensed payout partner.

What is the difference between Reserve and Pre-funding under Balances & Reserves?

Wed, 18 Jan 2023 18:17:32 +0000

Faisal KhanAnswered Jan 18, 2023

In the United States, ACH is subject to abuse, because of the way it is structured.

ACH transactions can be reversed up to 90 days after they appear on the statement. This protection is guaranteed by law to the consumer. Unfortunately, the society we live in will always have nefarious players, who will take advantage of this and do a transaction and then reverse it. For regular and same-day ACH, the onus (burden of proof) of proving the transaction was genuine and was executed in good faith lies with the merchant and not the consumer. Solution providers will require you to place money in a reserve, that would be used in the event of a chargeback. When a chargeback occurs, the money will immediately be taken out from your reserve and paid to the customer’s bank. They will hold on to the money until either the chargeback dispute is settled in favor of the customer or after investigation, the chargeback dispute is in your favor. Either way, the money needs to be provided to be held in escrow, and that money comes out from your reserve.

What is Hawala or Hundi?

Mon, 16 Jan 2023 18:17:29 +0000

Faisal KhanAnswered Jan 16, 2023

Hundi and Hawala are informal money transfer systems that have been used for centuries in various parts of the world.

Hundi, also known as Hundi banking, is a traditional financial system that has been used in South Asia for centuries. It is a form of informal banking that allows individuals to transfer money without the need for a formal banking system or financial institution. Transactions are typically conducted in cash and are based on trust and reputation.

As a sponsored party which parties do we share our customers’ KYC information with, if any?

Mon, 16 Jan 2023 18:17:28 +0000

Faisal KhanAnswered Jan 16, 2023

If the sponsor is sponsoring you for license/regulatory coverage in the US, then the client legally belongs to them, this means, the KYC data lies with them. Unlike Europe and (UK, pre-Brexit), the PII (Personally Identifiable Information) was passport-able. That is not applicable in the United States. This implies that customers signed up in the United States, their KYC information belongs to the PLH (Principal License Holder), unless you are an Agent, in which case, you ‘may’ have the right to KYC the customer, but the PLH will always retain the right to have KYC information.

Who is responsible for anti-money laundering?

Mon, 16 Jan 2023 18:17:27 +0000

Faisal KhanAnswered Jan 16, 2023

The solution provider is. That is the beauty of this setup. You are not legally responsible for any such issues as AML, CFT, PF, KYC, KYCC, CIP, Compliance. All the 3-letter acronyms you can throw at it, the service provider is responsible for it. You are not responsible for such areas.

Needless to say, if you are a licensed entity, then you are responsible for regulatory compliance.

What is Regulation-E in cross border funds transfer?

Tue, 03 Jan 2023 18:17:25 +0000

Faisal KhanAnswered Jan 3, 2023

Regulation E is a federal regulation that applies to electronic fund transfers (EFTs), which are financial transactions that involve the transfer of funds from one account to another using electronic means, such as a debit card or an electronic check.

In the context of cross-border fund transfers, Regulation E applies to EFTs that involve the transfer of funds from a bank account in the United States to a bank account in a foreign country, or vice versa. These types of EFTs are subject to the same rules and protections as domestic EFTs, and financial institutions must follow the same requirements for disclosing information to consumers, handling errors and unauthorized transactions, and resolving disputes with consumers.

In economics, what is a Pegged Currency?

Tue, 03 Jan 2023 18:17:24 +0000

Faisal KhanAnswered Jan 3, 2023

In economics, a pegged currency is a type of exchange rate system in which the value of a currency is fixed to the value of another currency or a commodity, such as gold. This means that the central bank or other regulatory authority in the country whose currency is pegged will intervene in the foreign exchange market to maintain the fixed exchange rate. The goal of pegging a currency is to stabilize the value of the currency and reduce exchange rate fluctuations, which can have negative effects on trade and the economy.

How is One Currency Pegged to Another and How Does it Work?

Tue, 03 Jan 2023 18:17:23 +0000

Faisal KhanAnswered Jan 3, 2023

There are several ways in which one currency can be pegged to another, and the specific details of how the peg is established and maintained can vary depending on the specific circumstances and exchange rate system being used.

One way in which a currency can be pegged to another is through a fixed exchange rate system, in which the value of the pegged currency is set at a specific level and is not allowed to fluctuate. To maintain this fixed exchange rate, the central bank or other regulatory authority in the country whose currency is pegged will intervene in the foreign exchange market by buying or selling the pegged currency as needed to maintain the desired exchange rate. This can involve buying or selling the pegged currency with the currency to which it is pegged, or with other currencies.

What is Europe's Electronic Money Directive or EMD?

Tue, 03 Jan 2023 18:17:22 +0000

Faisal KhanAnswered Jan 3, 2023

The Electronic Money Directive (EMD) is a piece of European Union (EU) legislation that sets out the regulatory framework for electronic money (e-money) in the EU. The EMD applies to all financial institutions that are authorized to issue e-money in the EU, known as electronic money institutions (EMIs).

The main purpose of the EMD is to ensure the integrity and stability of the e-money market in the EU by setting out rules on matters such as financial stability, consumer protection, and anti-money laundering. The EMD also aims to promote the use of e-money and to facilitate the development of the e-money market in the EU by establishing a single market for e-money and reducing the burden of regulation on EMIs.

Why is a nested transaction in the banking world a high risk transaction?

Tue, 03 Jan 2023 18:17:20 +0000

Faisal KhanAnswered Jan 3, 2023

Nested transactions in the banking world can be considered high risk for a number of reasons. One reason is that nested transactions often involve multiple steps, each of which can introduce potential risks or uncertainties. For example, if one step in the transaction fails or is delayed, it can affect the outcome of the entire transaction.

Another reason is that nested transactions can involve multiple parties, which can increase the complexity of the transaction and make it more difficult to manage and mitigate risks. For example, if a third-party payment processor is involved in the transaction, there is an added layer of risk as the payment processor may have its own policies and procedures that must be followed.

What would be considered a nested transaction for cross border money transfer?

Tue, 03 Jan 2023 18:17:19 +0000

Faisal KhanAnswered Jan 3, 2023

A cross-border transfer refers to a financial transaction that involves the transfer of funds between accounts in different countries. Nested transactions can occur in the context of cross-border transfers, as they involve multiple steps and may involve multiple parties.

Here is an example of a nested transaction in the context of a cross-border transfer:

Customer A initiates a transfer of funds from their account at Bank A in Country X to their account at Bank B in Country Y.
Bank A verifies that Customer A has sufficient funds in their account to complete the transfer.
If Customer A has sufficient funds, Bank A debits the funds from Customer A's account and initiates a transfer to Bank B in Country Y.
Bank B in Country Y receives the transfer and credits the funds to Customer A's account.

In this example, the transfer of funds from Bank A in Country X to Bank B in Country Y is a nested transaction, as it involves multiple steps and is dependent on the outcome of the previous step (verifying that Customer A has sufficient funds).

What is considered a nested transaction?

Tue, 03 Jan 2023 18:17:16 +0000

Faisal KhanAnswered Jan 3, 2023

In the context of money transfers, the term "nested transactions" generally refers to a scenario in which a money service business (MSB) or smaller financial institutions use the accounts of larger, correspondent financial institutions to process transactions on behalf of their own customers.

Nested transactions can create several issues from a risk management perspective for banks:

Lack of Transparency: The correspondent banks may not have visibility into the true originators and beneficiaries of transactions. This is because the transactions are “nested” inside the MSB’s account. This opacity can make it difficult for banks to monitor and identify suspicious activity effectively.
AML (Anti-Money Laundering) and CTF (Counter-Terrorist Financing) Risk: The lack of transparency can exacerbate money laundering and terrorist financing risks, as individuals or entities looking to move funds illicitly may take advantage of nested services. The correspondent bank might unknowingly facilitate such transactions, exposing themselves to regulatory penalties and reputational damage.
Regulatory Compliance Risk: Banks are subject to strict regulatory requirements when it comes to monitoring transactions and reporting suspicious activities. The lack of information on the true parties involved in nested transactions can make it more difficult for banks to comply with these regulations.
Legal Risk: If nested transactions involve illicit activities, the correspondent banks could be held partly responsible for facilitating these activities, even if inadvertently. This can lead to legal ramifications including fines, sanctions, and reputational damage.
Operational Risk: Managing nested accounts often requires additional controls and monitoring systems, which can add complexity to a bank's operations. This additional burden may lead to operational risks, including failures in internal processes, human errors, or system breakdowns.
Reputational Risk: If a correspondent bank is involved in a scandal or regulatory action related to money laundering or terrorist financing through nested transactions, it could suffer reputational damage. This may cause a loss of customer trust and potential business.

Because of these risks, many banks are cautious about allowing nested transactions, and some may avoid them altogether. To mitigate risks, banks that do allow nested transactions will generally require extensive due diligence on the MSBs or smaller financial institutions they service and impose strict transaction monitoring and reporting requirements.

What is Dollar Cost Averaging?

Tue, 03 Jan 2023 18:17:14 +0000

Faisal KhanAnswered Jan 3, 2023

Dollar cost averaging is a way to save money for the future. Imagine you have a little piggy bank and you want to save up for a new toy. Every week, you put some of your allowance into the piggy bank. Sometimes you can only put in a little bit, and other times you can put in a lot.

If the toy costs $20 and you put in $1 every week, it might take you a while to save up enough money. But if you keep putting in money every week, eventually you will have enough to buy the toy.

What are the downsides of offshore banking?

Mon, 02 Jan 2023 18:32:26 +0000

Faisal KhanAnswered Jan 2, 2023

Top three disadvantages that I can name are:

First of all, are the minimum requirements to maintain an account. Most have a minimum deposit requirement that may not be worthwhile or within reach of everyday users.

The KYC requirements are pretty stringent. As more and more offshore banks are being derisked from the correspondent banking network, the remaining ones want to make sure that those that they onboard have gone through a pretty exhaustive screening process.

What is FATF?

Mon, 02 Jan 2023 18:17:11 +0000

Faisal KhanAnswered Jan 2, 2023

The Financial Action Task Force (FATF) is an intergovernmental organization that works to combat money laundering and terrorist financing. It was established in 1989 by the G7 countries, and it now has 37 member countries and jurisdictions.

The main role of the FATF is to set international standards for combating money laundering and terrorist financing. These standards are known as the FATF Recommendations, and they are designed to prevent the misuse of the financial system for illicit purposes. The FATF Recommendations provide a framework for countries to develop and implement effective laws, regulations, and policies to combat money laundering and terrorist financing.

In payments, what is a merchant of record and what does it mean?

Mon, 02 Jan 2023 18:17:10 +0000

Faisal KhanAnswered Jan 2, 2023

In the world of payments, a merchant of record (MOR) is a company or entity that is responsible for accepting and processing payments on behalf of another company or entity. This can be done through various payment methods such as credit cards, online payments, or mobile payments.

The MOR is responsible for handling all aspects of the payment process, including billing and collections, customer service, fraud prevention, and compliance with payment industry regulations. They also typically provide the merchant with tools and resources to manage their payment operations and provide insights into the performance of their business.

What is Interoperability in payments?

Mon, 02 Jan 2023 18:17:08 +0000

Faisal KhanAnswered Jan 2, 2023

Interoperability in payments refers to the ability of different payment systems, networks, and financial institutions to work together and exchange information seamlessly. This allows customers to make payments and transfer funds using their preferred payment method, regardless of the technology or infrastructure used by the payee.

For example, if a customer wants to make a payment using their bank's mobile app, but the payee only accepts payments through a different payment processor, interoperability would allow the transaction to be completed smoothly without the need for the customer to sign up for a new payment method or open a new account.

What is Embedded Finance?

Mon, 02 Jan 2023 18:17:07 +0000

Faisal KhanAnswered Jan 2, 2023

Embedded finance is a term that refers to the integration of financial services into everyday products and services. This means that instead of having to go to a separate financial institution to access financial products, such as loans or investment opportunities, people can access these services through the products and services they already use. For example, a person might be able to take out a loan or make an investment directly through a retail app or website. The goal of embedded finance is to make financial services more accessible and convenient for people.

What is Regulatory Arbitrage?

Mon, 02 Jan 2023 18:17:04 +0000

Faisal KhanAnswered Jan 2, 2023

Regulatory arbitrage refers to the practice of exploiting differences in regulatory requirements between different jurisdictions or sectors in order to gain a competitive advantage. This can be done through a variety of means, such as locating a business in a jurisdiction with more favorable regulations, using financial instruments or structures that are not subject to the same level of regulation, or shifting activities from one sector to another to take advantage of different regulatory regimes.

How do Foreign Exchange transactions work?

Mon, 02 Jan 2023 18:17:03 +0000

Faisal KhanAnswered Jan 2, 2023

When people or businesses want to buy something from another country, they often need to pay for it in the other country's currency. This is called a foreign exchange payment.

For example, let's say a person in the United States wants to buy a toy from a store in China. The toy costs 100 Chinese yuan, which is the currency used in China. The person in the United States doesn't have any Chinese yuan, so they need to pay for the toy in US dollars, which is the currency they have.

What is Bank of International Settlements and how does it work?

Mon, 02 Jan 2023 18:17:01 +0000

Faisal KhanAnswered Jan 2, 2023

The Bank for International Settlements (BIS) is an international financial institution that promotes international cooperation among central banks and other financial institutions. It was founded in 1930, and is headquartered in Basel, Switzerland.

The BIS operates as a forum for central banks and other financial institutions to discuss issues of common concern and to coordinate their activities. It also conducts research and provides analysis on a range of topics related to central banking and the global financial system.

What is Hawala and How Does it Work?

Mon, 02 Jan 2023 18:16:59 +0000

Faisal KhanAnswered Jan 2, 2023

Hawala, also known as hundi, is a traditional and informal system of money transfer that has been used for centuries in many parts of the world, particularly in the Middle East and South Asia. It is based on the principle of trust and the use of a network of agents, known as hawaladars, who facilitate the transfer of money between individuals or businesses.

What is the difference between Hawala and Hundi?

Mon, 02 Jan 2023 18:16:58 +0000

Faisal KhanAnswered Jan 2, 2023

Hawala and hundi are two different words that are used to describe the same informal system of money transfer. Hawala is the Arabic word for "transfer" or "remittance," while hundi is the Hindi word for "bill of exchange" or "promissory note." Both terms are used interchangeably to refer to the same system of money transfer, which is based on trust and personal relationships between a network of agents, known as hawaladars.

What is Feipiao and how does it work?

Mon, 02 Jan 2023 18:16:57 +0000

Faisal KhanAnswered Jan 2, 2023

Feipiao is a Chinese term that translates to "fake ticket" or "counterfeit ticket." It is commonly used in the context of counterfeit money or documents, such as fake banknotes or fake train tickets. Feipiao can also refer to a type of money laundering scheme in which fake invoices or receipts are used to generate illicit funds or to conceal the true source of money.

What is Feipiao?

Mon, 02 Jan 2023 18:16:56 +0000

Faisal KhanAnswered Jan 2, 2023

Feipiao (also spelled fei piao) is a Chinese term that translates to "fake ticket" or "counterfeit ticket." It is commonly used in the context of counterfeit money or documents, such as fake banknotes or fake train tickets. Feipiao can also refer to a type of money laundering scheme in which fake invoices or receipts are used to generate illicit funds or to conceal the true source of money. In this context, feipiao is often used to describe the fake documents or receipts that are used in the scheme.

What is the difference between flying cash and paper money?

Mon, 02 Jan 2023 18:16:55 +0000

Faisal KhanAnswered Jan 2, 2023

Flying cash and paper money are two different terms that are not necessarily related to each other. Flying cash is a term that is sometimes used to refer to a specific type of money transfer or payment system used in China, in which cash is physically transported from one location to another. This system is sometimes used to bypass restrictions on the movement of money or to avoid the fees and regulations associated with the formal banking system.

What is the difference between a Nostro account and a Vostro account?

Mon, 02 Jan 2023 18:16:53 +0000

Faisal KhanAnswered Jan 2, 2023

A nostro account and a vostro account are two different types of bank accounts that are used in international trade and finance. Nostro and vostro are terms that are used to indicate which bank is holding the account, with nostro meaning "our" in Latin and vostro meaning "your" in Latin.

A nostro account is a bank account that is held by one bank in another bank's currency. For example, if a bank in the United States has a nostro account with a bank in the United Kingdom, the account will be denominated in British pounds. The bank in the United States can use this account to hold funds in the local currency, which can then be used for transactions with the bank in the United Kingdom or other banks in the local market.

What are remittances and how do they contribute to the economy of the developing world?

Mon, 02 Jan 2023 18:16:50 +0000

Faisal KhanAnswered Jan 2, 2023

Remittances are funds that are sent by individuals who are working abroad to their home countries. These funds can be sent for various purposes, such as to support families, to invest in businesses, or to pay for education or health care.

Remittances can have a significant impact on the economies of developing countries. They can provide a stable source of income for families and can help to reduce poverty. In addition, remittances can be used to support local businesses and can help to stimulate economic growth.

What is Europe's Electronic Money Directive (EMD)?

Mon, 02 Jan 2023 18:16:39 +0000

Faisal KhanAnswered Jan 2, 2023

Why is a Legal Memo Required?

Fri, 14 Oct 2022 18:16:49 +0000

Faisal KhanAnswered Oct 14, 2022

Definition and Origin

What is a Legal Memo?
A legal memo, or legal memorandum, is a document used by legal professionals to provide a thorough analysis of a legal issue. It includes a detailed examination of the facts, relevant laws, and precedents, culminating in conclusions and recommendations.

Origin and Evolution
Legal memos originated in traditional legal practice as a means of documenting legal advice and analysis. Over time, their use has expanded into various sectors, including financial services, where they have become critical tools for ensuring regulatory compliance and managing legal risks.

How to do Money Transfer?

Mon, 26 Sep 2022 18:16:47 +0000

Faisal KhanAnswered Sep 26, 2022

Definition and Origin:
How to do Money Transfer? refers to the process of electronically transferring funds from one party to another, domestically or internationally, utilizing various financial systems and technologies. Originating from traditional banking systems, this process has evolved significantly with advancements in digital payments and fintech solutions.

Usage Context and Evolution:
Money transfer methods are integral across banking and financial sectors, adapting to digital innovations and regulatory changes. From simple bank transfers to mobile wallets and blockchain-based solutions, the evolution focuses on efficiency, speed, and security, impacting both personal and business transactions globally.

What are reliable alternatives to PayPal and Venmo as of 2021?

Thu, 11 Aug 2022 18:33:05 +0000

Faisal KhanAnswered Aug 11, 2022

Honestly, depending where you are, USDC/USDC, i.e. crypto, is a really good alternative now.

What is the most effective approach to conducting KYC for an ICO?

Thu, 11 Aug 2022 18:33:03 +0000

Faisal KhanAnswered Aug 11, 2022

There are plenty of providers that can provide KYC services and liveliness tests that are essential for any kind of online offering, including an ICO.

However, be cognizant that not everyone has a passport, so if the passport is the only acceptable document for online verification, then be prepared to lose out on a large swath of the population who would not be able to qualify.

Which countries currently allow the use of cryptocurrencies for remittances?

Thu, 11 Aug 2022 18:33:02 +0000

Faisal KhanAnswered Aug 11, 2022

It is not as to which countries accept crypto for remittances, but which counties can and do. In many ways, the answer can be all countries.

Let me explain:

Currently, the transfer of remittances is predominantly via fiat channels, i.e., the end-to-end transfer includes fiat. You can introduce crypto for remittance transfer at four different points (summarized below):

Origination (start point, at the time when value/money is loaded onto the system to be remitted across)
Termination (end-point, when the payout is done in the beneficiary country)
Transit (in-between the transfer from the origination end to the termination end)
Complete (origination, transit, and termination).

As long as beneficiary countries get the end value remitted as foreign-exchange, the transfer mechanism is acceptable to most (at times, even the ones where the cryptocurrency may be banned/outlawed).

Can ACH transfers be made to or from a prepaid card?

Sun, 07 Aug 2022 18:33:00 +0000

Faisal KhanAnswered Aug 7, 2022

This depends. In most cases, the answer is no. A prepaid card can be of so many types. For example, a Netflix prepaid card or a Starbucks prepaid card. Such cards do not allow you to ACH funds into them, as they are sold over-the-counter with the card's value as the purchase price.

The idea behind the prepaid card is that they are not tied into any bank account at the time of issuance. However, prepaid VISA/Mastercards, which are sold over-the-counter, can be ACH’d into once the card is attached to the issuing bank account that it comes with (meaning you would have to enhance KYC and essentially be opening a bank account with the card issuer). In which case, ACH into the card would be possible.

Why must international wire transfers be verbally approved by banks and how do fees differ from standard transfers?

Sat, 06 Aug 2022 18:32:59 +0000

Faisal KhanAnswered Aug 6, 2022

Rules are changing from bank to bank. International wire transfers are now seen as a higher-risk transaction by many banks. Compliance programs and FATF guidelines have pushed everything into being overly cautious (IMHO).

You have to call the bank to be sure the funds transfer is approved by you. Many accounts can be compromised, and fake international transfers can be done. Banks generally have a better perspective on the frequency of such kinds of fraud and hence the SOP to call it in.

If offshore funds are proven stolen, can they be frozen or seized?

Mon, 04 Jul 2022 18:32:57 +0000

Faisal KhanAnswered Jul 4, 2022

The short answer is, possible, but not probable. Meaning, your chances of getting the money back are between slim to zero. Why? Let me explain.

In order to get your money back, you would have to file a legal case in the jurisdiction in which the offshore bank is licensed. Such a case an be extremely expensive, as you would have to presumably hire a local law firm that excels in not only financial services, but also in financial crime and forensics.

How do countries obtain US dollars when adopting it as their official currency?

Wed, 01 Jun 2022 18:29:45 +0000

Faisal KhanAnswered Jun 1, 2022

There are many different ways to acquire the US Dollar. When a country decides that the US Dollar be the official currency, depending on the nature of the country’s relationship with the United States, the US Government would most likely designate a commercial bank, most likely out of Federal Reserve New York jurisdiction to hold the US Dollar balances for the country. The country in question must have some tradeable assets that can be converted to the US Dollar (oil? gold? US treasury bonds? previous UD Dollar reserves? exports? other currency reserves like GBP, CHF, EUR, JPY, etc.)

Can I open a US bank account remotely to create a PayPal business account?

Wed, 11 May 2022 18:32:22 +0000

Faisal KhanAnswered May 11, 2022

Depending on your business this is pretty easy to do. Assuming you are not operating a business that is not accepted by banks, then the process is very simple, albeit it takes about 1–2 weeks.

There are many companies in the US that will register your company in the US (which is a must for this solution). I’ve personally used Jumpstart Filing, they were the ones who registered a company for me, got the EIN, the ITIN, and did all the setup to get a bank account. Even got the debit card (which you would need to get the PayPal account running).

How do international banks physically settle balances between each other?

Wed, 11 May 2022 18:32:20 +0000

Faisal KhanAnswered May 11, 2022

The physical money is very, very little compared to the actual money that is settled.

In most cases, what the banks are doing is simply balancing the ledgers they have amongst them.

If there is physical cash to be moved, central banks sell this cash (printed notes) to commercial banks, and then commercial banks make physical flight arrangements to ship this money physically over to other countries (where in most cases, other commercial banks are buying this currency).

Does incorporating in Montana exempt a company from money transmitter licensing?

Thu, 10 Feb 2022 18:32:48 +0000

Faisal KhanAnswered Feb 10, 2022

You may be exempt from money transmitter licenses only in the state of Montana. Because you have an exemption in the state of Montana, does not mean that you can offer your financial services nationwide. The exemption is only valid for the state of Montana and Montana alone. This means that the transaction must originate within the state and terminate within the state of Montana. It cannot traverse or transit outside the state of Montana without additional licensing.

If my branch lacks a SWIFT code, can I use the main HBL Pakistan SWIFT code for transfers?

Tue, 01 Feb 2022 18:29:43 +0000

Faisal KhanAnswered Feb 1, 2022

Your branch is not even expected to have a SWIFT Code. Chances are wherever instructions are being asked for SWIFT code, HBL’s SWIFT code for Pakistan should suffice.

However, it is always a good idea to obtain international wire transfer instructions for your account from HBL, they will provide you with the instruction set in many languages and this ought to contain the SWIFT code.

How do companies receive money from products sold in supermarkets?

Tue, 01 Feb 2022 18:29:42 +0000

Faisal KhanAnswered Feb 1, 2022

This is typically done in one of three ways:

Distributor: This is the most common method. A distribution company would get distribution rights for a company’s product in a specific geographic area and would then be responsible for stocking the products in the supermarket and collecting payments. The distributor then aggregates payments and settles with the company. In most cases, a distributor has a credit line with the company.
Direct Retail: In some cases, the company directly supplies and stocks with the supermarkets for its products and because it is in some manner in the distribution business themselves, they are able to collect payments (again, typically against a credit line) offered by the company to the supermarket.
Supermarket Buys Direct: The last case is a supermarket directly sourcing from the company. Same as #2, except the supermarket (typically a chain) will reach out to the company in order to save up on costs and middlemen. The settlement scenario is the same. There is a credit line extended by the company and it is settled every X many days.

Is a money transmitter license sufficient for crypto services in the US?

Mon, 10 Jan 2022 18:32:47 +0000

Faisal KhanAnswered Jan 10, 2022

No. In certain US states like New York, for example, a BitLicense is required to trade in Cryptocurrency related services. In addition to the NY Money Transmitter License, you would require an NYDFS issued BitLicense to operate within the crypto domain in the state of New York.

Other US states are also slowly putting a fence around crypto-related activities in their state. It is expected that most US States will require some form of additional licensing in the near future when you apply for a money transmitter license from them. Whether it is embedded within the license or as an added extension, remains to be seen, however, with strict guidance coming from the Department of Treasury to regulate crypto, it is only a matter of time that additional licensing would be required for crypto-related activities.

What qualifies as a cryptocurrency service?

Mon, 10 Jan 2022 18:32:45 +0000

Faisal KhanAnswered Jan 10, 2022

Crypto-as-a-service or cryptocurrency-as-a-service (CaaS) has not yet fully been defined. It can literally mean any sort of Software or Platform as a service related to the crypto world. In the broader sense, Crypto-as-a-Service is the ability to launch a crypto-related product/service, with the service provider providing not only the platform rails but also the regulatory (read: licensing) and compliance rails as well.

For example, if someone is trying to launch an OTC (Over-the-Counter) Bitcoin Trading Desk, then a CaaS (Cryptocurrency-as-a-Service) would imply that the solution provider is able to provide the platform rails (i.e. API), custody of funds handling, licensing, compliance, anti-money laundering, KYC/KYB, and reporting requirements at a very minimum.

Can trust companies provide money transmitter license coverage?

Mon, 10 Jan 2022 18:32:44 +0000

Faisal KhanAnswered Jan 10, 2022

For example, if you want to start an over-the-counter bitcoin trading service, OTC services very much require a license if the “intent” is to buy from others and sell on to others, where your eventual role would be that of an intermediary.

What is the difference between an agent and non-agent of an EMI in Europe or the UK?

Mon, 10 Jan 2022 18:32:42 +0000

Faisal KhanAnswered Jan 10, 2022

There are a couple of differences between an agent and a non-agent in the European EMI licensing regime.

A non-agent for starters is commonly referred to as an operator-led model. Where the operator of the license is handling all the facets of custody of funds, compliance, reporting, etc. The non-agent is essentially responsible for marketing & sales, including the first level of customer support.

What alternatives exist to Payoneer for receiving US client payments?

Sat, 08 Jan 2022 18:32:04 +0000

Faisal KhanAnswered Jan 8, 2022

TransferWise is a good option, but your customer has to sign up with them. If the payment is one-off, or even regularly occurring payments from business accounts, then Payoneer is a great option (their standard charges for deduction is 1.0% and then they offer a reasonably good FX rate when you do the payout to your currency of choice (all things considered).

If you are running a business and also receive payments from individuals, then Payoneer might not be the best solution for you. In which case, depending on your setup, you might want to apply for a US incorporation and get a business bank account for your company, whilst never having to enter the US. Again, there are limitations (depending on your nature of work), but it works for the most part.

Do digital balances always represent real money held by banks?

Sat, 01 Jan 2022 18:29:40 +0000

Faisal KhanAnswered Jan 1, 2022

The answer is NO.

The currency in circulation today, known as Money Supply (to make it simpler, albeit there are many different types of the money supply) is electronic in nature.

If you’re asking that US$ 10 Billion (for example) in electronic form has some sort of $10 Billion in notes stored in a safe in a bank somewhere, then that is not the case at all.

Is a routing number always required to transfer money?

Sat, 01 Jan 2022 18:29:39 +0000

Faisal KhanAnswered Jan 1, 2022

In the United States, yes, you do need the ABA number or the routing number in order to make the transfer. This is a 9-digit number that along with the bank account number makes the interbank transfer possible.

If the transfer is intra-bank (within the same bank), then the routing number may not necessarily be needed.

For cross-border transactions, if the transaction is inbound into the United States, a routing number would be essential information.

When companies are acquired for billions, how does the payment transaction occur?

Sat, 01 Jan 2022 18:29:37 +0000

Faisal KhanAnswered Jan 1, 2022

There a couple of ways this can play out.

(a) Cash: Assuming the purchase is an all-cash buy out (either buying the shares from a publicly-traded company or privately), it is simply a matter or escrowing your payment with a bank, a team of lawyers and auditors would make sure the transfer of shares occurs and then the bank releases the payment to the appropriated accounts.

Is there a global standard for a compliance manual?

Wed, 03 Nov 2021 18:16:46 +0000

Faisal KhanAnswered Nov 3, 2021

Definition and Origin

Is there a global standard for a compliance manual?

Definition: A global standard for a compliance manual refers to a comprehensive set of guidelines and protocols that outline regulatory requirements, operational procedures, and ethical standards applicable to businesses in the banking and financial sectors worldwide.

Origin: The need for global compliance standards arose from increasing regulatory complexity and international business operations. Initially, firms developed internal manuals to ensure adherence to local laws. Over time, globalization and digital advancements necessitated unified standards to streamline compliance efforts across borders.

When Should We Hire a Compliance Officer

Wed, 03 Nov 2021 18:16:44 +0000

Faisal KhanAnswered Nov 3, 2021

When Should We Hire a Compliance Officer

Definition and Origin

A Compliance Officer is a professional responsible for ensuring that a company adheres to external regulations and internal policies. This role emerged prominently in the late 20th century as regulatory environments became more complex and stringent, particularly in the financial sector. Over time, the scope of compliance officers has expanded to cover a broad array of regulations including anti-money laundering (AML), know your customer (KYC), data protection, and fraud prevention.

Why is mobile money adoption higher in developing countries than developed ones?

Mon, 04 Oct 2021 18:30:23 +0000

Faisal KhanAnswered Oct 4, 2021

No legacy.

In most of the developing countries, there was no legacy attachment to a financial system. It was like a great equalizer. When the storm front came for mobile penetration, it did not discriminate after a few years (because the cost of the device fell). There wasn't a physical network one had to build (like bank branches, etc.), newer models and methods of creating employment, and a vast network of agents was never thought before.

Does every central bank maintain foreign exchange reserves?

Mon, 04 Oct 2021 18:30:22 +0000

Faisal KhanAnswered Oct 4, 2021

Yes. Pretty much.

Why? You ask.

If a country wants to trade with another country (and I cannot think of a single country that does not trade with someone else), you need a common currency to trade usually (if you cannot agree for a swap).

Let’s say you are CountryX and your currency is called Xollars. Now you want to buy some wheat and you can only export coconuts. CountryY will buy coconuts from you and give you Yollars for it, but you have no need for Yollars. You want to buy wheat from say Egypt and Egypt prefers the payment in US Dollars (because Egypt was to buy something else).

Do I need my own e-money license or can I start under a leased license?

Sat, 02 Oct 2021 18:30:20 +0000

Faisal KhanAnswered Oct 2, 2021

If you’re going to be a financial intermediary (for purposes of money transfer/remittance business), chances are you will be classified as a Money Services Business and hence would require a money transmitter license in each state you operate in.

You can absolutely do the on the sponsorship program with an existing license holder or a chartered bank/credit union if they will cover you. In which case, you will not be needing to go through the rigorous process of applying for licenses, getting your net worth to the minimum levels required, surety bonding, compliance, audits, personnel, etc.

How can law enforcement access a bank account without notifying the account holder?

Fri, 01 Oct 2021 18:29:36 +0000

Faisal KhanAnswered Oct 1, 2021

In almost every country that provides banking, there is a systematic method of allowing LEA (Law Enforcement Agencies) access to your bank account.

Despite what you may hear or assume, regardless of a developed country or a developing country, a bank account is a very well protected asset.

In order for LEA to get access to it, they usually have to get a court order / legal injunction / subpoena / insert-your-legal-terminology here from a competent authority before access to the bank account is allowed.

Are there official government-issued anti-money laundering or anti-terrorism certificates, or are these scams?

Fri, 01 Oct 2021 18:29:34 +0000

Faisal KhanAnswered Oct 1, 2021

To the best of my knowledge, there is no certificate or form issued by the government for AML or CTF.

Governments (including provincial and/or federal) are in the business of making guidelines, typically put out by the financial regulator. You have to adhere to these guidelines. Maybe in some rare case, there might be mandatory training required by the government, but this is rare.

What are the advantages of holding an EU money transmitter license versus operating under a bank’s umbrella?

Sun, 01 Aug 2021 18:29:33 +0000

Faisal KhanAnswered Aug 1, 2021

A couple of things here… at the time of writing this answer (see snapshot below).

There is no money transmitter license in the EU. The word money transmission and money transmitter license is the US terminology for a money transfer/e-money license.
The EU does not have a surety bonding requirement like the US.
Bank-led sponsorship (which you are calling umbrella coverage), is a perfectly okay method of going forward with your plans. It just ties everything to that bank.
Tomorrow when you might want to shift to a bank or a non-bank institution that offers a better product or service, you won’t be able to go, because you’re stuck with the existing bank.
Even if you get your own licenses, you will have to negotiate with the bank, pre-hand that the clients will be transferred to you (EU allows passporting of KYC information), as and when you get your own license.

How is money transferred between domestic and international bank accounts instantly when no physical cash moves?

Mon, 12 Jul 2021 18:29:05 +0000

Faisal KhanAnswered Jul 12, 2021

The answer is - it depends. Typically money is moved because there is money parked around the world by banks in their accounts abroad. These are called Nostro accounts and are bank accounts that a Bank has abroad with other banks.

In the cross-border payments world, this is called pre-funding, because you are able to pre-fund an account, you are able to pay out money almost immediately.

Why do individuals open bank accounts in multiple countries?

Mon, 12 Jul 2021 18:29:04 +0000

Faisal KhanAnswered Jul 12, 2021

Most individuals who want to open up a bank account from overseas (internationally) are usually those who are dealing with the overseas market as a freelancer or doing some sort of a business on an individual level.

For example, someone from Pakistan wants to open a bank account in the US, Canada or Europe, it is most likely the person is engaged in some form of a business and would like to receive payments natively to the buyer.

What is involved in issuing prepaid debit cards through offshore banks?

Thu, 08 Jul 2021 18:28:28 +0000

Faisal KhanAnswered Jul 8, 2021

You will simply have to find an off-shore bank that is not only an issuer, but has the CMS (Card Management System) to handle pre-paid as well as is able to onboard customers from around the world (I’m presuming that would be your goal), in as little KYC/onboarding costs as possible.

The goal is to find someone who can do this and is comfortable with the low balances that might be maintained, has great network coverage and correspondent banking relationships to support the major currencies.

Are international money transfers truly instant?

Wed, 07 Jul 2021 18:28:01 +0000

Faisal KhanAnswered Jul 7, 2021

Domestic, yes, international, no.

The cross-border payment rails are based on correspondent banking and Nostro accounts. They are usually batch processed, sequential and follow East to West sun cycle. So if something goes wrong in a transfer, you have to wait for the next day.

There are new companies propping up that do instant transfer or near-real-time transfers, but they are so, so, so, so, small in size and volume, they are not noticeable at the moment. Think of the current money transfer system as the old 1950s television set. The need of the hour is a HD 4k curved 3D TVs. We are doing all we can to run HD videos on 1950s technology and it does not bode well.

How large is the global market for small-value remittances?

Tue, 06 Jul 2021 18:31:59 +0000

Faisal KhanAnswered Jul 6, 2021

No one knows, but it is HUGE.

There are many ways to model this problem, there is no right or wrong way.

Here is a formula that I came up with and as per this method, the market size is estimated to be x10 the size of the international remittance market (which is US$ 600 Billion), so the market size for small value transfers is x10 that or US$ 6 Trillion.

How can small money transfer businesses improve competitiveness?

Tue, 06 Jul 2021 18:31:57 +0000

Faisal KhanAnswered Jul 6, 2021

There are many things you can do as a small money transfer business, one of them happens to be a pivot, but that’s a conversation for another day.

As you have asked what you can do, here is a video I did (shameless plug here), that explains five things you can do for your money transfer business today!

Bank Account. This is the most requested feature from us.
ACH processing
Debit Card Processing for your money transfer business.
Going Digital (Platform, ready to go live today). In less than 2 weeks you can be up and running with a white-labeled website and system of your own.
More licensing coverage - extend your licensing to include other states and collaborate with other money transmitter license holders.

I did a quick and short video on it which you can see here:

How Much Money Do I Need to Get Started?

Mon, 05 Jul 2021 18:16:43 +0000

Faisal KhanAnswered Jul 5, 2021

The amount of money required to start a money transfer and remittance business will vary depending on the specific market and business model you are pursuing. Some factors that may influence the cost of starting such a business include the cost of obtaining licenses and regulations, the cost of developing and maintaining a platform for transferring money, the cost of establishing relationships with banks and other financial institutions, and the cost of marketing and promoting the business.

Which apps besides PayPal allow instant transfers to friends and family?

Thu, 10 Jun 2021 18:32:28 +0000

Faisal KhanAnswered Jun 10, 2021

Let me answer from two perspectives:

Cross-Border Payments: There isn’t any worldwide consensus on this. Real-time payments, especially for cross-border are still not a reality for many, many countries. Each remittance corridor (pair of countries, from where the transaction is originated and where it is terminated) varies from corridor to corridor. For example in Australia to the Philippines, there may be a specific money transfer provider or an app that might be the preferred choice for sending money back home at the earliest. So, no clear definitive answer here.

Are there payment methods with zero transaction fees?

Wed, 02 Jun 2021 18:30:19 +0000

Faisal KhanAnswered Jun 2, 2021

Might not be in your neighborhood, but Shetab/Shaparak (in Iran) is the only 100% free payment system in the world that I am aware of. Read more about it at: Faisal Khan's answer to Why is the Shetab card in Iran so successful?

Do banks in developing countries follow international banking regulations?

Tue, 01 Jun 2021 18:29:31 +0000

Faisal KhanAnswered Jun 1, 2021

Banks in third world countries, as well as first and second world countries, are institutions that are primarily licensed, regulated, and governed by their respective central banks. That is what they have to follow up on first.

As banks deal more internationally, they enter into membership (full, associate, or even part-time) of various networks and working groups.

Such networks/groups have their own issued guidelines should you want to work with them. They are purely voluntary basis, but essential if you continue to work with these groups.

Are wire transfer funds available immediately after sending?

Tue, 01 Jun 2021 18:29:29 +0000

Faisal KhanAnswered Jun 1, 2021

It is a complicated answer. The safe answer is, they do not. First of all, we need to understand if we are looking at a domestic wire transfer, regional or truly international. If for example, the wire transfer is within the US and we are talking about FedWire then the transfer and settlement is the same day, during banking hours. If we are talking payments within the SEPA region and say we are talking about SEPA Inst (instant), then they literally clear within a couple of seconds. If the transfer is done via SWIFT, etc. then it is mostly working days, follow-the-sun cycle.

Can foreigners open bank accounts in Turkey without residency permits?

Sat, 08 May 2021 18:28:27 +0000

Faisal KhanAnswered May 8, 2021

The answer is, it depends. Just to amplify on my experience:

1. You need not have a 'Turkish' bank account statement to show proof of funds. Your bank statement from your country of origin can be accepted. Turkish statement is nice, but not mandatory. What you have to show in the investigation (or discovery process) is your ability to sustain yourself here (in Turkey) financially.

Which countries allow non-citizens to open bank accounts with only a passport?

Fri, 07 May 2021 18:28:00 +0000

Faisal KhanAnswered May 7, 2021

Almost all the offshore countries/islands will let you open a bank account without ever having step foot on their soil. A passport alone might not do it, as they would need to confirm your identity from multiple documents/sources.

Predominantly, private banking island nations. However the caveat being, a higher deposit.

What is the “Travel Rule” in financial transactions and why does it matter?

Thu, 06 May 2021 18:31:56 +0000

Faisal KhanAnswered May 6, 2021

To explain it with a little bit of handwaving, the Travel Rule is a BSA (Bank Secrecy Act) rule that came out which basically requires that the movement of money has tracking information with it.

This means, that transactions going through payment networks &/or banking systems should not be anonymous. If and when requested, the audit trail about the origination of the transaction and the end beneficiary of the transactions should be clear and be presentable (when asked, or deemed required).

What does it cost to register with FinCEN?

Thu, 06 May 2021 18:31:54 +0000

Faisal KhanAnswered May 6, 2021

A FinCEN (Financial Crimes Enforcement Network) license? There is no such thing.

FinCEN has a registration that is 100% free! FinCEN does not issue licenses so please do not be duped into getting a supposed license or paying for one.

I did two videos on the same subject which you can see below:

Is FinCEN Registration Free or Not?

Does accepting cryptocurrency as payment classify a US company as an MSB under FinCEN?

Sun, 02 May 2021 18:30:14 +0000

Faisal KhanAnswered May 2, 2021

Most likely not. If the company that is receiving the cryptocurrency &/or stable coin as payment, is also the company that is the merchant on record, then most likely, the activity is not an MSB (money services business) related activity, as defined by FinCEN.

An easy tell is if you are offering some kind of a banking service or handling money/payments as an intermediary, meaning you are neither the originator of the transaction, and neither the end beneficiary.

Why do criminals engage in money laundering?

Sat, 01 May 2021 18:29:28 +0000

Faisal KhanAnswered May 1, 2021

When you have a little cash it is okay to spend it. You can walk into stores and spend it. When you have lots of it, it gets challenging. When you have a whole lot of illegal money, think millions of dollars, then even spending it becomes an issue.

Questions are asked if you try to spend the money. Many establishments are trained to report excessive cash activities. If you go and say spend $8,000 in cash in an Apple store - that may/may-not raise an eyebrow. Do the same for $30,000 in cash at a car dealership and it would definitely raise an eyebrow.

How can a non-US crypto exchange legally onboard US customers?

Thu, 08 Apr 2021 18:28:25 +0000

Faisal KhanAnswered Apr 8, 2021

You can do this three ways:

Obtain your own Money Transmitter Licenses, including the coveted BitLicense (for the State of New York)
Obtain your own Banking Trust Charter (NY will still not be covered)
Find a Bank/Trust/MSB who will be a ‘sponsor’ for your licensing requirements and they end up being the Program Manager, i.e. they run it under their license. Again, this would be limited to 49 US states only (NY is not included).

In order of priority, most people who wish to enter the US market #3 is the easiest and #1 the most difficult. Lease, versus Buy, versus Build. Try working with someone who can offer the service to you.

Who ultimately receives the funds when a company is sold?

Fri, 02 Apr 2021 18:30:13 +0000

Faisal KhanAnswered Apr 2, 2021

The owners of the company do, which in this case, the shareholders of the company get the money. When a company is sold off, you are essentially paying a price for the shares of the company. So depending on your shareholding in the company, i.e. the number of shares you own, you will get the money (most likely) in the same percentage/fraction as your ownership.

Why does McKinsey report cross-border flows in the hundreds of trillions of dollars?

Thu, 01 Apr 2021 18:27:12 +0000

Faisal KhanAnswered Apr 1, 2021

The cross border flow implies the cross-border payments that are made between two countries.

The B2B (Business-to-Business) cross-border payments market is huge! No one has an exact estimate, but it is believed to be more than US$ 50 Trillion and probably closer to the US$ 100-125 Trillion mark per annum.

Suffice to say it is over the US$ 100 Trillion mark and that is what the report is referring to.

Are there countries where non-residents can open bank accounts without visiting in person?

Thu, 01 Apr 2021 18:27:11 +0000

Faisal KhanAnswered Apr 1, 2021

In some country? Yes.

Be informed that in countries like the US, Canada, UK, Ireland, European Union, Japan, South Korea, Australia, New Zealand, etc. you simply cannot open a remote bank account.

You can open pseudo bank accounts with reserve trust companies or e-money payment institutions, but these would not be a proper bank account, but more or less a wallet account.

How are bank routing numbers structured in Pakistan?

Mon, 08 Mar 2021 18:28:24 +0000

Faisal KhanAnswered Mar 8, 2021

Pakistan does not use the routing number per se. We have two local schemes, somewhat convoluted. We have each bank designating their own account number and branch code, the length and format of these vary from bank to bank. Then we have the IBAN which is standard.

For an international transaction, depending on where the transaction is originating and what network is being used, the routing code can vary. Best to ask the beneficiary or the bank itself.

What major problems in payments technology remain unsolved?

Sat, 06 Mar 2021 18:31:52 +0000

Faisal KhanAnswered Mar 6, 2021

Interoperability in Payments.

We currently have an amazing level of interoperability in our communication networks, i.e. data exchange. Any two points on Earth can talk to each other directly because the standards and protocol for communication are essentially homogeneous and available for all.

The same cannot be said about banking, specifically payments. We have such a fractured or fragmented system for making payments to each other. With over 1,900+ payment networks around the world, less than 3% of them are directly connected to each other. If we include stored value systems (from small to large), we are then talking in excess of 10,000 systems in which case, most of them are island systems or networks, i.e. they are hardly connected.

Will Facebook Novi threaten small and mid-sized money transfer operators?

Sat, 06 Mar 2021 18:31:51 +0000

Faisal KhanAnswered Mar 6, 2021

YES!

When Novi formally launches they have huge advantages over the small and medium money transfer businesses, namely, traction and a very large user base that can very easily be targeted (Facebook, Instagram, WhatsApp, FB Messenger).

Not to mention the alliance partners that would themselves be bringing in their own user base.

I view the situation in the very same way small local, metropolitan ISPs went out of business. MTOs will go out of business in the same way/manner.

Why is the Apple credit card receiving so much attention?

Wed, 03 Mar 2021 18:27:32 +0000

Faisal KhanAnswered Mar 3, 2021

There are plenty of examples and articles to cite the benefits, etc. about the Apple credit card. Here are some tangential points to consider:

An extremely large user base (600+ million), not sure who else would have such a large user base.
Apple, the company has lots of cash. Nothing out there that they cannot buy!
Ease into a payment system, that tomorrow can rival the existing card networks and banks (may seem silly right now, given they partnered up with a bank and a card network).
Get in on the low hanging fruit which is a mix of old and new, very easy for people to ease into this.
Get more merchants to sign up with Apple Pay so that the cash back increases for its customers and merchants are able to sell at a lower MDR)
With enough traction, money movement will be instant as both the buyer and the seller would be Apply customers.
The monopoly gets dented (Visa/Mastercard), eventually.
Apple’s foray into financial services also means at some point in time, APIs to such services will be opened to developers community. That would be big.
Micro-payments: Because Apple would control the rails (where the transaction is On-Us, i.e. merchant and customer both using Apple Pay), payments made with Apple Credit can be instant (real-time) and can be micro. So with a touch of a finger, you can pay for a payment wall article for say 32 cents and continue on). This will be huge.
Accelerate time to market for other large players thinking about the same (Microsoft, Amazon, Google, Facebook, etc.) — which is great for consumers. More choice.

How can governments influence remittance inflows and outflows?

Wed, 03 Mar 2021 18:27:30 +0000

Faisal KhanAnswered Mar 3, 2021

The government can incentivize. Use game theory to make sending remittances back home, earn more points. These are not necessarily points per se, but the more you send back, the more benefits you reap. I am always surprised, how many organizations, institutions, and the government especially forget about game theory and how it works in keeping a repeated interest.

When you incentivize using game theory, you are essentially starting a system that feeds a mild addiction of scoring and this scoring mechanism, keeps the cycle going.

Why do interbank transfers take longer than transfers within the same bank?

Tue, 02 Mar 2021 18:30:11 +0000

Faisal KhanAnswered Mar 2, 2021

Let me answer this question with a physical analogy.

Movement of money within the bank is the equivalent of taking money out of your physical wallet and handing, say a $20 bill to your brother, who lives with you in the same house to put it in his wallet.

The movement is local. It’s within the house. You did not have to get dressed, put your shoes on, go out, and drive somewhere for this to happen. The money movement was nearly instant.

Is wiring money illegal under any circumstances?

Tue, 02 Mar 2021 18:30:09 +0000

Faisal KhanAnswered Mar 2, 2021

Wiring money is legal. However, it is illegal to wire money if you are engaged in a business or activity for which you might need to be licensed, or registered and regulated. This is especially true for handling 3rd party funds.

For example, if you do any activity as a business and engage in such a manner so as to become a financial intermediary or say a cross-border payments facilitator (but still an intermediary), then the act of wiring money without a license is illegal.

Which countries receive the highest volume of remittances globally?

Tue, 02 Mar 2021 18:30:05 +0000

Faisal KhanAnswered Mar 2, 2021

Top Remittance Recipients in 2018

Figures for 2019 are being released, but the countries pretty much remain the same.

Source: https://www.knomad.org/sites/def...

What is the IBAN for Wells Fargo Bank?

Tue, 02 Mar 2021 18:30:00 +0000

Faisal KhanAnswered Mar 2, 2021

Peter Bruins very accurately has answered this question. Just to add to it. US Banks (i.e. Banks IN the United States) do not use IBANs.

The American equivalent is the Bank Account Number and the ABA# (commonly called the Routing number).

US Banks that are chartered outside the US, may issue IBANs in the respective countries they would be working out of.

Can wire transfers be lost, and what causes this?

Tue, 02 Mar 2021 18:29:59 +0000

Faisal KhanAnswered Mar 2, 2021

Money can never get lost in a wire transfer. It can be delayed, stuck, reversed, flagged, credited to the wrong account, misclassified, etc., but never lost. It will eventually be credited or returned.

In most cases, today’s payment systems are quite robust so as not to ‘lose’ a payment.

Why are PayPal transfers faster than traditional bank transfers?

Mon, 01 Mar 2021 18:29:26 +0000

Faisal KhanAnswered Mar 1, 2021

It is quicker because the ‘balance’ is essentially being moved in the same company. The common denominator is that regardless of the US, Canada, UK, etc. the balance for PayPal is held by one PayPal company or the other, and it is managed by a treasury software that makes sure at the end of the day, netting off happens. Your balance is not moved per se in real-time to another bank. It is simply a deduction from one ledger account in PayPal and addition to another ledger account in PayPal. The key component being that the ledger is maintained by the same company.

Is it realistic to create a single global currency for international trade?

Mon, 01 Mar 2021 18:27:10 +0000

Faisal KhanAnswered Mar 1, 2021

Possible? Yes. Will it happen in yours and my lifetime? Probably not. Currency is a man-made token of exchange medium. The reason we keep having different currencies is because of geography, politics, religion, ideology, natural resources, etc. amongst many other factors.

However, the one thing society cannot agree in general is wealth token. It is a man-made tool that is used for manipulation. The start wars, to have brother turn on brother, to have civil wars because of it and to dominate and subdue other nations that have a weaker currency than yours. We also use it to bully others.

If Payoneer is linked to my bank, are received funds automatically transferred?

Thu, 11 Feb 2021 18:32:19 +0000

Faisal KhanAnswered Feb 11, 2021

Partially Correct.

Payoneer has multiple arrangements in almost every country they operate in, i.e. they have pre-funding arrangements with local banks and money transfer companies.

When a payment is received to your Payoneer account, it is held by Payoneer and not your bank.

You have to do a ‘pay-out’ to your bank in order for the money to move from Payoneer to your local bank account and be credited. This local credit is assisted by the pre-funding arrangements that Payoneer has in the local institutions.

Can I use a Payoneer Mastercard to open an Amazon seller account?

Fri, 08 Jan 2021 18:28:22 +0000

Faisal KhanAnswered Jan 8, 2021

Yes, you can. What you need is not your MasterCard number, but the Payoneer payment services number (i.e. for the US, it would be the Bank Account information for ACH).

You can learn more at: https://www.payoneer.com/resourc...

How much does counterfeit currency sell for on the black market?

Fri, 01 Jan 2021 18:29:25 +0000

Faisal KhanAnswered Jan 1, 2021

Depending on the currency, denomination and the quantity, typically between 5% to 10% on the low side to 15% to 30% on the high side. Where the percentage is the face value of the note being counterfeited.

In correspondent banking, who sets FX rates and who profits from them?

Wed, 02 Dec 2020 18:32:25 +0000

Faisal KhanAnswered Dec 2, 2020

It depends. If you’re looking at something like Remittance-as-a-Service, then the answer is as follows:

Sponsoring principal license holder only deals in the US Dollar. The FX rate is provided by the payout partner and the cost of termination is also provided by the payout partner (assuming the principal license holder has these arrangements in place). For example in the current RaaS provisioning, these are the payout corridors and countries:

What is Remittance-as-a-Service (RaaS)?

Wed, 02 Dec 2020 18:32:23 +0000

Faisal KhanAnswered Dec 2, 2020

Remittance-as-a-Service or RaaS is a term that was coined by myself in 2013. The quest was to find a legal method to be able to offer white-label remittance services to startups and incumbents alike for the US market (which is fiercely guarded, complex, and expensive to operate in).

At the time, circa 2012, white-labeled money transfer services were literally non-existent. The ones that were available, were simply out of reach of the vast majority of startups and incumbents, even banks from emerging markets, due to the prohibitive pricing structure that was available at the time.

What prevents a major social network from becoming a full banking and payments platform?

Tue, 01 Dec 2020 18:27:08 +0000

Faisal KhanAnswered Dec 1, 2020

Nothing would prevent it. Some might argue it might be inevitable. In order for any network or group to start offering banking and payments, they would need to get licensed.

Licensing in itself might not be a very difficult thing to do, but what would be required is tightening of the loose ends. KYC (Know Your Customer) requirements would be much more stringent. Security would be paramount and the provider would have to open their systems to auditors to assess the same.

Is it legal in the US for a business to issue its own internal currency for purchases?

Tue, 01 Dec 2020 18:27:07 +0000

Faisal KhanAnswered Dec 1, 2020

Yes. This would be legal, but then again, IANAL (I am not a lawyer). If you replace the word ‘currency’ here with the word ‘store-credits’ or ‘loyalty-points’ the whole scenario doesn’t look so bad after all.

The condition here would be that the issuer of this currency, i.e. you, can issue the currency (as much as you like), however, it can only be bought, sold and redeemed at your store, i.e. your business is the only one that can accept this currency. This would make it a closed loop system and be totally legal.

How can someone in Pakistan get a free virtual Visa or MasterCard without a bank account?

Thu, 05 Nov 2020 18:32:17 +0000

Faisal KhanAnswered Nov 5, 2020

At present, you cannot. A virtual card like MasterCard or VISA is tied into bank accounts, via the issuing bank.

There is no plausible method to obtain one without directly or indirectly becoming a bank account holder.

In Pakistan, in today’s date, off-the-shelve, pre-paid virtual cards or physical cards by VISA/MasterCard are not offered.

What is the difference between interbank FX rates and open market FX rates?

Thu, 05 Nov 2020 18:32:16 +0000

Faisal KhanAnswered Nov 5, 2020

None essentially. The mid-market is derived from open-market rate.

The open market rate is the rate (buy/sell) quote that you get. The interbank rate is the ‘mid-market’ rate between the open-market rate.

This video explains what the mid-market rate (also known as interbank rate).

https://www.youtube.com/watch?v=...

The mid-market rate is also known as the interbank rate. As it sounds, this is the rate that banks will use if they sell currency to each other. It’s figured out by taking the midpoint between the buy and sell rates used on the open market. This is the only real exchange rate. Anything else is simply a number made up by the banks, including their slice of profit.

Do all banks rely on intermediary banks for international wire transfers?

Wed, 04 Nov 2020 18:32:14 +0000

Faisal KhanAnswered Nov 4, 2020

No.

If two banks have direct access to each other and have a settlement arrangement between their ledgers, then needless to say an intermediary is not required.

If both the banks are the same bank, think Deutsche NYC and Deutsche London, then an intermediary might now be required as it would be a book to book settlement.

Intermediaries are used when the originating bank and the settlement bank do not have a direct arrangement with each other for that specific foreign currency, or if mandated by law to settle through an assigned 3rd party.

Do I need a money transmitter license if my platform collects customer payments and distributes proceeds to vendors?

Wed, 04 Nov 2020 18:32:12 +0000

Faisal KhanAnswered Nov 4, 2020

The answer vastly depends on what relationship you have with both the customer and the supplier.

Let’s start with the Customer. What would the customer see as the name of the business on your invoice? Would it be yours or that of the supplier?

If the name is yours, then essentially, you are selling the goods directly to the buyer. In which, you’re nothing more than a trader. You ought to be fine. Also, provided you can show a dotted line agreement to the supplier (i.e. your vendors). The goal here is that you must accept payments into your own account and then you must payout to the vendors directly. The vendor cannot accept payment directly, and the MOR (Merchant on Record) is your company.

Can banks recall international wire transfers during compliance investigations?

Wed, 04 Nov 2020 18:32:11 +0000

Faisal KhanAnswered Nov 4, 2020

It depends.

If the receiving bank wants to ‘investigate’ the money, i.e. source of funds, or if you or the transaction has been flagged in any manner whatsoever, you would most likely be the last person to know about this.

In a sequence of events, the receiving bank will approach the intermediary bank to request more information from the originating bank and the customer who initiated the wire transfer.

How can Saudi Riyals be transferred into a Pakistani Riyal-denominated account?

Wed, 04 Nov 2020 18:32:09 +0000

Faisal KhanAnswered Nov 4, 2020

You can simply do an international wire transfer to your Pakistan Foreign Currency Account in SAR from your bank.

If you do not have a bank account, then you need to search for a money transfer service that would allow you to send Riyals back home to your foreign currency account.

Why do banks prohibit storing cash in safe deposit boxes, and how would they know?

Mon, 02 Nov 2020 18:32:07 +0000

Faisal KhanAnswered Nov 2, 2020

It is not that they would never know, they do this for a couple of reasons, the primary one is CYA - Cover Your Ass (i.e. their ass), meaning, if cash is found in your locker or if a locker was vandalized or stolen from and you claimed you had US$ 200,000 in cash, your claim would not be upheld as cash was not allowed in the first place.

How can PRC be issued in Pakistan for a Western Union remittance?

Mon, 02 Nov 2020 18:32:05 +0000

Faisal KhanAnswered Nov 2, 2020

Your WU Agent or Bank can provide you with this. Simply ask them. If they refuse to cooperate and not provide you with a receipt, please take the following details:

Name of Sender
Sending Date
Originating Country
Currency
Amount
Receiving Bank/Agent
Date Received & Time (approximately when it was credited or cashed out)
Amount Received in Pakistan Rupees
Your Name and CNIC
Your phone and email.

Submit a complaint to the Pakistan Remittance Initiative (www.pri.gov.pk). You can also call them at +9221-111-727-774 or email at: complaints@pri.gov.pk

When will physical cash and coins fully disappear?

Mon, 02 Nov 2020 18:27:22 +0000

Faisal KhanAnswered Nov 2, 2020

Suffice to say in the next 50 years, our money supply of cash, coins, and paper money would be a thing of the past. The increase in the clampdown on cash, and undocumented economies, and forcing (or migrating) everyone to the digital economy means that at some point in time in the next 50 years, money that you can physically keep in your hand or exchange would cease to exit and not be convertible or recognized.

What forms of money or payment methods do you expect to use in the future?

Mon, 02 Nov 2020 18:27:19 +0000

Faisal KhanAnswered Nov 2, 2020

Cash and traditional fiat money channels are still on top of the list, however, it seems, it does not seem too far fetched an idea of exchanging payments using say Ethererum or Bitcoin. And if you are worried about price volatility, you can always convert it to USDT, or similar stable coins.

Is it possible to send money anonymously through Western Union?

Mon, 02 Nov 2020 18:27:17 +0000

Faisal KhanAnswered Nov 2, 2020

Most likely not possible. The transmission of money, is a licensed business.

Hence, anyone participating in this transmission of money has to identify themselves, provide some form of identification as part of the KYC (Know Your Customer) program.

Anonymous or semi-anonymous transactions are not allowed with licensed money transfer companies.

Why do developing countries rely heavily on prepaid mobile services?

Sat, 03 Oct 2020 18:27:29 +0000

Faisal KhanAnswered Oct 3, 2020

From a consumer point of view, it is very easy for users to understand what they are buying and paying for.

Just like groceries, when you buy say oil, or rice or lentil, you are buying up front and then use it over the coming days. The very same consumer purchasing mentality was applied to the pre-paid service. It solved a whole series of problems. Most of the consumers are poor. They don’t have credit or credit reporting agencies. Most of them live pay-check to pay-check. Many are on daily wages, etc.

How did banks transmit international payment instructions before SWIFT existed?

Tue, 11 Aug 2020 18:32:02 +0000

Faisal KhanAnswered Aug 11, 2020

They used a telex machine, it was like a real-time modem/typewriter that was connected and it transmitted messages in real-time.

Based on the origination number (Bank’s telex code), ledgers were then adjusted.

There was a specific code and format that as utilized and the receiving party then did the adjustment to their ledger balances and made payments.

The word TT rate comes from “telegraphic transfer”.

Can I use only Payoneer’s virtual card without receiving a physical card?

Tue, 11 Aug 2020 18:32:00 +0000

Faisal KhanAnswered Aug 11, 2020

At present, Payoneer does not offer VCT virtual card technology, whereby you are issued virtual cards, as opposed to a physical one.

However, if you did receive the physical one, you can most certainly use it for CNP (card not present) transactions on the internet.

Which global payroll platform offers the lowest fees and widest coverage?

Sun, 09 Aug 2020 18:28:47 +0000

Faisal KhanAnswered Aug 9, 2020

The sad truth is - there is no one single platform that is standard and meets your criteria —worldwide. Sure, players like Payoneer, TransferWise, PayPal, Uphold, PaySafe, etc. will all tell you, that their system is the best and works everywhere, the truth is, there are many, many countries where such solutions either don’t work, or if they work, they are simply not the best / cheapest / fastest / most-preferred.

Why don’t banks explain why they freeze or close accounts?

Wed, 05 Aug 2020 18:27:49 +0000

Faisal KhanAnswered Aug 5, 2020

Predominately three reasons:

They are not allowed by law to disclose. It could be something serious/not-so-serious, but it needs to be reported or investigated, they don’t need to tell you that.
Any explanation they give will start a chain of counter-clarifications or challenges from your end. They just don’t want to get into I-said-they-said argument.
They have been ordered to do so by the financial regulator.

The best thing they can do is to freeze the account (so that no more transactions can happen on this account). If they close your account it means, it is something they don’t want to associate themselves with you, for economic and legal reasons.

How can an overseas Pakistani file a tax return with no income source?

Sat, 01 Aug 2020 18:27:05 +0000

Faisal KhanAnswered Aug 1, 2020

If you are an overseas Pakistani with no income source in Pakistan and have been away from Pakistan for more than 183 days in a tax-calendar year, you are not required to submit tax returns in Pakistan.

What’s the fastest way to send money to the Philippines besides Western Union, MoneyGram, and Xoom?

Wed, 08 Jul 2020 18:25:41 +0000

Faisal KhanAnswered Jul 8, 2020

Assuming you are talking about the USA to the Philippines?

Plenty of options: TransferWise, Remitly, WorldRemit, etc. are some names that come to mind.

Do economists classify balances in Venmo or PayPal accounts as part of M1 or M2 money supply?

Wed, 08 Jul 2020 18:25:40 +0000

Faisal KhanAnswered Jul 8, 2020

Yes, PayPal / Venmo money is considered M1, because a wallet at the end of the day, is a For Benefit Of account for you, under a licensed bank’s charter, run by the program manager, which in this case is Paypal.

What role do US banks play in international money transfers?

Tue, 07 Jul 2020 18:24:27 +0000

Faisal KhanAnswered Jul 7, 2020

Predominantly two roles:

US Dollar Clearing (Correspondent Banking Relationship or CBR as it is known)
International Money Transfer to/from the United States.

In the first instance, the US Bank that are authorized to provide US Dollar Clearing, act as Correspondent Banks for other financial institutions worldwide for US Dollar Clearing.

As the US Dollar is printed by the US Government, the US licensed banks are the only banks that can do clearing for it. So when two banks in say Manila and Tokyo are settling in US Dollars, this transaction has to reflect through a ledger maintained by some US Bank (contrary to popular belief, the US Dollars in the banking system, all of it, the ledger entries are in the US with US banks and regional Federal Reserve Banks).

When sending money to a foreign bank in another currency, which bank performs the FX conversion—the sender’s bank or the receiver’s bank—and whose exchange rate is used?

Tue, 07 Jul 2020 18:24:26 +0000

Faisal KhanAnswered Jul 7, 2020

This can vary a lot, others have correctly answered that there are many different scenarios.

In most cases, the currency is converted by the receiving bank. In such a scenario, the sending/receiving bank have a direct correspondent agreement and the receiving bank provides the exchange rate into the local currency and does the conversion.

In the event a middle, correspondent bank is used, same result again, the receiving bank provides the forex rate and does the conversion.

Which companies offer API-based ACH pay-ins and payouts?

Sun, 05 Jul 2020 18:27:48 +0000

Faisal KhanAnswered Jul 5, 2020

Almost any decent bank with a tech stack would be able to provide you with this service. Most banks are able to process NACHA files. At the end of the day, even if you work with an API, you’re still essentially constructing a NACHA file for submission.

Try Evolve bank, Cross River Bank, Signature Bank, Silicon Valley Bank, etc. All of these banks offer the APIs you are asking for.

Can correspondent agreements include more than two money transfer parties?

Wed, 10 Jun 2020 18:31:49 +0000

Faisal KhanAnswered Jun 10, 2020

In a way yes.

Typically a correspondent tie-up is strictly between two parties, but there is a way, you can have a third party and hence it is aptly called a tri-party correspondent agreement. These are far and few due to the risk involved if all the parties are unknown to each other, but they do happen in the money transfer world business.

Do FinCEN-registered businesses still need state money transmitter licenses?

Wed, 10 Jun 2020 18:31:48 +0000

Faisal KhanAnswered Jun 10, 2020

For the umpteenth time. A FinCEN registration is not a license. It is a registration for purposes of reporting to the Federal Government.

The registration simply highlights in which state(s) would you be conducting business. By merely checking those boxes for the states (or all of them), you are not getting a license.

You are simply informing the government.

Which is better for African correspondent banking: Turkey or the UAE?

Wed, 10 Jun 2020 18:31:46 +0000

Faisal KhanAnswered Jun 10, 2020

This is obviously a matter of choice. UAE used to have the lead because of its lax laws, but those loopholes are now being closed. UAE has been fighting tooth and nail not to be on any FATF list, but the reality is the banking system has a lot of holes and is very porous to illicit wealth and capital flow. The Central Bank of UAE is taking this very seriously and trying to clamp down. However, this will take some time.

What is the difference between deposit-taking and non-deposit-taking financial institutions with examples?

Mon, 08 Jun 2020 18:31:45 +0000

Faisal KhanAnswered Jun 8, 2020

A good example of a non-deposit taking financial institution would be say MoneyGram or Western Union or your USPS (United States Postal Service). Of all these three institutions can accept cash/money and forward it - i.e. do a delivery of money, but none of them are a deposit-taking institution, i.e. deposit related banking services are offered by neither of these three institutions.

Compare this with any retail bank, that is a deposit-taking institution.

Why do money transfer companies struggle to access card processing services?

Mon, 08 Jun 2020 18:31:43 +0000

Faisal KhanAnswered Jun 8, 2020

Many people wrongly assume that card acquiring (or card acceptance) is something that is available to you, as a matter of fact.

It is not.

Card acquiring is something you have to 'qualify' for. Just like a credit card application looks at your credit and good standing, the same is applicable for card acquiring.

As a business, your creditworthiness and good standing have to qualify for a bank to be able to underwrite you for card processing.

Why does Nigeria have a parallel exchange rate market for the naira?

Mon, 08 Jun 2020 18:31:42 +0000

Faisal KhanAnswered Jun 8, 2020

It exists because of several factors. First of all, Nigeria has capital outflow restrictions. That by itself creates pressure on the foreign-exchange. As Nigeria is an oil-dependent economy, the foreign exchange is in short supply. So whenever, anything is in short supply, a premium on that item starts appearing. People will pay a higher price to have access to it. In this case, the US Dollar. The general public and businesses will pay a premium to have access to the foreign exchange and the US Dollar is the top currency of choice.

Can funds be transferred from a bank account into Payoneer?

Mon, 08 Jun 2020 18:28:20 +0000

Faisal KhanAnswered Jun 8, 2020

As a Payoneer account holder, you cannot. The only way to load funds via a bank account into your Payoneer account is to have a business bank account push money into it using the payment service that Payoneer provides, i.e. the virtual bank account number.

How can I identify a merchant’s name using only the merchant ID (MID) from my bank statement?

Sat, 06 Jun 2020 18:24:22 +0000

Faisal KhanAnswered Jun 6, 2020

At present this is no public database where you can query an MID (to the best of my knowledge). You may search Google to see if someone else might have had any interaction with the MID in question and posted it on internet, which Google indexed.

Barring this, the only way is to ask your bank. Dispute the transaction or say you don’t remember doing it and need to know who the merchant is. Your bank should easily be able to sort this out for you.

Do I need a money transmitter license if I collect money on behalf of someone in another country (e.g., Ghana) and pay them out monthly to reduce micro-transaction fees?

Sat, 06 Jun 2020 18:24:21 +0000

Faisal KhanAnswered Jun 6, 2020

This makes you an intermediary, when you cited on behalf of a person, implies you are neither the owner of the transaction, nor the recipient and hence this makes you an intermediary, and where ever you go, in most countries this would classify you as a money transfer business and thus require you to get licensed.

If I receive money in the US on behalf of someone else to make an online purchase for them (they live outside the US), am I considered a money transmitter?

Sat, 06 Jun 2020 18:24:19 +0000

Faisal KhanAnswered Jun 6, 2020

This comes under the Agent of Payee exemption and as such, IIRC only 12 or 13 US States recognize this exemption.

Other States don’t provide an exemption, so you need a money transmitter licenses for those states.

What regulations would apply to a peer-to-peer money transfer platform (like a TransferWise/Wise matching model) if the platform never touches customer funds and only matches users?

Sat, 06 Jun 2020 18:24:18 +0000

Faisal KhanAnswered Jun 6, 2020

If a State or Federal regulator cannot find an exact way to pin this marketplace down, then they go after intent.

Barring the problem the marketplace will face with respect to trust, etc. let us look at the intent.

The intent will clearly how that without the market place, the transaction cannot take place. How will the marketplace make money? If you extract a fees for the exchange, you just made yourself party to the transaction and now depending on the regulation, a state may deem you as a money transmitter, but it would be difficult to do so.

What would happen if someone stole $0.10 from every bank account in the world, but later paid it back using their invested billions?

Sat, 06 Jun 2020 18:24:16 +0000

Faisal KhanAnswered Jun 6, 2020

With roughly 7 Billion people in the world and 2 Billion being unbanked. You have essentially 5 Billion Bank Accounts to steal from.

5 Billion x 10 cents = $500 Million.

Now sure how much you will make from your invested $500 Million. It is not the invested billions you had thought of. Even if you assume that there are twice as many bank accounts as their are people, then you’re looking at US$ 1.4 Billion.

How are US money transmitters surviving “de-risking” (loss of banking relationships), and what workarounds do they use?

Sat, 06 Jun 2020 18:24:14 +0000

Faisal KhanAnswered Jun 6, 2020

Those with money transmitter licenses, will survive the derisking, but not on their terms.

The entire derisking exercise is becoming more costly and is forcing more expensive access to banking for those that have a license and need to continue with banking.

It is also trimming the edges. That means weak or smaller players are throwing in their towels, i.e. giving up and exiting the business or merging with other players.

Can a fintech startup legally rent a money transmitter license?

Fri, 05 Jun 2020 18:30:31 +0000

Faisal KhanAnswered Jun 5, 2020

The answer is yes.

You don’t actually “rent” a license, but you can get is essentially a sponsorship by a Program Manager who would provide you with “access to license” for your fintech.

There are many ways this can play out. You can be a pure ISO (Independent Sales Organization), you can be a Registered Agent of the license holder or you can get sponsorship from the PLH (Principal License Holder) to be able to manage all this on your behalf and provide you with either APIs or a white-label solution.

Is there profit potential in launching a remittance business focused on Somalia?

Wed, 03 Jun 2020 18:30:30 +0000

Faisal KhanAnswered Jun 3, 2020

tl:dr; Yes. Like every other country that depends on remittances, there is definitely money to be made in the money transfer business to Somalia.

Contrary to popular belief, Somalia is not a sanctioned country. It has its fair share of problems, but the money transfer business is Somalia is thriving. The largest geographic segments who send money to Somalia are from the Minnesota, USA region, Canada, UK, and parts of Europe.

The problem is trying to find able and willing financial institutions to partner with, who can help you move money into Somalia, legally.

I did a short video on this subject that touches on the money transfer business opportunity for Somalia and how you if you are in the money transfer business can benefit from it. This is a shameless plug, but you can ignore that part.

Will money transfer operators be disrupted by Facebook’s Novi?

Wed, 03 Jun 2020 18:30:28 +0000

Faisal KhanAnswered Jun 3, 2020

This is an easy one to predict.

A gradual transformation is happening.

I believe that money transfer as a business is like the VHS videocassette rental business, we went from renting videos to streaming. What changed was not only the technology but the way the service was provisioned as well (atoms to electrons, physical cassettes to on-demand streaming services). It still relied on a service provider, but the delivery model changed.

How can an international business access SquareCash, Venmo, or PayPal APIs?

Mon, 01 Jun 2020 18:30:27 +0000

Faisal KhanAnswered Jun 1, 2020

Almost all such services provide access to their APIs via their developer/partner program. I know PayPal does, not sure about SquareCash or Venmo.

However, a word of caution on using these services for your money transfer business. In all three cases, these services prohibit the use of their service is the activity you are engaged in classified as a Money Services Business. Since international money transfer business is classified as an MSB activity, you are therefore prohibited by their Terms of Service (look up under prohibited services) for using their service for international money transfer business.

What is the difference between white-label sponsorship and being an agent of a money transfer company?

Mon, 01 Jun 2020 18:30:25 +0000

Faisal KhanAnswered Jun 1, 2020

The answer can vary from geography to geography. Each financial regulator provides its own prescribed set of rules on how such a relationship can be established.

For example, in the UK or EU, there is the white-label sponsorship program and a registered agent program, better known as an EMD (electronic money distributor).

https://www.youtube.com/watch?v=...

The differences between the two are summed up below:

What alternatives to SWIFT exist for international payments?

Tue, 12 May 2020 18:29:02 +0000

Faisal KhanAnswered May 12, 2020

SWIFT is a messaging system used by banks for purposes of payments & settlement. It is not an actual payment system per se.

Anyhow, there are over 1,900+ payment systems in the world. Some are regional to small villages in a very specific geographic area and some are worldwide, like VISA or Mastercard. Less than 3% of all such payment systems are connected. Almost every country has a bunch of local payment systems. QIWI, Boleto, SOFORT, Paypal, WeChat Pay, bKash, JassCash, EasyPaisa, Paytm, etc. are all such examples.

Can I send funds from Pakistan to Australia using TransferWise/Wise?

Mon, 11 May 2020 18:26:15 +0000

Faisal KhanAnswered May 11, 2020

No. At present, you cannot send money outside of Pakistan by using Transferwise from within Pakistan.

Is the Payoneer card a credit card or prepaid debit card?

Fri, 08 May 2020 18:28:19 +0000

Faisal KhanAnswered May 8, 2020

Payoneer’s card is a pre-paid debit card. The word pre-paid implies, that you must have money in your account for the charge to be successful. It is processed as a debit card. Merchants that require credit cards only (like some hotels and car rental agencies, some specific cloud hosting services, etc.) will not process Payoneer’s card as it is not a true credit card.

Who regulates international money transfers globally?

Fri, 08 May 2020 18:28:17 +0000

Faisal KhanAnswered May 8, 2020

No one regulates international money transfers. Each jurisdiction (originating, transit and termination) have their own financial regulators. For example, if money is being sent from Austin, TX to Manila, Philippines and traverses through a correspondent bank in London, UK, then each city has its own regional regulator. In TX, the Department of Banking (Texas Department of Banking) will be regulating the origination. In London, UK, it would be the FCA, Bank of England and HMRC that would regulate it. In Manila, Philippines, it would be regulated by Bangko Sentral ng Pilipinas (BSP) (the Philippine Central Bank).

Can you recommend law firms that specialize in US payments and money transmission regulation?

Wed, 06 May 2020 18:24:12 +0000

Faisal KhanAnswered May 6, 2020

For US Licensing/Payments Law:

Start with talking to…

Daniel Weiss,
President and Chief Executive Officer,
Chartwell Compliance
danielweiss@chartwellcompliance.com

(^^ Cannot recommend them enough).

Sean Ruff
Co-Chair, FinTech Group
Morrison & Foerster LLP
2000 Pennsylvania Avenue, NW
Washington, DC 20006-1888
P: +1 (202) 887.1530
SRuff@mofo.com | www.mofo.com

Judith Rinearson
K&L Gates LLP
New York & London
U.S. Tel (212) 536-3928
London Tel. 44 (0) 20 7360-8225
Cell (973) 632-1150
Email: judith.rinearson@klgates.com

Are TransferWise borderless account balances visible to tax authorities?

Sat, 11 Apr 2020 18:29:01 +0000

Faisal KhanAnswered Apr 11, 2020

They are not visible to the government in the traditional sense. Both United Kingdom (from where TransferWise is based) and Australia, are a signatory to the OECD Common Reporting Standards (CRS), which allows governments to report to another government the list of its citizens who may have an account in a foreign country. The goal of CRS is to prevent tax evasion.

To answer your question: The government of Australia can ask TransferWise a list of all its Australian citizens who maintain an account with TW, and TW would legally have to comply with the request.

Can PayPal payments be sent without revealing the sender’s name?

Sat, 11 Apr 2020 18:28:59 +0000

Faisal KhanAnswered Apr 11, 2020

No you cannot.

Anonymity in payments is frowned upon and all participating banks, payment institutions, and e-money institutions make it a point to adhere to the travel rule per se, which is that the sender’s identity and information are passed along. This is more so true now in the crypto world and post FACTA guidelines for crypto that cam out, that basically says, your name will travel along for the payment, whether it is PayPal or not.

Why do bank transfers still take days to complete?

Sat, 11 Apr 2020 18:28:58 +0000

Faisal KhanAnswered Apr 11, 2020

There are many reasons. Interest (or float, interest on free money every day) is what banks love. However, of late, in a competitive world and where the consumers are becoming more educated, not to mention, the power of social media, consumer reporting bureaus, and regulations, it is becoming harder and harder for banks to justify such holds (as they are now audited).

The reason we see more often now than anything else is, compliance. This is especially true when doing cross-border money transfers. Either the correspondent bank one of the parties involved in the transfer, would like to obtain more information about the nature of the transfer and this can take time. If a correspondent bank asks for questions /clarifications on the transfer (purpose, full name, occupation, city of birth, etc.) to better identify the sender (or receiver), then this takes a few days for the information to be requested and funneled back to the correspondent bank.

Which large companies missed out on the payments opportunity?

Fri, 10 Apr 2020 18:26:04 +0000

Faisal KhanAnswered Apr 10, 2020

I would have to go with Microsoft.

For reasons unbeknownst to us and everyone else, Microsoft did not enter the internet of value. Maybe one day there will be a Harvard Case Study on this, but I fail to understand, a company that has a very large presence, just did not go after payments.

The GAFA (Goole, Apple, Facebook, and Amazon), all have payment services and will slowly, but surely be rolling out pseudo-banking based products and services. Yet, you have a giant like Microsoft, that has properties like Microsoft Office, Skype, and the Microsoft XBox and LinkedIn, yet no payments.

Can USD cash be used for everyday transactions in Venezuela (like taxis and meals), or do I need bolivars?

Sun, 08 Mar 2020 18:25:38 +0000

Faisal KhanAnswered Mar 8, 2020

You can absolutely use US Dollars. They are happily accepted. Most venues will quote you in USD to pay for product/services.

Should I use Bitcoin or TransferWise/Wise to transfer money to myself internationally if I’m not in a rush but want to minimize FX “racketeering” fees?

Sun, 08 Mar 2020 18:25:37 +0000

Faisal KhanAnswered Mar 8, 2020

It depends if you’re able to cash out into fiat using Bitcoin. If that option is available, then Bitcoin might just be the best option. However, you’d be pretty hard to compete with Transferwise. What is the differential we are talking here between the two? Have you done any analysis of it.

Assuming the amount being sent is say US$ 10,000 - the typical fees between a TransferWise (or other competing) MTOs and Bitcoin is $100 to $25. So the question is how much would you be saving? The differential is US$ 75 (at its widest on average), so what will your savings be? $ 40? $50? $60?

Why is Bank of America’s ACH transfer process so slow?

Thu, 05 Mar 2020 18:23:54 +0000

Faisal KhanAnswered Mar 5, 2020

There are over 10,000+ banks in the US. The ACH system was developed over 40 years ago, it is still being used, that is why it is slow.

To better understand why it is what it is, here is perhaps the best listen by Planet Money on the US ACH Payment System:

Episode 489: The Invisible Plumbing Of Our Economy

Can someone split $1B across multiple FDIC-insured banks and live off the interest legally?

Sat, 08 Feb 2020 18:29:57 +0000

Faisal KhanAnswered Feb 8, 2020

Not sure of US$ 1 Billion, but this practice is very much done. FBO (For Benefit Accounts) are created and are essentially exactly what you’ve said. There is a master account and all these sub-accounts under it, all topped up and insured to the tune of US$ 250,000.

The splitting is not that big of a deal. The interest is a whole different story. On a side note, if you had US$ 1 Billion there are other better options. The US Treasury bill at the time of this writing gives 1.49% and the T-bills are back by the full faith and credit of the US government (the same full faith and credit that the FDIC offers).

How can a non-resident obtain a high-risk merchant account in the US?

Sat, 08 Feb 2020 18:29:55 +0000

Faisal KhanAnswered Feb 8, 2020

If your acquiring needs are from the US, then you need to incorporate there. Simply register a company in the US (Delaware or Wyoming), an LLC would suffice, obtain an EIN (Employer Identification Number), and get a bank account opened. Various firms can assist you in opening your company bank account without ever having to visit the US.

Once you have the company + EIN + bank account, you can then apply to literally 100s of merchant providers and ISOs who deal in high-risk acquiring.

Do US authorities monitor PayPal transactions for illegal activity?

Sat, 08 Feb 2020 18:28:15 +0000

Faisal KhanAnswered Feb 8, 2020

Directly? no. Indirectly? Yes. PayPal like all other businesses in the financial services sector is highly regulated on a state level in the United States with federal reporting responsibilities on transactions meeting certain criteria.

It is up to each business to set up a compliance and monitoring program, that is geared to highlight a multitude of areas such as suspicious transaction reporting, suspicious activity reporting, cash transaction reporting, money laundering flags, list flagging, and other flags that may be as a result of DD, EDD or correlation of data. Cross-examination and independent audits may also come into play here.

What should be entered in SBI remittance instructions for foreign transfers?

Sat, 08 Feb 2020 18:28:14 +0000

Faisal KhanAnswered Feb 8, 2020

Typically one can enter “Family maintenance allowance” which would suffice for purposes of remittances, denoting that the money is being sent home for family support.

Which currency has the highest value globally today?

Fri, 07 Feb 2020 18:29:54 +0000

Faisal KhanAnswered Feb 7, 2020

None.

This is a very relative answer. As far as the worth is concerned, the Kuwaiti Dinar is worth the most, at the time of this writing, the KWD’s relationship to the US Dollar is as under:

However, each and every currency in the world is government-issued, so it is subject to the ever-increasing money supply, and inflation, which makes the purchasing power of the currency decline every year.

Can TransferWise balances be withdrawn as cash?

Tue, 04 Feb 2020 18:29:52 +0000

Faisal KhanAnswered Feb 4, 2020

Only to your bank, from where you can cash out, or by using the Transferwise Borderless Account Debit Card, where you can get a cash advance at the ATM.

What’s the safest way to cash out a large amount of cryptocurrency?

Tue, 04 Feb 2020 18:23:32 +0000

Faisal KhanAnswered Feb 4, 2020

How large are we talking here. Large for you could be $25,000 and it would be a relatively small amount for other players.

Let’s assume large is a couple of million US Dollars. Anything less can easily be cashed out to your bank account. I would personally never straight cash out cryptocurrency, by transferring it to someone’s wallet and accepting cash. That would be questioned a lot by the authorities once you start using your money (origination of funds / source of funds would be impossible to prove). Besides you would have NO way of knowing/checking if the cash being given out to you is tainted or stained in any way.

How will central banks regulate cryptocurrency, and what are the privacy implications?

Mon, 03 Feb 2020 18:23:10 +0000

Faisal KhanAnswered Feb 3, 2020

Eventually pretty much as other equities or related value assets are regulated. You would need to be licensed to issue them or work with a licensed provider for issuance.

The same would hold true for trading them (on an exchange) and/or otherwise.

If there is a consumer facing element to it, you would need to provide some form of consumer protection or at the very least a methodology of addressing consumer complaints.

Why did Transfast discontinue its online money transfer service in February 2020?

Sun, 02 Feb 2020 18:29:51 +0000

Faisal KhanAnswered Feb 2, 2020

Presumably because once MasterCard acquired it, it does not want the company to continue with online payments and compete directly with MasterCard’s peer to peer payments that they have rolled out, i.e. card to card payments.

What is the total amount of money transferred globally each day?

Sun, 02 Feb 2020 18:29:49 +0000

Faisal KhanAnswered Feb 2, 2020

No one knows.

This would require one to look at the daily published figures of each and every payment system in the world (there are over 1,900+ of them) and a vast majority of them do not publish their numbers.

The answer is easy in the Trillions of Dollars.

Just the FX market each day do trades of $7 Trillion (would a trade count as money transferred as a contract has just been executed between two parties). There is VISA/MasterCard where millions if not billions of trades a day, all those are money transferred. The B2B market is about $300-$400 Billion a day!

What is the accounting system that tracks a country’s international financial transactions called?

Sat, 01 Feb 2020 18:29:48 +0000

Faisal KhanAnswered Feb 1, 2020

FX or Foreign Exchange.

In most banks and the central bank, this is accounting head (or chart of accounts) under which foreign-exchange related transactions are recorded. This could be remittances, business to business payments, letter of credit, loans, current account payments, foreign exchange reserves, etc.

All are recorded under foreign exchange account.

Can I transfer $20,000 from the US to Australia without triggering compliance flags?

Sat, 01 Feb 2020 18:29:46 +0000

Faisal KhanAnswered Feb 1, 2020

Certainly. The part of being flagged (or not), doesn’t lie in your hands and also does not lie in the amount you transfer. If there is something inherently not quite right with your transfer, you, the recipient, the nature of the transfer, the frequency, your past, your family circle, and that of the recipient, their family circle, etc. then the transaction would be flagged for a manual review.

Are money transfers like Western Union taxed by the US government?

Sat, 01 Feb 2020 18:27:04 +0000

Faisal KhanAnswered Feb 1, 2020

Not at the moment. In the United States for example, Oklahoma (OK) is the only state to have a remittance tax. This is $5 for transactions below $500 or 1.0% for transactions above $500.

Other than this example, no other state or country, that I know of, has a remittance tax implemented.

It has been proposed plenty of times, but no successful bill or legislation has ever been approved. Saudi Arabia was one of the lastest countries looking to implement a remittance tax on the billions of US Dollars that exit the country because of the migrant workers. The proposed tax has not been implemented.

What distinguishes a commercial bank from a nationalized bank?

Sat, 01 Feb 2020 18:27:02 +0000

Faisal KhanAnswered Feb 1, 2020

Pretty much. National banks are commercial/retail banks (depending on the country) except they are owned or majority owned by the Government. Nothing more, and nothing less.

Their product offering is the same as any other commercial banks. It is just that the government has more (or complete ownership) of these banks. Prioritizing them to handle most government payments, which gives them an edge.

Could countries eventually replace the US dollar with Bitcoin as a reserve currency?

Sat, 01 Feb 2020 18:27:00 +0000

Faisal KhanAnswered Feb 1, 2020

Difficult to say. The fiat currencies we have today, have built-in fault lines within them when it comes to issuance and usage. The US Dollar certainly is the preferred reserve currency of choice at the moment, but if history has taught us anything, it is that nothing lasts forever. Especially empires.

I think a lot of countries will eventually start to experiment with the cryptocurrency world. Whether they do it on the existing cryptocurrencies like Bitcoin, Ethereum, etc. or their own coins or even a combination of the two, remains to be seen.

Are government banking regulations overly burdensome for banks and the public?

Sun, 12 Jan 2020 18:29:23 +0000

Faisal KhanAnswered Jan 12, 2020

Yes, but what most people do not understand, much of the regulation comes about from the lobbying effort the bank themselves put it. Every now and then a regulator will publish a brilliant piece of regulation. Checking all the right boxes. This becomes problematic for banks, bankers and other financial institutions who have a vested interest in the industry and see this regulation hamper their progress.

How do companies prevent money laundering?

Sun, 12 Jan 2020 18:29:21 +0000

Faisal KhanAnswered Jan 12, 2020

Quite an open-ended question. Most companies may know or not know that they are laundering money. One of the most important investments a company can make is to ensure that all those dealing with money, undergo AML awareness training.

To give you an analogy if you’re looking at a very large color pallet and you’ve never been told that such and such colors are ‘neon’ and such and such colors are ‘earthy’ etc. you never would have guessed.

Is it risky to keep all your money in a single bank?

Fri, 10 Jan 2020 18:29:20 +0000

Faisal KhanAnswered Jan 10, 2020

Whilst it usually is for most of the customers who are banked, they still would like a mental satisfaction of having two accounts. Just in case!

The Basel III requirements in banks today, make them quite solid, however, they are not shielded from collapsing. The Basel framework makes the bank’s foundation stronger. So you actually good are well set in a single bank.

Can licensed money transmitters sponsor other companies under their licenses?

Fri, 10 Jan 2020 18:28:50 +0000

Faisal KhanAnswered Jan 10, 2020

Yes, of course, they can. They can become a program manager for the institution that needs sponsorship or can make that institution an agent of theirs.

Under the former condition, the Program Manager becomes the custodian of the funds and all things in the flow-of-funds, hence providing the regulatory cover, in the latter, the agent can also take custody of flow-of-funds.

Why are contactless cards called contactless if tapping is required?

Fri, 10 Jan 2020 18:28:48 +0000

Faisal KhanAnswered Jan 10, 2020

They are called contactless because there is no physical contact being made to read the data off the card (like a chip reader or a magnetic stripe reader).

Contactless cards utilize RFID / NFC (Radio Frequency Identification / Near Field Communication). There is no ‘tapping’ required. You just have to bring the card in close proximity for the card to be illuminated by the antenna in the POS terminal.

What happens to funds in forgotten or unclaimed bank accounts?

Thu, 09 Jan 2020 18:29:18 +0000

Faisal KhanAnswered Jan 9, 2020

In most cases, after “X” many years (the number varies from country to country), the asset balance is shifted from the bank to the central bank. The central bank will keep custody of these funds, literally for eternity, unless there is a provision to destroy the balance or assimilate the balance after say 50 years.

Should a valid claim be made for the money, the central bank can very easily recreate the balance and hand it over.

How can I track the location of money sent using a SWIFT transfer?

Thu, 09 Jan 2020 18:29:16 +0000

Faisal KhanAnswered Jan 9, 2020

You don’t. You are not given, nor provided any visibility of the SWIFT message requesting transfer of funds.

Even banks themselves at times don’t have direct visibility. They have to trace where the money is.

The only way to know where your money is is to ask for a copy of the transfer (MT102/103) and give it to your beneficiary bank so that they may trace the wire. It is in most cases stuck with the correspondent bank.

What are the best fintech podcasts?

Wed, 08 Jan 2020 18:25:35 +0000

Faisal KhanAnswered Jan 8, 2020

I recently compiled a list at Top Fintech Podcasts. The goal is to look at the quality of the content, viewership, reach, geographic coverage and feedback.

These are the best fintech podcasts that we have: Top Fintech Podcasts - Compilation of the Best Fintech Podcasts

The list for August 2018 is as follows (in no particular order).

Around The Coin
Breaking Banks
NPR: Planet Money
Payments on Fire
Bank On It
Rebank: Banking The Future
The Fintech Impact
Fintech Insider
Wharton Fintech Podcast
Tomorrow's Transactions

Disclosure: I am the owner of this website and the co-host of Around The Coin.

Is there any way to create a PayPal account for a minor?

Wed, 08 Jan 2020 18:25:33 +0000

Faisal KhanAnswered Jan 8, 2020

No, you are not allowed to use PayPal. You have to be at least 18 years of age.

Assuming you’re in the United States, then the Terms of Service of PayPal cites the following:

Welcome to PayPal!
This user agreement is a contract between you and PayPal, Inc. that governs your use of your PayPal account and the PayPal services. It applies to U.S. PayPal accounts only. For an individual to open a U.S. PayPal account and use the PayPal services, you must be a resident of the United States or one of its territories and at least 18 years old, or the age of majority in your state of residence. For a business to open a U.S. PayPal account and use the PayPal services, the business must be organized in, operating in, or resident of, the United States or one of its territories.

How do private banks create money?

Tue, 07 Jan 2020 18:29:15 +0000

Faisal KhanAnswered Jan 7, 2020

There is a great documentary that explains just that. It is a misnomer that deposited money is lent out again and again (fractional banking) is how private banks create money. This is not true. Commercial Bank Money (Bank Created Credit) is how private banks create money.

Many people (even economists and bankers) are completely clueless as to how money is created.

Why do people still fall victim to Western Union scams?

Tue, 07 Jan 2020 18:27:58 +0000

Faisal KhanAnswered Jan 7, 2020

Gullibility.

Add to that mix, the limited understanding of doing due diligence, being aware of signs of a scam and the skewed vision that comes with sudden money that might be coming your way, in some way, shape or form.

But it all boils down to gullibility and statistics. If a sucker is born every minute, there must be 100,000s of them out there!

What resources help newcomers learn the payments industry quickly?

Tue, 07 Jan 2020 18:27:57 +0000

Faisal KhanAnswered Jan 7, 2020

tl;dr: there is no single place.

If you are new to this space, read payments related news. That would at the very least set the compass in the right direction. It may not make sense, but it will eventually.

Find out some of the companies you want to learn about, and follow their twitter, Instagram accounts, and especially their blogs & videos. You will learn a whole lot more from there. See if they have any uploaded white-papers or webinars they did.

Does the money in bank accounts physically exist or only digitally?

Tue, 07 Jan 2020 18:27:55 +0000

Faisal KhanAnswered Jan 7, 2020

Very little money physically exists. Almost 97% of the money is digital in nature, exactly that, the proverbial figures typed into the computer.

It is very easy and difficult to explain to people how money works. A really great and easy to understand documentary on this subject is 97% Owned.

https://www.youtube.com/watch?v=...

Can someone open a US bank account from Nepal?

Tue, 07 Jan 2020 18:27:54 +0000

Faisal KhanAnswered Jan 7, 2020

Not directly in the United States, however, if you google, you might be able to open one in one of the territories, like Puerto Rico, which would give you semi-access to the US banking system.

Can a company charge the final amount to a credit card on file (saved at deposit) without getting permission again?

Mon, 06 Jan 2020 18:24:10 +0000

Faisal KhanAnswered Jan 6, 2020

Can they? Yes. The mechanism exists.

Is it legal? Depends on the fine-print when the deposit was being made. What did you agree on.

If, after the fine print, the company had no legal right to take the payment on a card that was provided for deposit, then needless to say, you have a case whereby the charge can be reversed.

What’s the difference between foreign exchange (FX) and the foreign exchange rate?

Mon, 06 Jan 2020 18:24:08 +0000

Faisal KhanAnswered Jan 6, 2020

To give you an analogy, the same difference between an Airline and its flight number.

Foreign Exchange refers to a currency type. For example US Dollars, or Philippines Peso, Kenyan Shillings, etc.

Foreign Exchange rate refers to the the exchange rate between two currencies.

If I hand over to you 1 unit of my currency, how many units of your currency will I get? That is what the foreign-exchange rate tells us.

Can someone withdraw funds if they have access to my email and bank statements?

Sat, 04 Jan 2020 18:29:13 +0000

Faisal KhanAnswered Jan 4, 2020

No.

There isn’t a bank that I know of that would allow such an easy walk through to happen. The email and bank statement would provide at best your address, but not any other details. Banks are trained for such. So, in order for the perpetrator to even try to reset or gain access to such, the bank would probably ask the customer information that cannot be supplied simply by having access to the bank statement and email only.

Will a bank allow you to deposit money into another person’s bank account without their involvement?

Sat, 04 Jan 2020 18:29:12 +0000

Faisal KhanAnswered Jan 4, 2020

In most cases, Yes.

Banks typically do not have firewall lists where a customer can choose who can (and cannot) deposit money into their account.

One of the core points of banking is payments, and the ability to make payments to anyone. As long as you have the account details, you can pretty much transfer/deposit money into that account.

How can a Nigerian graduate earning very little increase their income?

Sat, 04 Jan 2020 18:27:38 +0000

Faisal KhanAnswered Jan 4, 2020

Know photoshop? Start your own small business. It is not too difficult to learn photoshop, there are plenty of tutorials on YouTube.

Just a few days ago, I had a need to get some banner ads made. Nothing fancy just wanted up web headers (banners) made for a couple of websites I have. Not wanting to design them myself, I went to Fiverr, hired half-a-dozen designers and paid $7 a pop ($5 for the gig and $2 card processing fees).

How can someone legally bring a $2 million inheritance into the US?

Sat, 04 Jan 2020 18:27:37 +0000

Faisal KhanAnswered Jan 4, 2020

You can bring as much money as you want to the United States. There are no limits or restrictions. A simple way to do this would be to wire-transfer the money into your bank account in the US and you would have to provide a source-of-funds proof statement, how did you get the money?

Contrary to popular belief, you can bring the same in Cash. Heck, you could bring in a suitcase full of money or a container full of cash, no issues. You just have to declare it to the Customs & Border Patrol any sum in excess of US$ 10,000 or greater, and as always, you will have to show a source-of-funds statement.

What are the first principles behind how financial capital moves across the global economy?

Sat, 04 Jan 2020 18:23:30 +0000

Faisal KhanAnswered Jan 4, 2020

Is it Legal?

First rule of cross border value transfer is to find out what the legal rulings with respect to flow of capital. Is the entity that is initiating the transfer of capital (be it individual, company, a group of people) kosher? Are they clean and not on any watch lists?

It is allowed? If so, under what conditions and barrier.

If a bank calls you, what questions can you ask to verify the caller is legitimate even if the number appears genuine?

Wed, 01 Jan 2020 18:29:10 +0000

Faisal KhanAnswered Jan 1, 2020

Usually, this is the routine I follow.

I greet them properly.
Before they have a chance to speak, I will let them know that I record all my calls, and that this call is being recorded.
Then with a cheerful tone, I ask them for their name, even if it means repeating it multiple times till I get it right.
Then I ask from which department they are calling from. Customer Support is never enough of an answer for me.
I then ask what is the official web/URL of the bank (sometimes this catches them off guard).
Lastly, I ask for their customer support number (in the event I want to call back), they gladly supply this to me.

Once the above routine is done, I will let them know in no uncertain terms that I do not feel confident that they are who they claim to be. If this is a serious support call, I will gladly call back and the customer rep should have my issue on file when I call in.

Which types of bank transactions are classified as international?

Wed, 01 Jan 2020 18:29:09 +0000

Faisal KhanAnswered Jan 1, 2020

Typically any transactions that involve an external ledger and settlement with another bank (be it correspondent or direct respondent bank), which is outside the country the current bank is operating in.

Most of such transactions are either incoming payments or outgoing payments. The payment may be direct fiat money or a monetary instrument that is being executed.

Even the authorization of such a transaction would be considered an international transaction as that would need to be settled in T+X, where X is some time frame from the transaction date “T”.

Can wire transfers get lost, and what are the common reasons this happens?

Wed, 01 Jan 2020 18:29:07 +0000

Faisal KhanAnswered Jan 1, 2020

A wire transfer is never lost per se. There are literally 100s of scenarios as to why a wire transfer is either not returned or not credited to the end beneficiary. Most of the time it is an administrative (system or human) error in the handling of the wire transfer. It is usually stuck somewhere, held in abeyance until someone comes looking for it and fixes (reverses?) the error or until such time it is noticed missing and is found.

How did large money transfers happen before modern banks and coinage?

Sun, 08 Dec 2019 18:25:31 +0000

Faisal KhanAnswered Dec 8, 2019

Before banks per se, there weren’t any large transfers. Wealth or value was transferred either through property title deeds or goods being bartered.

There wasn’t much of a need to do transfers of money (in those days money was gold, silver, and other precious metals, plus prized commodities). Unless of course one was looting everything after a war, in which case, the armies literally had carriages to transfer away the loot.

Can an illiterate person operating a current account issue a cheque using a thumbprint?

Mon, 02 Dec 2019 18:23:02 +0000

Faisal KhanAnswered Dec 2, 2019

The requirement on the check where the signature part is to go, calls for an Autograph of the person there. So a hand-drawn scribble or one’s name written down is what is called for. Also, the amount in words is called the Legal Amount Recognition (LAR), but also be written out.

With these two considerations, anyone can help/aid the person write the cheque, but I don’t think a thumb-print would be accepted in lieu of signature.

Why can’t newer money transfer services (like TransferWise/Wise and WorldRemit) send money from some emerging markets where demand exists?

Mon, 02 Dec 2019 18:23:01 +0000

Faisal KhanAnswered Dec 2, 2019

The reason is not why these new money transfer operators are not able to send money out from these emerging markets because they are new, it is mostly because most emerging markets have a restriction on the capital outflow.

Earlier companies like MoneyGram, WesternUnion and the likes were able to score sending money permission from the central banks. Nothing stops these companies from doing the same. The problem is, the outflows are limited as to how much money you can send outside the country in a given year, the margins are mostly controlled by the banks and most central banks would not allow netting-off to the new MTOs, thus further reducing their profits.

What could be the biggest implications for Pakistani startups and SMBs if Pakistan is placed on FATF’s grey list or black list?

Mon, 02 Dec 2019 18:22:59 +0000

Faisal KhanAnswered Dec 2, 2019

Kinda complicated to ask, but what happened when Pakistan was on the list a couple of years ago? Betcha you don’t remember. It was business as usual. What will happen is that most businesses will refuse to send money directly to Pakistani vendors. Not because the businesses themselves don’t want to, but their banks would discourage it. They don’t want to show a direct transfer to Pakistan. Companies like TransferWise win in such cases.

How quickly do authorities detect money transfer fraud?

Tue, 12 Nov 2019 18:28:56 +0000

Faisal KhanAnswered Nov 12, 2019

Not as quickly as one would like to believe. In this case, crime is always one step ahead of the law.

Transactions large and small both go through the banking & payment systems. When you discover one, that happened to be for say $6, it is in the bank’s interest to follow through or involve the police for what might be a scam? Most likely not.

Who built the first electronic payment processing system?

Tue, 12 Nov 2019 18:28:55 +0000

Faisal KhanAnswered Nov 12, 2019

The Sumerians, circa 4,500 B.C.

They invented money and hence the system for documenting and processing how money moved in society. It was here where on clay tablets the first ledger was born and the movement (or processing) of Sumer (the monetary unit as it was called) was documented.

How do correspondent banking relationships work in remittances?

Tue, 12 Nov 2019 18:28:53 +0000

Faisal KhanAnswered Nov 12, 2019

When you are being provided sponsorship by a bank &/or a licensed financial institution (LFI), it is important you understand how correspondent relationships work.

Banks & LFIs cannot just unilaterally send money to another country. This is especially true when dealing with a repetitive business like remittances. In many countries, the payout country’s regulator would require the bank &/or the LFI be pre-approved and registered before they can offer such services in their country.

How do you obtain licensing and banking for a US-to-Kenya remittance app?

Sat, 09 Nov 2019 18:28:51 +0000

Faisal KhanAnswered Nov 9, 2019

The “How” is easy, you need to apply for a money transmitter license in the United States with each individual state and separately for Washington, D.C.

Banking you would need to secure as part of your licensing application.

The difficult part is the actual execution. This is why a lot many players are option to get sponsored for a money transmitter license coverage.

Can I receive funds in my Payoneer account from another Payoneer account?

Sat, 09 Nov 2019 18:25:57 +0000

Faisal KhanAnswered Nov 9, 2019

Yes, you can.

Within Payoneer, there is a system to make payment to any other Payoneer user. You have to know the email address of the Payoneer user - the one to which their account is tied into.

Simply ask the other party to go to the “Pay” option and select “Make a Payment” option from the main menu.

Is there such a thing as a “professional money launderer,” and do criminals hire specialists to launder money for them?

Sat, 09 Nov 2019 18:25:55 +0000

Faisal KhanAnswered Nov 9, 2019

Yes. There are many such players in the banking and payments world that do this for a living. Needless to say, they don’t openly advertise themselves.

A lot of them are masked behind foreign off-shore shell companies where finding the identity of the true people behind them is almost impossible.

Professional money launderers take a hefty fee (depending on the market) for whitening their money.

What’s the difference between a settlement bank and a remitting bank?

Sun, 03 Nov 2019 18:23:08 +0000

Faisal KhanAnswered Nov 3, 2019

Remitting bank in most cases is the originating bank, the institution that is originating the transaction on behalf of their customer.

The settlement bank is the one that is the designated bank (usually in a country) or usually for a particular transaction type (example credit card payments settlement for say MasterCard), which would initiate the payment for further (and hopefully final) credit and provide back the confirmation of the payment, hence closing the transaction loop.

If someone wires me $150, could I be charged with wire fraud?

Sun, 03 Nov 2019 18:23:07 +0000

Faisal KhanAnswered Nov 3, 2019

Too little information to go on. If the transfer is tainted, you could possibly be charged as a co-conspirator if there was enough evidence to support you knew these were tainted funds &/or the proceeds were through nefarious means.

However, if the funds were tainted and you knew nothing about them, then needless to say, you got nothing to worry about, except prove it to the LEAs that you don’t know anything about the money and its origin. Not always an easy explanation.

Can SWIFT be used for domestic transfers within a country?

Sat, 02 Nov 2019 18:22:57 +0000

Faisal KhanAnswered Nov 2, 2019

SWIFT is a messaging system. It does not transfer money per se. To answer your question, yes, what you are proposing, can also be done with SWIFT.

The actual money transfer in such a case would most likely utilize the RTGS or local clearing & settlement switches.

What effect could Bitcoin have on international trade?

Fri, 01 Nov 2019 18:22:44 +0000

Faisal KhanAnswered Nov 1, 2019

At present? Immediate future? Negligible.

Whilst Bitcoin is great, international trade requires a more stable (read: non volatile) and more bank-friendly alt-coin.

Bitcoin is neither at the moment. The current world trade is in Trillions of Dollars, and insofar as I can tell, Bitcoin is not even a small insignificant blimp on the world’s international trade radar.

Does this mean Bitcoin is useless? Far, far from it. I think bitcoin (or its variant) that would have a very important role to play in international trade, once we are past this friend or foe phase with governments, financial institution and regulators that we are going through.

If someone in the US sends crypto abroad, the recipient sells it, and sends fiat proceeds back—are there legal or compliance risks?

Fri, 01 Nov 2019 18:22:43 +0000

Faisal KhanAnswered Nov 1, 2019

No. You’d be okay, as long as you do it for yourself. The worse that can happen is that you will lose access to banking.

If I can receive international client payments directly to my bank, why would I use Payoneer?

Fri, 11 Oct 2019 18:26:14 +0000

Faisal KhanAnswered Oct 11, 2019

Use cases differ from person to person. In many cases, Payoneer users are from abroad, outside the EU/UK and outside US/Canada. Making payment to an account in Pakistan or Bangladesh to the Philippines is not always easily understood. It is also not cheap either.

Payoneer allows businesses to make local payments that they are already used to. So an American business would do a local ACH and pay perhaps $0.50 for the transfer. Easy, peasy, lemon, squeezy.

How are transactions worth over a billion dollars executed in practice?

Fri, 04 Oct 2019 18:23:27 +0000

Faisal KhanAnswered Oct 4, 2019

Depends on the payment.

If both the payment parties are in the same country, it can be settled by a cheque even. The cheque would probably go into the RTGS and get cleared. Not a big deal. If it is in Billions… some bank on one ledger has the money and it is a ledger transfer. To ensure the safety of the transfer, protocol is put into place to double-verify and authenticate the balance transfer.

Are deposits in Pakistani retail banks protected by any government-backed deposit insurance like FDIC?

Wed, 02 Oct 2019 18:22:56 +0000

Faisal KhanAnswered Oct 2, 2019

No. Pakistan does not have a deposit insurance program and neither are the deposits covered by any other insurance program.

How can I take PayPal Europe Ltd to court if they’re holding $26,000 for 180 days without a clear reason?

Tue, 01 Oct 2019 18:22:41 +0000

Faisal KhanAnswered Oct 1, 2019

PayPal doesn’t hold money of its client and prevent you from gaining access to it without reason. There always is a reason. This money belongs to you, and it is a liability for PayPal.

The question is why is PP holding to your money. The answer is most likely because of something you may have done (with the account, your KYC, etc.) which you would most likely know in which case you have your answer.

Is it legal for banks to block or limit transfers to cryptocurrency exchanges?

Tue, 01 Oct 2019 18:22:40 +0000

Faisal KhanAnswered Oct 1, 2019

Banks by law have to provide banking services to you. They cannot unilaterally shut you out. There has to be a basis. They need a reason. In the United States, most of the banks de-risk themselves of crypto-based business using the Operation Choke Point as the basis of not taking your business. Reason cited? A crypto-related business is a money services business and hence represents unlicensed and/or undocumented money transfer. On this basis, the bank will not provide banking services to you. (See: Operation Choke Point - Wikipedia).

Which major cryptocurrency exchanges are likely to fail (e.g., among the top 25)?

Tue, 01 Oct 2019 18:22:38 +0000

Faisal KhanAnswered Oct 1, 2019

My bets for failing are on HitBTC. This exchange is doing everything wrong, correctly!

One of the most fundamental way of doing research on existing exchanges is to open accounts on them, trade on them, do continuous deposits, withdrawals, open support tickets, etc. and measure/gauge responses.

In addition to this, look at the interwebs chatter, especially Twitter!

HitBTC is practically pinging the WTF scale.

Can Pakistani banks transfer funds online to UAE banks?

Wed, 11 Sep 2019 18:28:45 +0000

Faisal KhanAnswered Sep 11, 2019

No. Cross-border transfers are not allowed online. If you have a US Dollar account, you will have to go to your bank and fill out a transfer form (preferably person-to-person) and provide a rationale as to why the money is being sent overseas.

100% online, at present, no method exists that I know of.

Why must non-US transactions often clear through US banks?

Mon, 09 Sep 2019 18:28:44 +0000

Faisal KhanAnswered Sep 9, 2019

If the clearing and settlement is done in United States Dollars, even for a transaction that is not originating or terminating in the United States, but in countries outside the US, then the US banking would still be applicable.

For all transactions related to the US Dollars, respondent banks are responsible for clearing these transactions through authorized correspondent banks in the United States.

If I collect money from people and send it using a licensed money transmitter’s app, is that legal in the US—and can I charge a fee for doing it?

Mon, 09 Sep 2019 18:25:54 +0000

Faisal KhanAnswered Sep 9, 2019

Yes, this is clearly prohibited and illegal on two fronts.

First, when you collect money that doesn’t belong to you, i.e. you are neither the originator or the funds, not the beneficiary of the funds, but are acting as an intermediary, you are a money services business. Because you can have access to the funds that don’t belong to you, you will be classified as a money services business and hence require a money transmitter license.

How affordable is living in Istanbul when earning in US dollars?

Sun, 08 Sep 2019 18:28:42 +0000

Faisal KhanAnswered Sep 8, 2019

First of all, earning in US Dollars is a huge benefit as it is in Turkey. As the Turkish Lira has weakened against the US Dollar, luckily you will not be in that position where your purchasing power is seriously diminished.

I do feel sorry for the locals who earn in Turkish Liras, but if you earn in US Dollars, thank your lucky stars. The cost of living in Istanbul? Let’s compare it to a few cities in the world:

Do you need a money transmitter license in New Jersey to operate a Bitcoin ATM business, and why?

Sun, 08 Sep 2019 18:25:29 +0000

Faisal KhanAnswered Sep 8, 2019

Yes.

Reason, because you are providing intermediary services with cash (can even be electronic) of which money receiving and transmission is at the core.

Source: Foreign Money Transmitter/Money Transmitter

Is TransferWise/Wise a good option for sending money abroad?

Sun, 08 Sep 2019 18:25:28 +0000

Faisal KhanAnswered Sep 8, 2019

Yes. No doubt Wise (formerly TransferWise) is a great company to use to send money abroad. Their rates are extremely competitive and they are truly one of the few disruptors in the field of money transfer (many may argue otherwise).

It is because of Transferwise’s low fees that many others had to lower their fees to compete. However, Transferwise is not the only solution provider in town. There are many others, so do your homework and ask questions.

What are the costs associated with surety bonds for US money transmitter licenses?

Thu, 05 Sep 2019 18:28:39 +0000

Faisal KhanAnswered Sep 5, 2019

It depends on the minimum amount as requested by each state (which varies from State to State). Grimes Law (out of Arizona) had done some work on this a few years back (it might be outdated), and the amount then was US$ 6.9 Million (at the very minimum). Applying a premium of 1.5% this would mean US$ 103,500 per year.

The financial examiner of each state can (I believe) allow a maximum of US$ 2 Million of required surety bonding for each state, if they deem your business requires additional bonding, above and beyond the minimum. If every state mandated a bonding of US$ 1 Million, you would be looking at $ 50 Million in bonding and this would mean US$ 750,000 in bonding premium per year.

How long does it take to obtain money transmitter licenses nationwide in the US?

Thu, 05 Sep 2019 18:28:37 +0000

Faisal KhanAnswered Sep 5, 2019

Up to two years. Some states like Alabama, Arkansas, Iowa, etc. might come in 3–4 months, most of the other states will take between 6–9 months. States like Massachusettes, Florida, North Carolina, Illinois, Maryland, etc. can take between 8–12 months.

New York, Texas and California can take the longest, nearly up to two years for California and New York.

Can non-US institutions sponsor US crypto businesses legally?

Wed, 04 Sep 2019 18:28:36 +0000

Faisal KhanAnswered Sep 4, 2019

No. All in all, this is a BS claim.

As I have already cited in my other answers, please do not be fooled or conned by someone claiming to provide you with such an arrangement. Almost every licensed bank knows of this and many licensed non-banking financial institutions are also aware that their license cover does not extend out to the United States.

How do stablecoins work?

Wed, 04 Sep 2019 18:23:25 +0000

Faisal KhanAnswered Sep 4, 2019

Day 1: Single IOU

Let’s say you walk into your bank in America and present $ 100,000 to the bank, and ask them to make a Cashier’s Cheque for you. No problem they say! The teller types one up, and charges you $ 10 extra for it and then ask you:

“Sir, what beneficiary name would you like on your cashier’s cheque?”

Is the era of the US dollar ending, and could oil/gold be priced in another currency like EUR or JPY?

Wed, 04 Sep 2019 18:23:24 +0000

Faisal KhanAnswered Sep 4, 2019

Eventually, yes, the US Dollar will end. Will it be in the next 50 years or 100 years or 400 years, no one knows. However, in this globally connected economy and one that is now preparing to jettison humanity to another rock in place, the US Dollar would eventually lose its value. Some argue, money itself as an instrument of value and exchange would cease to exist (did you ever see a Star Wars, or Star Trek episode where gold or Euro or future currency was being negotiated?) Eugene (Gene) Roddenberry - the creator of Star Trek certainly did not envision so.

If someone scammed me in Bitcoin in Pakistan, should I report it to the police or FIA—especially if Bitcoin is illegal?

Wed, 04 Sep 2019 18:23:22 +0000

Faisal KhanAnswered Sep 4, 2019

Bitcoin is not illegal in Pakistan (at the time of writing this answer). There is no entry in the Pakistan Penal Code (PPC) that makes it so. What State Bank of Pakistan has recently said that the institutions that SBP licenses and regulates are barred from dealing in crypto currencies, bitcoin, ICOs, etc.

Your recourse is under section PPC 420 (defrauding another person). What you will have to prove is that there was an asset value assigned which you were swindled out of.

Can foreign banks provide money transmitter coverage inside the US?

Tue, 03 Sep 2019 18:28:34 +0000

Faisal KhanAnswered Sep 3, 2019

No.

Please do not be fooled or conned by someone claiming to provide you with such an arrangement. Almost every licensed bank knows of this and many licensed non-banking financial institutions are also aware that their license cover does not extend out to the United States.

FinCEN actually has an advisory on this, and it is FIN-2012-A001, Issued Date: February 15, 2012, Subject: Foreign-Located Money Services Businesses.

How difficult is licensing for crypto exchanges in the US?

Sun, 01 Sep 2019 18:28:33 +0000

Faisal KhanAnswered Sep 1, 2019

It is not easy.

Meaning, you need to have adequate finances for it. To operate a crypto exchange in the United States, you would need a Money Transmitter License in each state (including the BitLicense in New York). This would legally allow you to operate an exchange in the United States. There may be SEC / FINRA guidelines, but I am not an expert on those. The other alternatives are to seek a bank-led sponsorship (which will still not cover you for New York, as they have a very specific license for it), or you can work with a licensed Trust Company that has the appropriate banking relationships in place to enable you to run your own crypto exchange. Even for Trust companies, you have to obtain a legal opinion if the coverage provided by a Trust company will suffice, and as with the banks, the State of NY will not be covered.

How can a cash-strapped startup obtain US money transmitter licenses?

Sun, 01 Sep 2019 18:28:31 +0000

Faisal KhanAnswered Sep 1, 2019

Yes, of course, there is a workaround. It is akin to leasing a car.

Imagine if you will that you would be launching a taxi service - do you lease your cars? buy them? or build them? Conventional wisdom would say, lease, then buy and then build. The very same analogy applied to the money transmitter license coverage in the United States. Rather than going and applying for your own licenses, you would be better off with partnering with someone else, who would sponsor you and provide you money transmitter license coverage, under their own license, but using your brand. They would essentially be the program manager. This allows you to go to the market, without incurring expensive upfront costs and short-circuits the time to market drastically.

Do international fintech startups need US money transmitter licenses?

Sun, 01 Sep 2019 18:28:30 +0000

Faisal KhanAnswered Sep 1, 2019

The answer is it depends. Are you going to be doing business in the US? If you plan on signing up US customers then you need a money transmitter license for all the US States (and territories) where you plan on doing business. If you are terminating remittances into the United States, when you don’t need a money transmitter license per se, but you need to work with a licensed MSB with the requisite MTLs who would terminate those transactions for you, via a correspondent or settlement agreement.

Can multiple country bank accounts be linked to a single Payoneer account?

Fri, 09 Aug 2019 18:28:12 +0000

Faisal KhanAnswered Aug 9, 2019

At present Payoneer’s system does not allow that, or rather I should say, it is not geared for it. I happen to have the same problem. Got a Payoneer account from Pakistan and linked to my PK Banks. Now moved to Turkey, if I want to link the TR Banks, the system does not allow it. It needs me to create a new ID and then I have to provide an explanation on why two IDs are being maintained with the same passport. In the end, I have not been successful to open two accounts using the same ID in two different countries …yet.

Can you deposit cryptocurrency directly into PayPal?

Thu, 08 Aug 2019 18:25:26 +0000

Faisal KhanAnswered Aug 8, 2019

Possible? Yes.

Can you do it today? No, Not yet.

PayPal would most likely offer something like this later on, consider’s Square’s huge success in getting on the crypto-bandwagon market.

How much more or less expensive is international money transfer using Bitcoin compared to traditional banking?

Thu, 08 Aug 2019 18:25:24 +0000

Faisal KhanAnswered Aug 8, 2019

In many cases, just marginally better.

Lets say a traditional remittance transfer is 3% between US and Philippines, so for the $1,000 you are sending, the fees is $30.

On the Bitcoin front, this might be about 0.75% to 1.0% at best. So you are paying $7.50 to $10 for the transfer.

Great savings? Perhaps!

You need to find an exchange in the US to buy bitcoins from, and likewise find a bitcoin exchange in Manila to sell to and cash out. Both exchanges will levy a fees.

What did the United States attempt to buy for $100 million in 1946?

Mon, 05 Aug 2019 18:28:11 +0000

Faisal KhanAnswered Aug 5, 2019

In 1946 - long after Seward's time - the United States seems to have made a formal offer of $100 million for Greenland, according to declassified documents discovered about ten years ago in the National Archives.

Source: Reasons of State: Why Didn't Denmark Sell Greenland?

Which countries allow online bank account opening for non-citizens?

Mon, 05 Aug 2019 18:28:09 +0000

Faisal KhanAnswered Aug 5, 2019

Almost all offshore banking (read: tax havens) will open an account without you ever visiting. Think the Bahamas, Grenada, St. Lucia, St. Kitts & Nevis, et. al.

However, this does not mean they are lax in their KYC. Quite the opposite. You will have to provide a bunch of documents to authenticate your identity and then your account would be opened.

What happens if I accidentally used a wire routing number for an ACH deposit transaction?

Sun, 04 Aug 2019 18:23:20 +0000

Faisal KhanAnswered Aug 4, 2019

Unless both the numbers are the same, the transaction will not go through and will be reversed and usually takes 4–6 days. The NACHA routing error for this is C03.

How does Payoneer legally provide bank accounts to non-UK residents?

Sat, 03 Aug 2019 18:28:08 +0000

Faisal KhanAnswered Aug 3, 2019

It doesn’t create a real bank account for you.

Payoneer is an E-Money License holder in the UK, which means, they are allowed to hold money (or stored value) on behalf of a customer. This means, they work with banks and can obtain virtual IBANs or (segregated named accounts in their own pool) and hold your money. It is NOT a bank account as such, just a pseudo service that mimicks the incoming aspect of a regular bank account, i.e. being able to receive funds on a given address, where the address is your virtual IBAN.

Is there a system that ensures global bank transfers net to zero?

Sat, 03 Aug 2019 18:28:06 +0000

Faisal KhanAnswered Aug 3, 2019

There isn’t an institution per se, there are many, depending on how the payments are being cleared. BIS (Bank of International Settlements) based in Basel, Switzerland is one. There is the CLS Group out of NY that pretty much handles the worlds FX, and then there are many direct/indirect correspondent banking relationships which ensure that double-entry accounting in the ledger of the various banks involved is there. Each bank also maintains an account ledger with the corresponding bank also. Thus if you screw up on your accounting, the corresponding set would not match.

Why do many automated bank transfers only process overnight?

Thu, 01 Aug 2019 18:28:05 +0000

Faisal KhanAnswered Aug 1, 2019

Much of the banking world is batch-process, which means, transactions and payments are bulked up and then batch processed at a certain time. This is due to the old way of doing things, and it takes time to upgrade and get everyone (read: banks) onboard with the program.

An analogy would be if you’re running a store. When you open for business, you presumably have cash with you, for customers who come in. So the first customer comes in, buys let us say €100 worth of goods. After the customer leaves, you run to the bank and deposit €100. Another customer comes in and buys €250 worth of goods and after they leave, you again run to the bank and deposit the €250. Another customer walks in and wants a refund on their previous purchase for €75, so you quickly make a dash to the bank and withdraw €75 to give to the customer.

How do remittances benefit national economies?

Thu, 01 Aug 2019 18:28:03 +0000

Faisal KhanAnswered Aug 1, 2019

Well, for starters, it affects the local buying/spending economy. When this money (let’s say GBP), exists the UK and terminates in the Philippines (for example), there is less economic activity in the UK had the money stayed in the UK.

The money supply does not change per se, only the local economic activity does, which also means, the government is able to collect fewer (direct & indirect) taxes on this money and the circulatory effects of this money to keep the economy churning, lessened.

Does a startup need a money transmitter license to offer a closed-loop gift card system for SMBs?

Thu, 01 Aug 2019 18:22:37 +0000

Faisal KhanAnswered Aug 1, 2019

This depends on your definition of a closed loop and the regulator’s definition of a closed loop. In most cases, a closed loop is defined as a company/merchant issuing a card that has points or value, that can be redeemed only at the company/merchant’s place of business.

So if you’re say CompanyX and you issue gift cards that can be used in all your CompanyX stores and can be loaded/unloaded only in your stores, this would be fine in many jurisdictions and qualify as a closed loop.

How can Remitly send money to a customer’s bank account in India within minutes?

Tue, 09 Jul 2019 18:25:52 +0000

Faisal KhanAnswered Jul 9, 2019

The is achieved by what is called a ‘pre-funded’ account.

Let’s take an example. Money needs to be transferred (using Remitly) from Chicago (USA) to Mumbai (India).

Traditionally, if money needs to be sent to India from the US, Remitly, every day will collect the money and then using SWIFT, send the money over to the bank in India for further distribution. However, this can take 2–3 days.

Does a money transmitter need to notify state regulators when forming an agreement with another transmitter, or can MTOs enter/exit partnerships freely?

Mon, 08 Jul 2019 18:25:22 +0000

Faisal KhanAnswered Jul 8, 2019

No notification is necessary. During a state audit, the auditor can ask you to show the correspondent tie-up agreement. Truth be told, all agreements, etc. for money transmission will be reviewed during a state audit.

MTOs are free to enter and exit into any agreement they wish. No prior permission is required.

What impact do small and mid-sized money transmitters have on the global remittance market—are they insignificant, and what data exists on their combined share?

Mon, 08 Jul 2019 18:25:20 +0000

Faisal KhanAnswered Jul 8, 2019

They are very much relevant, albeit now facing various hurdles. As Katie Koroleva cites, the number varies. I’ve seen it as low as 5% and as high as 50%. However, they average out between a fifth (20%) to a quarter (25) of the market share.

These numbers are now on the decline due to issues like derisking/access to banking, OMTOs (Online Money Transfer Operators), technology, compliance, corridor offering, pre-funding capital issues, etc.

How much US currency physically exists, and what percentage of US money is only digital (bank ledger entries)?

Sat, 06 Jul 2019 18:24:06 +0000

Faisal KhanAnswered Jul 6, 2019

The total number of Coins and Currency Notes, etc. are as follows:

Source: The Fed - Data

There was approximately $1.63 trillion in circulation as of March 21, 2018, of which $1.59 trillion was in Federal Reserve notes.

Source: How much U.S. currency is in circulation?

You also need to look at the M1 and M2 money supply.

Can you view all money transfers made through a specific Western Union account over multiple years?

Thu, 04 Jul 2019 18:23:18 +0000

Faisal KhanAnswered Jul 4, 2019

Western Union for legal purposes is required to keep records of all transactions for a minimum of 7 years. In some cases much longer. Chances are that Western Union has complete record of all the transactions associated with a particular account. The only problem is, that they are not legally bound to give it to you or share it with you, without a court order saying so.

How feasible is it to get a money transmitter license in California for a storefront crypto-to-cash business?

Thu, 04 Jul 2019 18:23:16 +0000

Faisal KhanAnswered Jul 4, 2019

You certainly have not only chosen a difficult state to get a license in, but also a difficult combination.

To obtain a money transmitter license in California, you would need to put in an application with the Department of Business Oversight (California Department of Business Oversight).

In all likelihood, if you’re asking this question here on the feasibility of obtaining an MTL for cryptocurrencies, chances are you might not get it.

What gives money its value if it’s no longer backed by gold?

Mon, 10 Jun 2019 18:26:03 +0000

Faisal KhanAnswered Jun 10, 2019

You and I. This includes the government, and a little bit of faith.

A “value” in the fiat world (IMHO) is an abstract term. It comes from demand and supply. What people are willing to assign for purposes of a medium of exchange.

In a world of very little items, for example, consider Corn, Rice, Chickens, and Wood as the only tradeable commodities in an economy. With four items over time, it will be easy to set the ‘exchange value’.

Will Ripple dominate global cross-border payments?

Mon, 10 Jun 2019 18:26:01 +0000

Faisal KhanAnswered Jun 10, 2019

Hard to say. At the time of writing this answer, Ripple (payment network) has about 100 or so banks signed up. Pretty small number, but much more than any other alternative provider out there, that just got started int he last few years.

With over 15,000 banks, some put this number as high as 25,000, the number signed up by Ripple is small. But then again, Ripple is just starting out.

Is there a network or consortium for small licensed money transmitters in the US?

Sun, 09 Jun 2019 18:27:52 +0000

Faisal KhanAnswered Jun 9, 2019

Not really. There was an effort by David Landman to create the NMTA, but that has now been morphed into MSBA (Money Services Business Association). Their website can be found here: Money Services Business Association

NMTA (National Money Transmitters Association) was a great newsletter that David put out, to join the industry, and the newsletter is still there (just with a different name), but for all purposes, MSBA is the de facto association to join.

Why is Payoneer withdrawal to Pakistani local banks labeled “ATM Transfer” instead of “Home Remittance” (tax-free), and how can I prove it in my tax return?

Sun, 09 Jun 2019 18:25:51 +0000

Faisal KhanAnswered Jun 9, 2019

Please write a letter to your bank, requesting a Proceeds Realisation Certificate (PRC) for the transaction mentioned.

The bank will check with the counter bank and confirm was indeed an incoming foreign exchange transaction and paid out from the local pre-funded account.

The PRC will suffice for tax purposes to treat this as a remittance (if the sending person is a person), or a foreign-source income, in the event the sending party is a company.

Can non-residents open US bank accounts?

Sat, 08 Jun 2019 18:27:51 +0000

Faisal KhanAnswered Jun 8, 2019

The answer is, it depends. Typically you would be able to open a company bank account, where at least one representative from your company has to reside inside the United States and be given the authority to sign on the account and be able to conduct banking transactions. This is (to the best of my knowledge) the only legal way of doing it.

Is it possible to build a PayPal-like online payment system in Thailand?

Thu, 06 Jun 2019 18:24:05 +0000

Faisal KhanAnswered Jun 6, 2019

Possible? Yes. Worth your while? Questionable!

Building a payment system is no rocket science in many cases. Put people in a room, give them enough coffee, white-board markers and sugary sweet delights, and soon enough they will come up with a payment system.

There are 1,900+ payment systems in the world, yet, less than 1% are connect (on a single-hop basis) and less than 3% connected on a two-hops basis.

What are the odds Bitfinex is not AML/KYC compliant for a significant share of its transactions?

Sun, 02 Jun 2019 18:22:54 +0000

Faisal KhanAnswered Jun 2, 2019

Medium to high probability. But chances are the company is fixing that. Plugging the holes, fixing the short-comings, etc. There is an extremely high-probability that they have had serious infraction when it comes to their compliance program.

Whilst it is good that they are fixing it - the problem is, past infractions are still past infractions and any regulator can pounce on them.

Are certificates of deposit still a good investment choice?

Fri, 10 May 2019 18:27:46 +0000

Faisal KhanAnswered May 10, 2019

Depends, but generally speaking, the answer is No. It has been no in 1973, a no in 1984, a no in 1999, a no in 2013 and will be a no for the years to come.

A CD or certificate of deposit is perhaps the lowest risk, lowest yield form of investment vehicle available to you, from your bank.

It is not zero risk, but very low risk.

Does PayPal provide routing numbers similar to bank accounts?

Fri, 10 May 2019 18:27:45 +0000

Faisal KhanAnswered May 10, 2019

No.

At the moment, PayPal operates as a Wallet. You load money into/out of the wallet using your bank account, but PayPal is not providing a DDA/IBAN to you… yet!

What are the key differences between ACH payments and CHIPS transfers?

Mon, 06 May 2019 18:27:42 +0000

Faisal KhanAnswered May 6, 2019

CHIPS is basically RTGS (Real-Time Gross Settlement) System for large value, low-volume, instant clearing, whilst ACH is low-value high-volume batch clearing payments. Both are US concentric.

As per Wikipedia:

The Clearing House Interbank Payments System (CHIPS) is a United States private clearing house for large-value transactions. By 2015 it was settling well over US$1.5 trillion a day in around 250,000 interbank payments in cross border and domestic transactions. Together with the Fedwire Funds Service (which is operated by the Federal Reserve Banks), CHIPS forms the primary U.S. network for large-value domestic and international USD payments where it has a market share of around 96%. CHIPS transfers are governed by Article 4A of Uniform Commercial Code.

What services are typically offered under private client banking?

Sun, 05 May 2019 18:27:40 +0000

Faisal KhanAnswered May 5, 2019

It offers slightly bespoke banking and investment products that are otherwise not available to the general banking customers. You get more attention to start with. Like having your own financial planner, concierge services, etc. Even simple things like the visit to the bank or the telephone call or email are handled by a completely different set of personnel, who are trained to give you attention and priority.

Why does the Pakistani rupee lose value when USD reserves fall, compared with reserve declines in other currencies?

Thu, 02 May 2019 18:22:53 +0000

Faisal KhanAnswered May 2, 2019

Most of the trade is US Dollar denominated and so are our payment (debt) obligations.

The liquidity of the US Dollar has a direct impact. It is not that the Pakistan currency loses its value (whilst technically you are 100% correct), what happens is demand exceeds supply and hence the price people are willing to be for 1 US Dollar goes up!

What is the most misunderstood aspect of cryptocurrency?

Wed, 01 May 2019 18:22:35 +0000

Faisal KhanAnswered May 1, 2019

Two things…

First, if I can use the analogy of the big bang, we are in the inflationary stages of cryptocurrencies, some might argue, the dark ages even.

The planets, the stars, the gold dust, life itself has yet to bloom. We are in the very early stages, so cryptocurrencies today might not be there tomorrow, but their evolutionary work and presence today, might yield to a more functional and acceptable cryptocurrencies tomorrow.

Why did remittances to low- and middle-income countries peak in 2018?

Fri, 12 Apr 2019 18:27:35 +0000

Faisal KhanAnswered Apr 12, 2019

All empirical evidence suggests that the US Dollar got stronger against other currencies and hence people sent more. One would believe that if the beneficiary country’s currency depreciates, the same amount of money will come in, just more in local terms. Turns out, people try to send in more money to take advantage of the situation. Perhaps they want to save more. Perhaps they want to invest in some investment back home, like property/real-estate, stocks, etc.

Is TransferWise generally better than other remittance services?

Wed, 10 Apr 2019 18:27:34 +0000

Faisal KhanAnswered Apr 10, 2019

Sure. TransferWise is not the only provider in town for great transfers. If that were the case, everybody else would had packed up and gone home. That is clearly not the case.

It all depends on the corridor(s) in question and what type of money transfer service is being offered. TransferWise has its fair share of competition and competes with them.

Could money be “wiped out” the way an ant society functions without money?

Sat, 06 Apr 2019 18:24:03 +0000

Faisal KhanAnswered Apr 6, 2019

Can it? Yes, it is a human construct. Will it? Eventually, yes!

If you look at some of the futurologists like Gene Roddenberry, the creator of Star Trek, there was no money in Gene’s future.

Gold, Silver, Diamonds, all lose relevance when you have a meteorite that is for example made of gold of platinum. when humanity eventually ventures out in space, and we will venture out, not for money, but perhaps more for survival and curiosity (because it can).

Why don’t banks process transactions on Sundays?

Sat, 06 Apr 2019 18:24:02 +0000

Faisal KhanAnswered Apr 6, 2019

Historically, Sunday has been a day of rest. A holiday in most of the Christian countries around the world. Banking was done during the 6-day work week, before the 5 day work week was adopted in many countries, but Sunday was always off.

As the world got more and more electronic and connected, you have different banking systems, networks and a whole lot of legacy code.

What qualifications are essential for an anti–money laundering (AML) officer?

Sat, 06 Apr 2019 18:24:00 +0000

Faisal KhanAnswered Apr 6, 2019

The prerequisites to becoming an AML Officer are pretty standard. Most AML course work or Job Descriptions cover it well. Two key elements are usually never thought of or discussed so openly:

Field Research or On-the-ground-Experience. If you have never been outside in the field, and only have been a theoretician - then you will never be a great AML officer…
Creativity. ML today is all about ingenious creativity. If you are not equally creative, you’re missing a key attribute. “What would Dave do?” is the kind of thinking you need!

Where does the money used for transfer payments actually come from?

Sat, 06 Apr 2019 18:23:58 +0000

Faisal KhanAnswered Apr 6, 2019

Depends:

It is either pre-funded, i.e. arrangements are made to have enough money on the other side, so that when a payment is made, the money is taken out of the available balance and paid for.

The other arrangement is credit (which has a counter party risk factor higher than the pre-funded one).

In both cases, it is a bilateral agreement between two entities to have these balances maintained for payments and settlement occurring on a periodic basis.

How did banks transfer money bank-to-bank before telex or SWIFT existed?

Sat, 06 Apr 2019 18:23:57 +0000

Faisal KhanAnswered Apr 6, 2019

Wire transfers (which meant Morse-code type transfers over the wire) and these go quite a ways back.

Before that? Good ol’ ledger comparison. Bankers would meet regularly and do inter ledger settlements. How much do you have? How much do I have? How much do I owe you? How much do you owe me?

Then one bank would transport its ledger and credits/debt notes across the country, ocean, etc. to do correspondent settlement with the other bank (which is how the entire merchant banking system was setup).

Is it possible to identify which banks do business with gun manufacturers/dealers (for boycott purposes)?

Tue, 02 Apr 2019 18:22:51 +0000

Faisal KhanAnswered Apr 2, 2019

If the gun manufacturers are publicly listed companies, their banks would be identified in their quarterly or annual reports. However, in most cases, if they are not publicly listed, you will not be getting this information. The gun manufacturers are a small part of the equation. There is a complete allied industry around gun making that together encompasses what one would call the gun manufacturers.

How can I start a cryptocurrency exchange if banks won’t open accounts tied to Bitcoin?

Tue, 02 Apr 2019 18:22:49 +0000

Faisal KhanAnswered Apr 2, 2019

Most banks today will not touch you if you have anything to do with Bitcoin/crypto. The FUD (Fear, Uncertainty, Doubt) factor has spread so much, many bankers don’t even know why they are saying no to you, except that they should say no, because everyone else is saying no.

The best way of going about opening a cryptocurrency exchange is to have a cryptocurrency exchange only, i.e. you do not touch fiat. Binance, HitBTC, Cryptopia, etc. are a few examples.

What is the most important lesson you’ve personally learned about money?

Tue, 12 Mar 2019 18:26:49 +0000

Faisal KhanAnswered Mar 12, 2019

That there are TWO kinds of money, one that…

Creates Jobs, improves the GDP, increases manufacturing, or provides a service (like elderly care or gardening or mechanic, etc.) The real money goes here. It builds businesses. Land, factory, plant, and machinery, etc. This is what the 99.9% of the people work for.

This is the real world.

This is the world’s GDP: about US$ 75 Trillion (give or take a few).
Then there is the other kind of money, that is speculative in nature, i.e. the derivatives markets. Where Millionaires and Billionaires make their money. They don’t put up factories. They don’t create jobs per se (expect an occasional wealth management banker or quant for trading), they don’t manufacture products or offer a service. They are speculative in nature.

They pry and bet on the GDP of the regular world and create bets. Derivatives are nothing but a much more fancier way of betting. These bets create the financial tsunamis when they go wrong.

The size of the world’s derivative markets? In excess of US$ 700 Trillion! (some say US$ 900 Trillion).

Why can companies like Coinbase handle both fiat and crypto while others struggle?

Tue, 12 Mar 2019 18:26:48 +0000

Faisal KhanAnswered Mar 12, 2019

It is not that difficult if you know whom to contact and what it entails. Getting access to the fiat rails (on/off ramp) from your crypto exchange (for example) requires you to run a marathon. 26 miles (proverbial example, with each mile being a milestone).

Many are not prepared to run the distance (it takes times, patience and persistence).
Many companies are not willing to alter their compliance program
Many companies are not willing to get licensed (believing they don’t need to be)
Many of them are not willing to slightly alter their transaction set
Many just give up at the 20th-mile marker.

It is even more of a tedious process if you start fresh. Alternatively, you can contact special consultants who can make this work for you for a fee of course.

What factors cause foreign remittances to rise or fall?

Tue, 12 Mar 2019 18:26:46 +0000

Faisal KhanAnswered Mar 12, 2019

There can be a number of factors, there is no definitive list, but here are some points worthy of consideration:

Seasonal activities (summer vacation, winter vacation)
Seasonal festivities (think Christmas, Eid, etc.)
Exchange Rate in Beneficiary Country. If the exchange rate is high, then more money flows, if less, people tend to hold back remittances to a wait-and-see scenario
Size fo Expat community or working labor overseas
Taxation
Incentives to official remitters
The unofficial rate in the open-market (hawala rate)
Wanting to come under the government’s umbrella as a remitter or not, some government then start hounding you for no reason for more taxes, etc.
The geopolitical situation back home, which can directly affect the rate.
Investment schemes
Wedding Season

If I want a regulated money supply, don’t speculate, and don’t care about anonymity, why would I still choose Bitcoin?

Fri, 08 Mar 2019 18:25:18 +0000

Faisal KhanAnswered Mar 8, 2019

tl;dr Unshackled movement of money!

Let me cite an analogy that would help you understand better.

If email was regulated and you could only send email between approved providers, would you accept? Well your answer might be sure! You’ll accept. You don’t see any reason not to as long as the system works.

What if I told you, that you can only send email to specific people and not everywhere one? I am sure you would reply no, that is not a good email system.

Why are money transfer operators still popular in the Philippines even though PayMaya and GCash can be cheaper?

Fri, 08 Mar 2019 18:25:16 +0000

Faisal KhanAnswered Mar 8, 2019

Michael Ranola aptly sums it up. It is a behavioral issue more than a technology issue.

There is an ingrained belief of people using money (currency notes) for transfers and that gives them a sense of transaction completed when the money is in their hands.

The newer generation also has been programmed to do it the same way, because they have been seeing it all their lives - remittances = visit to MTO = get cash.

Which remittance corridors rely heavily on hawala networks?

Fri, 08 Mar 2019 18:25:13 +0000

Faisal KhanAnswered Mar 8, 2019

In all the developed-to-developing countries route. So all your Top 25–30 countries that receive remittances, also have very well established hawala/hundi routes.

This is a natural by-product. It exists because invariably, there will be a grey channel demand.

But they also exist for a reason most people tend to forget. Capital outflow restrictions in the receiving countries. With the air of hawala networks, people within a developing country can easily contact ground agents in their country to send payments to people or businesses in the US (for example).

Can international bank transfers be guaranteed at the time of execution?

Tue, 05 Mar 2019 18:27:27 +0000

Faisal KhanAnswered Mar 5, 2019

In most cases, the answer is no.

International wire transfers are subject to manual review, and the very minute you introduce a manual review process, the committed timelines go out the window.

Also, most of the wire transfers are based on a batch of FIFO (First In, First Out) during operational times. The interdependencies with respect to the next bank in line that will take over the transaction baton and run with it, is always questionable. They might be having a holiday, so systems are down, or transaction was flagged by the correspondent bank, etc.

Could Venmo realistically replace Western Union?

Tue, 05 Mar 2019 18:27:26 +0000

Faisal KhanAnswered Mar 5, 2019

Most likely not.

Venmo is US concentric, whilst Western Union is available pretty much all around the globe. The problem that the two solve are inherently different.

It is very unlikely for Venmo to achieve a global status of what WU has. For that to happen, Venmo would have to become a household name like Western Union and also go into the business of assigning agents worldwide. 100,000s of agents.

What legal position do individuals have when operating like MoneyGram or Western Union?

Tue, 05 Mar 2019 18:27:24 +0000

Faisal KhanAnswered Mar 5, 2019

Depending on where in the world you may be, you would most likely be classified as a money transfer operator or money services business. This means, you are now dealing with money in a way, that most likely requires you to be registered with state/provincial authorities as well as federal authorities, in addition to being licensed to do this line of business.

Who are market makers on Ripple, and are they considered money transmitters requiring licenses?

Fri, 01 Mar 2019 18:22:34 +0000

Faisal KhanAnswered Mar 1, 2019

This is a tough one. If I am a market marker, I am bringing in trade for the XRP on some currency pair. Because I own the pair, I may not be acting as an intermediary, so I might get away with being a money transmitter, but as soon as I breach the various limits (set up by various US States as to what is the limit, over which you become a money transmitter).

Why do countries hold foreign exchange reserves?

Fri, 01 Mar 2019 18:22:32 +0000

Faisal KhanAnswered Mar 1, 2019

Trade!

If you wish to trade with the world and have nothing to offer in return that I want, then I want to get paid in the currency of my choice.

Let’s say Country X has various natural resources. It wants to trade with United Kingdom. The UK Government doesn’t want those natural resources. So if Country X wants to buy UK based chainsaws, it needs to pay in a currency the UK is willing to accept. “X-Shillings” (Country X’s default currency) is not acceptable to the UK Government.

Why isn’t an escrow model like LocalBitcoins typically treated as a money transmitter/MSB in many US states?

Fri, 01 Mar 2019 18:22:31 +0000

Faisal KhanAnswered Mar 1, 2019

It is considered a money transmitter in most US states, and outside the US depends on which country you’re talking about.

In the US for example, if you exceed certain limits you would be classified as a money transmitter and if your role is that of an intermediary, even more so. You have to look at the BSA and state guidelines on this.

Are MoneyGram and Western Union owned by the same parent company?

Tue, 12 Feb 2019 18:27:16 +0000

Faisal KhanAnswered Feb 12, 2019

No. Both Western Union and MoneyGram are two independent companies. They do not have a single controlling company on top of them.

Will the Pakistani rupee strengthen against the USD under the government led by Imran Khan?

Fri, 08 Feb 2019 18:25:11 +0000

Faisal KhanAnswered Feb 8, 2019

Not immediately.

The fundamentals and country’s financial numbers are not too sound. Even with the new government, it will take a quarter or two just to set the policies and perhaps a year or two for the turnaround to begin.

Economist and other analysts will look at the underlying fundamentals. The numbers on the report card would be proof. Nothing else.

Can I be arrested in GCC countries or my home country if I have an unpaid UAE credit card debt of AED 5,000?

Fri, 08 Feb 2019 18:25:09 +0000

Faisal KhanAnswered Feb 8, 2019

In your home country (say outside the GCC), most likely not.

In GCC and UAE in particular, possibly yes, if the financial institution went so far as pursuing the case legally and filing an official police report. The chances of them doing so are thin, very thin. It is not worth their time nor attorney fees to pursue AED 5,000. It would eventually be written off as bad debt.

How much cash can I legally carry on an international flight (e.g., Karachi → Bangkok or Karachi → Dubai)?

Tue, 05 Feb 2019 18:23:52 +0000

Faisal KhanAnswered Feb 5, 2019

US $ 60,000 per annum. Currency over US $ 10,000 has to be declared.

Pakistan Rupee limit Rs. 10,000 (yes that is correct, that low: http://www.sbp.org.pk/press/2017...).

Is Ripple classified as a money transmitter under FinCEN regulations?

Sat, 02 Feb 2019 18:27:14 +0000

Faisal KhanAnswered Feb 2, 2019

In 2015, FinCEN fined Ripple for acting as a money transmitter and also violating various sections of the BSA (Bank Secrecy Act).

WASHINGTON, DC – The Financial Crimes Enforcement Network (FinCEN), working in coordination with the U.S. Attorney’s Office for the Northern District of California (USAO-NDCA), assessed a $700,000 civil money penalty today against Ripple Labs Inc. and its wholly-owned subsidiary, XRP II, LLC (formerly known as XRP Fund II, LLC). Ripple Labs willfully violated several requirements of the Bank Secrecy Act (BSA) by acting as a money services business (MSB) and selling its virtual currency, known as XRP, without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers. XRP II later assumed Ripple Labs’ functions of selling virtual currency and acting as an MSB; however, like its parent company, XRP II willfully violated the BSA by failing to implement an effective AML program, and by failing to report suspicious activity related to several financial transactions.
“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,”said FinCEN Director Jennifer Shasky Calvery. “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”
FinCEN’s assessment is concurrent with the USAO-NDCA’s announcement of a settlement agreement with Ripple Labs and XRP II. In that settlement, the companies resolved possible criminal charges and forfeited $450,000. The $450,000 forfeiture in that action will be credited to partially satisfy FinCEN’s $700,000 civil money penalty. A Statement of Facts and Violations, describing the underlying activity and details of the BSA violations, is incorporated into FinCEN’s assessment as well as the USAO-NDCA’s settlement.
Both actions were accompanied by an agreement by Ripple and XRP II to engage in remedial steps to ensure future compliance with AML/CFT obligations, as well as enhanced remedial measures. Among these steps are agreements to only transact XRP and “Ripple Trade” activity through a registered MSB: to implement and maintain an effective AML program: to comply with the Funds Transfer and Funds Travel Rules: to conduct a three-year “look-back” to require suspicious activity reporting for prior suspicious transactions and a requirement for the companies to retain external independent auditors to review their compliance with the BSA every two years up to and including 2020. Pursuant to the agreement, Ripple Labs will also undertake certain enhancements to the Ripple Protocol to appropriately monitor all future transactions.
“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of, and prevent the misuse of, the financial markets,” said U.S. Attorney Melinda Haag. “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would–be criminals to avoid detection. We hope that this sets an industry standard in the important new space of digital currency.”
“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Richard Weber, Chief, IRS Criminal Investigation. “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”
Ripple Labs Inc., headquartered in San Francisco, CA, facilitated transfers of virtual currency and provided virtual currency exchange transaction services. XRP II, LLC is a wholly-owned subsidiary of Ripple Labs that was incorporated as XRP Fund II, LLC in South Carolina on July 1, 2013; the company changed its name to XRP II in July 2014. As of 2015, Ripple is the second-largest cryptocurrency by market capitalization, after Bitcoin. On March 18, 2013, FinCEN released guidance clarifying the applicability of regulations implementing the BSA, and the requirement for certain participants in the virtual currency arena–namely, virtual currency exchangers and administrators–to register as MSBs with FinCEN pursuant to federal law.
Director Shasky Calvery expressed her appreciation to the U.S. Attorney’s Office for the Northern District of California and to the Internal Revenue Service-Criminal Investigation Division for their contributions to the investigation and strong partnership with FinCEN.
FinCEN seeks to protect the U.S. financial system from being exploited by illicit activity. Its efforts are focused on compromised financial institutions and their employees; significant fraud; third-party money launderers; transnational organized crime and security threats; and cyber threats. FinCEN has a broad array of enforcement authorities to target both domestic and foreign actions affecting the U.S. financial system.

Why do correspondent payout partners have to maintain reserves with the principal license holder—but not the other way around?

Fri, 01 Feb 2019 18:22:29 +0000

Faisal KhanAnswered Feb 1, 2019

Its the other way around. Usually, the license holder is required to pre-fund an account with the correspondent payout partner.

In the example you’ve cited above, chances are, the correspondent payout partner is wanting to join a network/alliance, and is hence required to put up money.

Where and how are exchange rates determined?

Fri, 01 Feb 2019 18:22:28 +0000

Faisal KhanAnswered Feb 1, 2019

Typically on what the last trade was.

It all depends what I am willing to pay out (or what I think the currency pair is worth) and vice versa, what you think the currency pair is worth.

In the genesis moment, we might disagree until such time we agree and a trade is made.

The rate at which the trade is made would be the exchange rate. Exchange rates are reflective of the traded rate. When more trades are made, it is then reflective of the rate and the size of the trade taken into account. If a VERY large quantity was traded, the rate can move quickly, if a light trade occurred and someone tried to manipulate the market the exchange rate would average that in and a very slight increase/decrease would show.

What’s the simplest way to convert cryptocurrencies (Bitcoin/altcoins) to fiat and withdraw to a bank account?

Fri, 01 Feb 2019 18:22:26 +0000

Faisal KhanAnswered Feb 1, 2019

This answer will needless to say vary in which country you reside and in which country you wish to cash out.

From a Exchange-to-Bank Account Conversion:

Easiest method is to convert everything to bitcoin and use the exchange you use to cash out (find out from them if they will ‘wire-transfer’ the amount to your bank account). The bank account has to be in your name. Most exchanges will not transfer money to a third party account.

How much money volume is transacted globally in a single day across all categories (consumer, business, forex, etc.)?

Fri, 01 Feb 2019 18:22:24 +0000

Faisal KhanAnswered Feb 1, 2019

Extremely difficult to gauge. Are we talking documented economy? undocumented? both?

If you look at the world GDP, that is US$ 75+ Trillion (2016).

Add to this the derivatives market size (annually) which is estimated to be over US$ 700 Trillion to US$ 1,200 Trillion.

The Forex market itself is US$ 5–7 Trillion a day!

The stock market trades that are not part of the derivatives or forex are not included in these numbers.

Why are US banks closed during hours when it’s most convenient for many customers (evenings/weekends), and how does that make business sense?

Fri, 01 Feb 2019 18:22:23 +0000

Faisal KhanAnswered Feb 1, 2019

Many banks have done studies on this, not just US Banks. Whilst there is certainly a demand in the evenings and weekends, considering all the other banking partners that banks have to work with (who are not open after hours and on weekends), banks lose out a very small market segments that sees an immediate need for banking after hours/weekend.

If banks were to open on weekend/off-hours, statistically (from a business point of view), they earn very little income. Traffic numbers are very low. So all-in-all, closing on weekends/after-hours is not bad for them.

Is it fair for TransferWise to take up to 90 business days to refund rejected transfers?

Sat, 12 Jan 2019 18:26:45 +0000

Faisal KhanAnswered Jan 12, 2019

Not fair, but perhaps a little bit of context will help. In typical cases, let’s say if you were originating this transaction via ACH, had it been a fraudulent one, after 90 days you would have no recourse.

In the event they suspect your transaction is flagged as fraudulent, they would not let it go through, but hold on to the money for 90 days and then reimburse it to you. The goal is if any claims or counterclaims on the account came within 90 days, TF would have the money to refund. After 90 days, the statute of limitations so to speak on challenging the transfer is eliminated.

Can individuals send money directly to my Payoneer account?

Sat, 12 Jan 2019 18:26:42 +0000

Faisal KhanAnswered Jan 12, 2019

You can receive money from another Payoneer account holder, that would be an individual. That is the only known way at present, to load a Payoneer account with money from an individual.

Otherwise, Payoneer does not allow external P2p loads.

Where does PayPal actually hold and deposit users’ funds?

Fri, 11 Jan 2019 18:26:59 +0000

Faisal KhanAnswered Jan 11, 2019

As Paypal itself is not a bank, it uses various commercial banks as the licensed custodians for holding its customers' money.

So when you receive a payment, it is actually under an FBO account that is pooled under PayPal’s name with one of the commercial banks they use.

Is gold necessary for a country to issue paper currency?

Fri, 11 Jan 2019 18:26:57 +0000

Faisal KhanAnswered Jan 11, 2019

No. Used to be, not so important anymore.

Today’s fiat currencies are not backed by gold reserves. In fact, the only thing they are backed up with is a promise. The full faith and credit of the government. Nothing more and nothing less.

Countries today invest in gold reserves because they fear at some point in time, a country’s wealth may again indeed be looked at by the amount of gold reserves they have, and thus they continue to invest in gold reserves, but such wealth is not linked to their ability to print more (or less) paper money.

What payment gateway options exist besides PayPal for receiving funds from the US into Pakistan?

Fri, 11 Jan 2019 18:26:55 +0000

Faisal KhanAnswered Jan 11, 2019

Xoom works in Pakistan, but the sender has to set up an account on Xoom and use it. If the payment is originating from a US Business account, then the best method is to ask them to do an ACH to your account, (if you subscribe to Payoneer (company)’s US Payment Service).

In this manner, you will be able to receive the money in your Payoneer account and you can choose to keep it on your card or withdraw to your bank account in Pakistan.

How is TransferWise able to process international transfers so quickly?

Wed, 09 Jan 2019 18:26:54 +0000

Faisal KhanAnswered Jan 9, 2019

This is usually achieved by something called Pre-funding. It is a concept by which the Sending company, pre-funds foreign currency with the beneficiary country's banks.

For example, if money has to move from the UK to the Philippines. Transferwise will maintain a pre-funded account with say Bank D'Oro (BDO) in the Philippines.

Once TW gets a confirmation of the payment in the UK, TW instructs BDO to release the equivalent amount in PHP (Philippines Pesos) into Beneficiary's account.

Why are cryptocurrencies still largely unregulated?

Wed, 09 Jan 2019 18:26:52 +0000

Faisal KhanAnswered Jan 9, 2019

It depends which geographic area you are talking about and which cryptocurrency in general. In some countries, they have outright banned cryptocurrencies (See: Legality of bitcoin by country or territory | Wikiwand)

In other countries, regulations are slowly coming out, to regulate the dealing of cryptocurrencies when it is a token or some form of an offering and even when it is a unit of transferable asset/value.

Besides cash and precious metals like gold, what other forms of payment would you personally accept?

Tue, 08 Jan 2019 18:25:06 +0000

Faisal KhanAnswered Jan 8, 2019

There are plenty of options:

Bearer Bonds
Metals (like Steel)
Stocks
Commodity Contracts
Crypto-Currency
Prepaid Debit Cards with the amount loaded
Travelers Cheques
Store Vouchers (Gift Cards)
Fuel Card Vouchers
Loyalty Points on Hotels and/or Frequent Flyer Miles

What do you think about an Uber-style remittance model where senders in opposite directions match and exchange locally, with default risk insured via blockchain-based collateral?

Tue, 08 Jan 2019 18:25:01 +0000

Faisal KhanAnswered Jan 8, 2019

What you are describing is some I wrote a paper on way back, called the Uberization of Money Transfer. (Read here: The Uberization of Money Transfer - Faisal Khan).

Let’s start with the basic notion. Yes, it seems logical that independent PLHs (Principal License Holders) would benefit from a grand alliance of sorts. Think about how Oyo Hotels, AirBnB, Uber itself have benefitted from a marketplace app.

What is the average monthly revenue a typical independent sales organization (ISO) is expected to generate for a small-to-mid principal license holder, and what commission structures are common?

Tue, 08 Jan 2019 18:25:00 +0000

Faisal KhanAnswered Jan 8, 2019

This depends on the corridor and the margins on the corridor.

Typically, a PLH (Principal License Holder) will be raking in about 20–25 basis points, and would a minimum. So for every $1 Million processed, the PLH takes about $ 2,000 in income.

Anything above and beyond is the pricing set by the ISO (typically between 40–100 basis points on average and for some corridors as high as 200–300 basis points).

Why do banks and money transfer businesses portray cash as “bad” or undesirable?

Sat, 05 Jan 2019 18:23:51 +0000

Faisal KhanAnswered Jan 5, 2019

A lot many of my colleagues are presenting the argument that Cash is Evil. Cash is Dead. Cash is a Menace to Society.

I beg to disagree. Whilst I do agree the obsolescence factor has come into play, one can hardly call it game over.

Cash is not evil.

It has been made evil, because of various governments and regulatory bodies who want more control. This is not a contrarian view, but for over 3,000 years, cash or its relative forms have been used. In fact if you read the World Bank reports circa 1995-1998, cash was presented as just another monetary instrument. Not evil. Today, we need an escape goat for most of the problems (distribution, de-tethered wealth, management, cost of printing and seigniorage incomes to name some).

What is the difference between a traditional wire transfer and an email-based e-transfer?

Wed, 02 Jan 2019 18:26:51 +0000

Faisal KhanAnswered Jan 2, 2019

In this day an age, pretty much the same thing. Just legacy nomenclature still being used.

Almost all forms of transfers today are digital in nature when it comes to wires. Nearly all of them are electronic and based on some proprietary messaging network and protocol.

How can I buy cryptocurrency in Pakistan?

Tue, 01 Jan 2019 18:22:21 +0000

Faisal KhanAnswered Jan 1, 2019

There are many ways to invest, most of them require patience in getting approved.

The first and foremost is that the three dominant currencies (if you will) are USDT (Tethered), BTC (Bitcoin) and ETH (Ethereum).

BTC & ETH are what I call the gateway currencies, once you buy them, you can exchange them for tall the other currencies you have mentioned.

Can a PayPal account be linked to a Pakistani national bank account?

Wed, 12 Dec 2018 18:26:41 +0000

Faisal KhanAnswered Dec 12, 2018

Nope. As of today, PayPal is not supported in Pakistan (traditional PayPal that is) and none of Pakistan banks are connected for PayPal payments.

Does a wire transfer recipient see the sender’s bank account details?

Wed, 12 Dec 2018 18:26:39 +0000

Faisal KhanAnswered Dec 12, 2018

Depends on the wire transfer (payment) system in question. However, in most cases, the answer is not necessarily. A recipient usually does not care from which account the Sender sent the money. All they care about is that the money was received.

Secondly, you have to ask, what purpose would it serve in providing the recipient with the account information of the sender.

Why hasn’t PayPal launched another major breakthrough product in recent years?

Wed, 12 Dec 2018 18:26:38 +0000

Faisal KhanAnswered Dec 12, 2018

PayPal started as a payment concept and has now evolved to a payments ecosystem. It has created virtually one of the most recognized brands for payments across the world.

Within PayPal there are many products. And they continually keep adding to it, by buying/acquiring more companies. Think Braintree, Venmo, Xoom, TIO Network, etc.

The breakthrough products are within their ecosystem.

Is Bitcoin protected by FDIC insurance?

Tue, 11 Dec 2018 18:26:36 +0000

Faisal KhanAnswered Dec 11, 2018

No. It is not. The Federal Deposit Insurance Corporation (FDIC) covers deposit insurance as held in the bank up to US$ 250,000 per account.

Here is what is covered:

FDIC insurance covers all types of deposits received at an insured bank, including deposits in a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA), time deposit such as a certificate of deposit (CD), or an official item issued by a bank, such as a cashier's check or money order.

Why is building a Plaid-like startup harder in the UK or Europe despite open banking APIs?

Tue, 11 Dec 2018 18:26:34 +0000

Faisal KhanAnswered Dec 11, 2018

Not tricky at all. The thing that worked out very well for Plaid in US was that the top say 25 Banks controlled more than 90% of the accounts held in American Bank (I’m guessing here). In Europe, that number is evenly spread out between the 3,000+ banks that they have. There never was a need to validate someone from across the border, but within the Eurozone as far as apps are concerned. Not to mention the language barrier for each country. No to mention the commercial demand has to be present.

How do startup founders handle compliance risks when they are not compliance experts?

Tue, 11 Dec 2018 18:26:32 +0000

Faisal KhanAnswered Dec 11, 2018

Let us assume you are asking this question in regards to compliance in the financial services industry. The answer is simple, you get external help. You can either go to an external company that specializes in establishing/developing compliance programs for startups, or you hire people with proven experience in the field.

Some would even work out a part-time arrangement with an external consultant to act (in a part-time capacity), as a Compliance Manager, and develop the processes, systems, manuals, etc.

Can I verify a second PayPal account using the same Payoneer US bank details as my first account?

Sun, 09 Dec 2018 18:26:31 +0000

Faisal KhanAnswered Dec 9, 2018

At present, PayPal is not recognizing virtual accounts that Payoneer offers. As they are more or less pseudo bank accounts (virtual bank accounts) than real bank accounts.

You might have gotten lucky the first time around.

What would be the process for imposing a tax on remittances sent from the United States?

Sat, 08 Dec 2018 18:26:29 +0000

Faisal KhanAnswered Dec 8, 2018

You would have to tax it on a state-wide level. It is already in effect in one state: Oklahoma. The remittance tax in OK is $5 for remittances up to $500 and 1% of the total amount being remitted over $500.

The financial regulator of the state can make this tax deduction mandatory on a state level, so that all banking and non-banking financial institutions that are licensed and/or operating in the state, would have to adhere to it.

If an app only connects people to hawaladars but never touches funds, does it need FCA or HMRC registration in the UK?

Sat, 08 Dec 2018 18:26:28 +0000

Faisal KhanAnswered Dec 8, 2018

Frank answers the question dead-on! I would only add the following:

If you include a fee for registration and/or take a fee for enabling this transaction, then you would be required to register with the FCA / HMRC (IMHO) as you’ve just executed a function of an intermediary. There is a false sense that an intermediary has to have/channel the funds (i.e. touch the money) in order to be a money transmitter. Not necessarily always. As you are aiding the transaction, the regulator can come to you after intent, id est you are mimicking to being a money transfer agency without licensing.

Can someone identify my bank account details using only my SWIFT code?

Sat, 08 Dec 2018 18:26:26 +0000

Faisal KhanAnswered Dec 8, 2018

Just by the SWIFT Code itself, no. Think of the SWIFT code as the ZIP Code or Postal Code. It will indicate generally where you are, but NOT the exact address.

A SWIFT Code will tell me, that you bank at a such-and-such institution, but that is about it. It cannot provide me with your withdrawal/deposit account details.

The only way those details are made available if the wiring instructions carry the details (including the SWIFT Code).

Is there a global authority that oversees and regulates international wire transfers?

Thu, 06 Dec 2018 18:26:25 +0000

Faisal KhanAnswered Dec 6, 2018

Not in the authoritative sense, no.

There is Bank for International Settlements, in Basel, Switzerland, that is termed the central bank of all central banks. So they do a lot of settlements amongst member banks.

Then there is a company very few people know of. The Luxottica of Money as I call them. CLS-Group. This company clears roughly 70% of the daily $6–7 Trillion FX Market. Yes, that is Trillion and Daily!

How long does a domestic wire from Union Bank (a US community bank) typically take to show up in a Chase account?

Wed, 05 Dec 2018 18:26:23 +0000

Faisal KhanAnswered Dec 5, 2018

If it is a FedWire, same day or the next business at the very latest. This is assuming all instructions are correct, that there are no flags in the transfer itself.

Why do we still use expensive payment processors like PayPal and Western Union when cheaper alternatives exist?

Wed, 05 Dec 2018 18:26:22 +0000

Faisal KhanAnswered Dec 5, 2018

Brand Recognition: Which implies Trust and Network Outreach.

Both Western Union and PayPal are large brands. Their brand signifies that a lot of people are well-versed with the name and procedures associated in sending/receiving money with these brands.

There may be inexpensive alternatives, but that doesn’t mean, they are excellent as far as network outreach is concerned, providing better customer service, having a larger number of point of presence from where money is exchanged.

Is there any equivalent of a Social Security Number for people in Pakistan?

Wed, 05 Dec 2018 18:26:20 +0000

Faisal KhanAnswered Dec 5, 2018

The Computerized National Identity Card or CNIC as issued by NADRA (National Database Registration Authority) is the equivalent of the social security number in Pakistan.

References:

NADRA: National Database & Registration Authority Official Website
CNIC: National Identity Card (NIC)

Can I pick up a MoneyGram transfer that was sent to me via Western Union?

Mon, 03 Dec 2018 18:26:18 +0000

Faisal KhanAnswered Dec 3, 2018

No, you cannot. Western Union and MoneyGram are two separate payment systems. They are not interoperable in the sense that you can send a payment from one system and pick it up on the other end.

Previously, in the world of exclusive arrangements, an establishment could only choose one, MoneyGram or Western Union. In many countries, this exclusivity has now been abolished (Spain comes to mind). So now, you can go to an Agent, that might be an agent of both Western Union and MoneyGram, in which case it just makes it convenient to pick up the transaction. But true interoperability doesn’t exist.

Is it standard practice to pay remittance charges upfront?

Mon, 03 Dec 2018 18:26:17 +0000

Faisal KhanAnswered Dec 3, 2018

It depends on what the model is being followed by the remittance transfer company. In some cases, you might pay up-front, but they will still charge the recipient, in most case they don’t however.

Most of the time, you will be paying remittances charges up-front. In the event there are no remittance charges, ask if they are to be paid later on or not. When in doubt. Don’t! Ask around and check around.

If Ripple is a first mover in bank-based international transfers, how can competitors survive?

Wed, 07 Nov 2018 18:26:12 +0000

Faisal KhanAnswered Nov 7, 2018

My personal opinion is that, despite having a first mover advantage, no one company will dominate real-time worldwide transfers. There will be geographical pocket specialists and industry vertical specialists, but no one company will be ruling cross-border transfers.

It is no secret that cross-border payments are essential to any given economy. Politicizing them (as was the case with SWIFT and Correspondent Banking Relationship) as exercised by the United States has made others re-think about alternatives.

How do traditional banks respond to the rise of challenger banks?

Tue, 06 Nov 2018 18:26:11 +0000

Faisal KhanAnswered Nov 6, 2018

They basically have four avenues of approach with respect to the rise of challenger banks.

Buy them out. Most challenger banks will merge or become part of a larger group and may operate independently, etc. Incumbent banks have a lot of money, power, pull, institutional memory, etc. that can be a huge asset to these challenger banks.
Work with them: Provide high-street banking services to these challenger banks. A common misunderstanding is that challenger banks are able to do everything themselves, because of their technology stack. This is not true. A challenger bank in many cases has to rely (heavily?) on incumbent banks for many of the services they might need. Foreign exchange, cross-border payments, lending, treasury services, Vostro/Nostro accounts, etc.
Imitate Them: Pressure tactics may for the bank to put s stop-gap measure and try to imitate the same that the challenger bank is offering. Try to outmaneuver them and drive them out of business. This is usually a sign of desperation and does not bode well in the end. The incumbent-bank-mimicking-challenger-bank would continue to use the same rails, thinking, mindset and technology stack as the incumbent, so nothing challenging about it.
Succumb to them: It will invariably happen, some of the smaller (and even mid-sized) banks will slowly start to see an erosion of customers. They will simply not be able to keep up the pace or retain customers in comparison to the larger incumbent banks and challenger banks. These challenger banks would be offering a whole suite of services, usually for a whole lot less and much more intuitive UI/UX. Many incumbents will buckle under the pressure. The ones who are astute will merge with other incumbent banks to ensure survival.

If TransferWise/Wise can send money to Indonesia but can’t send money from Indonesia, why is that—doesn’t sending money there imply they already have local banking rails?

Mon, 05 Nov 2018 18:26:09 +0000

Faisal KhanAnswered Nov 5, 2018

I can think of three possible situations:

Many countries have regulations on inbound and outbound transfers. In certain countries, one can send money to that country, but sending money from that country may not be allowed by law.
Secondly, even if it is allowed by law, there might be a different or a restricted money transfer license that would allow outbound payments.
Commercial viability: It may not be commercially viable for them to work on the outbound market. Indonesia is predominantly an inbound market.

What factors make remittance systems complicated?

Sun, 04 Nov 2018 18:26:08 +0000

Faisal KhanAnswered Nov 4, 2018

Many things complicate the system of remittances. Here is my brief overview of it the major issues:

COMPLIANCE

One person’s regulations is another person’s nightmare. Compliance is the biggest hindrance in remittances. Because of the multi-corridor nature of the business, one has to deal with various local, state, federal and international laws &/or best-practices.

All these laws & best practices have to be part of the Compliance Manual/Program. That by itself is a continual challenge. You can’t just update a manual with a new rule. You have to look at the border scope of the manual, implementation, hurdles, etc. from IT. Compliance training, updating SOP (Standard Operating Procedure) manuals, etc.

Can you receive a Western Union transfer without the tracking number?

Sun, 04 Nov 2018 18:26:06 +0000

Faisal KhanAnswered Nov 4, 2018

Two scenarios:

You’ve misplaced or forgotten the tracking number, in which case, the tracking number can be provided to you by the person sending it.

In certain countries, you might be able to pick up the money without the MTCN, but you would have to call WesternUnion.

Source: Pick Up Money - Receive a money transfer at Money Services

What are the best blockchain guides or books for product managers, and which blogs/articles do you recommend?

Sun, 07 Oct 2018 18:26:00 +0000

Faisal KhanAnswered Oct 7, 2018

To be honest, whatever comes out, gets outdated quite quickly, due to the rapidly changing nature of this new technology.

Think of blockchain like the inflationary period in the big bang. The stars, planets, moons, black holes, galaxies, etc. have yet to form.

All the books today, are purely theoretical, and whilst many of them will enlist a lot of examples, they are mostly in the distant future and have very little to do with the practical side of things.

Which cryptocurrency is the best alternative to Bitcoin?

Mon, 01 Oct 2018 18:25:58 +0000

Faisal KhanAnswered Oct 1, 2018

Probably Ethereum.

It is the one that is perhaps most used. Plenty of smart contracts on it. Almost every ICO conducted has raised funds via Ethereum (or Bitcoin). Most of the transactions for ICO related token sales are on the Ethereum platform. Very economical to move value via Ethererum.

Again, perhaps the only cryptocurrency token/platform that has been tested with real-world examples. Whilst a lot of competing networks are coming out, Ethereum (in my opinion) is still the most used/widely-acceptable crypto currency outside Bitcoin.

Are international banks as strict as US banks when it comes to compliance and onboarding?

Sat, 08 Sep 2018 18:25:49 +0000

Faisal KhanAnswered Sep 8, 2018

If it involves US Dollar clearing, then the answer is yes. They are quite strict and if your bank that does US Dollar clearing is not strict, consider it a blessing.

Most international banks are not as uptight and strict as the US Banks. However, when it comes to competing landscapes, then banking is quite strict.

Allow me to explain.

How do I start a money remittance agency in the UK?

Wed, 05 Sep 2018 18:25:48 +0000

Faisal KhanAnswered Sep 5, 2018

You can do that by going to FCA’s website and then applying for a Small Payment Institution (SPI) License.

The SPI license is the entry point towards starting a money transfer business. Here is a small 2-minute video I made for those interested in knowing the difference between an SPI vs an API (API being an Authorized Payment Institution).

SPI vs API License (UK) - Faisal Khan

Is Apple Pay considered a successful mobile payments app?

Wed, 05 Sep 2018 18:25:46 +0000

Faisal KhanAnswered Sep 5, 2018

Successful how? If you look at the worldwide scale, not by far. If you look at the US, again, the same answer.

Apple does not even make a significant blip on the world radar for a successful mobile payment app.

Sure, it is operating in quite a few markets, but there are other mobile payment apps that are much more successful if you look at the percentage of users using it (bKash, mPesa, Tigo, Paytm, EasyPaisa, etc.) than Apple itself.

Why do people collectively have such strong faith in fiat currency?

Wed, 05 Sep 2018 18:25:45 +0000

Faisal KhanAnswered Sep 5, 2018

We’ve been taught this way. The majority of the world that is. If I had to fathom a guess, I would say 99.9% of the world population doesn’t know what fiat it, or how it is created, etc.

All they know, that all their adult lives, they will live and work for something called money.

It started when you were a child. You’d get 1 Rupee or 1 Dollar or 1 Peso from your parents, uncle, aunt, etc. and you knew with this piece of paper, wherever you present it - it would be accepted and in return, you could get whatever it was you were trying to buy (assuming you had enough money to buy with).

If the petrodollar loses reserve currency status, what’s most likely to replace it (other than cryptocurrency)?

Wed, 05 Sep 2018 18:25:43 +0000

Faisal KhanAnswered Sep 5, 2018

There are many ways it could go. Whilst, conventional wisdom would say, the runner-up might take the crown, that might not happen.

I very much agree with Ron Paul when he says, that SDR (Special Drawing Right) could become the currency of choice. The problem is the dominance of the US Dollar is high. In plain English, it has the largest share of the pie.

What is “float” in a banking system?

Sun, 12 Aug 2018 18:24:57 +0000

Faisal KhanAnswered Aug 12, 2018

Float is the money in a bank that has usually been credited to the bank, but not the customer.

Let’s assume a bank as an incoming payment of $100,000. Instead of crediting it out to the customer, the bank can keep it for one extra day and earn interest on it.

Almost every country has a system of overnight lending. Depending on how long this money the bank can keep, the money is lent out to other entities and the interest earned on the money. This money is called float.

When a new currency is created, how does it move from the central bank into circulation among people?

Sun, 12 Aug 2018 18:24:55 +0000

Faisal KhanAnswered Aug 12, 2018

When a central bank creates new currency, it is sold off to the commercial (high-street) banks, a process known as seigniorage.

The commercial banks then distribute this money via their cash management division through all the channels they have, predominantly, ATMs and Over-the-Counter.

If the new currency in replacing old currency, then customers usually queue up at banks and exchange their old currency for the new one (happened in India very recently).

Why do many places in Portugal reject “international credit cards”?

Sun, 12 Aug 2018 18:24:53 +0000

Faisal KhanAnswered Aug 12, 2018

I’ve experienced this in many countries, including Portugal, it seems the universal answers are:

Taxes: Just by saying they don’t take international credit cards, they are betting on the odds that you will somehow pay in cash, and a cash based transaction is not always reported (for purposes of taxation).
Settlement times: The settlement time for a payment for an international card is much higher than a domestic card. Thus many of them will avoid getting the settlement a week or 10 days later.

More often than not, it is the Taxes rule. They want to save on every penny they can, and when you opt to pay with cash, they get the best deal.

Could an app that enables users to exchange currencies with each other (so they become their own “money transmitters”) be disruptive for international remittances?

Fri, 10 Aug 2018 18:24:52 +0000

Faisal KhanAnswered Aug 10, 2018

There are various ways of looking at it, rather than just the money transmission angle.

State regulators or federal regulators will look at the intent of your app. Some pertinent questions are:

Does your app facilitate the transactions? Yes!
Can the marketplace charge a fees for such a facilitation? Yes!
Does the app aid in the transfer of money between two parties that may be dealing in illicit funds? Yes!
Does the app aid in the transfer of money between two parties that may be used for purposes of money laundering? Yes!
Can a transactions happen on this app, that would allow funding to terrorists groups/person take place? Yes!
Does the app screen in real-time PEPs? No!
Does the app have the ability to stop a marketplace transaction that has been flagged? Yes or No!
Can the app verify the identity of the person in compliance to the banking standards where it is being used? No.

Given the above answers, your app would clearly be violating a lot of state and federal regulation related to identity, compliance, foreign exchange, money transmission, banking secrecy act, data privacy acts, consumer protection, etc.

What do you think of a peer-to-peer FX platform where users directly exchange currencies without a middleman—can it reach enough liquidity to work?

Fri, 10 Aug 2018 18:24:50 +0000

Faisal KhanAnswered Aug 10, 2018

While I believe this model will ultimately be beneficial, the truth is, there are too many bad actors to make this be reviewed and come under the umbrella of a regulatory authority.

The crypto exchanges in many ways are doing this, but they are still centralized in many ways. DEX (Decentralized Exchanges) are coming up - but so far, nothing major.

What’s the safest way to transfer money from the Philippines to the US (wire, online services, or banks)?

Fri, 10 Aug 2018 18:24:47 +0000

Faisal KhanAnswered Aug 10, 2018

Bank transfers are usually the safest. In your reference you cited, wire-transfer, online or through bank.

All these are essentially the same. The only difference is, if the service is being provided by the bank itself (like BDO, etc.) or by an non-banking financial institution (like Xoom or TransferMate, etc.).

Will mobile payments ever replace credit cards in the US, and what are the main obstacles?

Tue, 07 Aug 2018 18:24:46 +0000

Faisal KhanAnswered Aug 7, 2018

For sure (in a way).

Nothing lasts for ever. Even the physical card you carry has an expiry date on it (read: obsolescence).

Unlike The VHS tape or the CD player or Blockbuster, there is a very powerful and controlling lobby and industry behind money.

Everyone in the credit card industry are aware that the card has got to go eventually, but they will phase it out. Millions of POS terminals will be gone. Tens of thousands of people employed in this card printing, distributions, POS servicing, customer service, etc. will be made redundant.

As a traveler in Denmark, where should I exchange money to get a relatively good exchange rate?

Tue, 07 Aug 2018 18:24:44 +0000

Faisal KhanAnswered Aug 7, 2018

I’ve had a difficult time in banks to change money. Plenty of bureau de change around, however, be advised, changing something small like $/Euros/GBP 50, or 100, or even 200 might have a high fees. Preferred amount is usually $300 (or equivalent) and higher. In such a case, you will not be paying the 6% or 8% and sometimes even 12% fees.

If a money services business is exempt from state money transmitter licensing, is FinCEN registration alone sufficient, or do they still need state licenses?

Mon, 06 Aug 2018 18:24:43 +0000

Faisal KhanAnswered Aug 6, 2018

If you are an MSB that is exempt from MTLs - that exemption would apply on a state by state basis. So for the states you are exempt, you are exempt, but others may require you to obtain a license.

As far as FinCEN registration is concerned, if you are deemed to be an MSB, you are required to be registered with FinCEN.

Are payroll service providers considered money transmitters/MSBs—and if not, why not?

Mon, 06 Aug 2018 18:24:41 +0000

Faisal KhanAnswered Aug 6, 2018

Originally, payroll companies did not need to be licensed. That is how the bulk of them operated. 100s of companies processed funds on behalf of their customers and no money transmitter licenses were required of them.

However, if we look at the flow of funds, if funds are processed through them, then yes, they are deemed to be money transmitters. As cited, In most cases, payroll companies worked with a licensed partner (like a bank) or a payment processor, but themselves did not have a money transmitter license. The payroll company handles all the information processing, whilst the licensed partner handles all the monetary processing. However, the money does touch their account which is where the problem lies.

What conditions does a society need before it can successfully implement fiat currency?

Mon, 06 Aug 2018 18:24:39 +0000

Faisal KhanAnswered Aug 6, 2018

Law.

A decree that cites that the fiat money being issued is legal tender for exchange and settlement of debt between two parties.

When the first fiat was issued, it was asset backed, which at the time was gold, silver, etc. (precious metals), but because it was the first time money was being issued, it was hacked (taken advantage of), a lot. Gold and Silver was stripped from the coins. Coins were remelted and the melted ore was sold, etc. The basic law to settle was first introduced and then defacing or melting of coins law was introduced.

What could replace paper currency in the future?

Sun, 05 Aug 2018 18:24:38 +0000

Faisal KhanAnswered Aug 5, 2018

Digital Currency.

Paper currency that you see, actually is a very small percentage of the overall money supply in any given economy. Typically less than 3% of the money is actually in paper form, whilst the rest of it, exists in digital form.

We are already gravitating towards digital money because that is what the pundits wants us to do (paper is now somehow bad) and the government cannot be more happier (reasons are obvious - digital money can be tracked).

Can RTGS be used to transfer funds from overseas into a US bank?

Sun, 05 Aug 2018 18:24:36 +0000

Faisal KhanAnswered Aug 5, 2018

Typically no. RTGS is usually used by banks in a country to go large settlements amongst themselves. It is pretty much a localized system. In many countries the RTGS is run by the central bank or by a semi-autonomous body. The clearing of funds with the RTGS are all based on local currency.

Which banks are willing to provide accounts and payments services to crypto exchanges (for deposits and transfers)?

Sun, 05 Aug 2018 18:24:35 +0000

Faisal KhanAnswered Aug 5, 2018

Many banks are willing to work in this arena, except they will not just do business with any exchange that comes along. You have to bring a strong compliance program, once that is pragmatic and not theoretical, a great introducer and a solid business plan for the money the bank will make on the risk they take on you.

Today, introduction to crypto-friendly banks is a huge business. Starting price for crypto-exchanges &/or platform to/from fiat, goes from anywhere as low as US$ 50,000 to median US$ 150,000 to as high as US$ 200,000 as introducers fees.

How can I replenish a forex account when my central bank heavily restricts foreign currency transfers?

Sun, 05 Aug 2018 18:24:33 +0000

Faisal KhanAnswered Aug 5, 2018

When a country places outgoing or foreign exchange limits, a new market mushrooms literally overnight, one that expects you to pay a premium and can do exactly what the government does not want you to do.

There are plenty of people in every economy who would be willing to provide such a netting off service for a fee. Meaning they might require you to pay off someone locally in your local currency, whilst for a bad exchange rate, they would top off your foreign account, outside the country.

If someone hides money offshore, how do they actually spend it back home without getting caught?

Sun, 05 Aug 2018 18:24:32 +0000

Faisal KhanAnswered Aug 5, 2018

There are two variants here.

People who have money in overseas accounts and their home government cannot do anything about it - because it is structured in such a way, that the local government’s taxation arm has no way of imposing collection on it.
People who simply have money overseas and hide it, i.e. don’t declare it and don’t want anyone to know about it.

I presume you are talking about the latter.

Is it smart for a fintech startup to build a blockchain product if its main customers are banks—would requiring banks to run nodes create security concerns?

Wed, 01 Aug 2018 18:24:30 +0000

Faisal KhanAnswered Aug 1, 2018

There isn’t a lot to go on from the question you have posed, but consider this.

If the fintech startup plans to do anything with fiat money, chances are it would need to be licensed and under this licensing umbrella, there will be a complete framework of how to handle risk, security, compliance, etc.

Whether the nodes are being installed at banks or not, remains to be seen as to what the solution may be, but banks don’t unilaterally allow others to establish nodes on-premise.

How do remittances physically move money (as opposed to just account balances)?

Wed, 01 Aug 2018 18:24:29 +0000

Faisal KhanAnswered Aug 1, 2018

It doesn’t! (unless of-course you are operating a 100% cash only money transfer network - an example of which I do not know of).

To understand how cash is transferred between countries, read this answer: Faisal Khan's answer to Where do currency exchanges get their currency?

To understand how money transfer works between countries, including remittances, you might want to read these answers that explain the process of inter-country money settlement:

Before credit cards and global banks, how did travelers (like aristocrats on continental tours) access funds safely without ATMs?

Fri, 06 Jul 2018 18:24:24 +0000

Faisal KhanAnswered Jul 6, 2018

Credit Lines.

In the olden days, if you were traveling outside your banking circle so to speak, you took with you credit notes that were honored in various other cities.

Sometimes these notes were coded, sometimes they were carried by external couriers in advance and sometimes you carried it yourself.

That is the whole premise of how correspondent banking established itself, which takes its roots in merchant banking.

How can I set up multiple payment gateways on my e-commerce site so payments route based on the customer’s location to the nearest branch?

Fri, 01 Jun 2018 18:23:55 +0000

Faisal KhanAnswered Jun 1, 2018

Look at super-aggregators like Adyen, Wirecard and I would highly recommend BlueSnap (payment processor) (no affiliation to anyone of them).

Companies like the above have payment processing facilities (integration) with like all the payment systems worldwide that matter, so if your customer is from Singapore and wants to use a payment system native to Singapore, these companies can provide it - for all the countries in the world, in a single API/Plug-in.

Why do ultra-wealthy people invest in second passports?

Fri, 11 May 2018 18:23:49 +0000

Faisal KhanAnswered May 11, 2018

Most of the UHNI that I know, come from either Pakistan, Bangladesh, Nepal, Nigeria, Ghana, Kenya, etc.

They obtain the second passport for two reasons:

First and foremost is travel. If you have passports from 3rd world countries (or developing countries) most of the time visas are your nemesis. You have to fill out visa applications and apply for visa to visit another country. It can be something as simple as 1 days affair or as long as 3–4 weeks. What most of the Western world takes for granted, is a major pain in the ass assignment for us lesser privileged passport holders. (You can use this tool to calculate how many countries you can go to visa free: https://www.henleypassportindex....)
As Thomas Miller said, Insurance Policy. Should shit hit the fan, you know you have the ability to simply hop on a plane and leave your country to go to the country from where the other passport was issued from.

How can I transfer money from Pakistan to the US if my funds are in a USD foreign currency account in Pakistan?

Thu, 10 May 2018 18:23:48 +0000

Faisal KhanAnswered May 10, 2018

UPDATED (2023):

It used to be that you could go to your bank and do what was mentioned below. Not anymore. The Government of Pakistan has placed limits as to how much money you are allowed to legally take outside the country. Currently, at the time of writing this answer, the limit is US$ 30,000 per person per year.

—

Is there a currency called “Dahra”?

Thu, 10 May 2018 18:23:46 +0000

Faisal KhanAnswered May 10, 2018

Not to the best of my knowledge. Perhaps you might be thinking of Dirham. Or it could be one of those new ICO/Token/Alt-Coins from the cryptoworld.

Will Ripple face serious regulatory risks (as of 2018)?

Sun, 06 May 2018 18:23:44 +0000

Faisal KhanAnswered May 6, 2018

There is one regulatory aspect, which can land Ripple in trouble: Issuance.

Ripple itself is not licensed as a money transmitter, and it would be classified as such if they sold XRPs directly. This is why the Coinbase deal is essential for Ripple, as Coinbase is licensed in every State in the US for money transmission, and hence can sell XRPs (on behalf of Ripple), without Ripple getting into trouble from the State regulators.

Which companies provide global payment services besides Payoneer?

Sun, 06 May 2018 18:23:42 +0000

Faisal KhanAnswered May 6, 2018

There are literally, 100s of companies that do global payouts. It all depends which corridor(s) you are talking about and which industry you are referring to.

Payoneer is a known name, so is Earthport, Tipalti, TransPay, Western Union Business Solution, Cambridge Payment, TerraPay, Contact, etc. (such some random few names).

The worldwide B2B, B2C payments market is in the 10s of Trillions of US Dollars. You can bet your money that there are providers out there in this field.

International wires are supposed to take a few days—if a wire is delayed for weeks or a month, where is the money during that time?

Sun, 06 May 2018 18:23:41 +0000

Faisal KhanAnswered May 6, 2018

The money is most-likely temporarily parked with some institution where the problem or issue may be.

See the diagram below:

If the payment origination starts at Bank A and terminates at Bank C (in this simplistic example), then the payment is like a flow, (from A to C). When you pause the flow (which is what you are defining), then depending where in the payment cycle we were, the money will be sitting in one of the three banks, awaiting further action.

Is it illegal in the US to offer remittances using cryptocurrency, and can crypto remittance services avoid the fees that regulated remittance providers pay?

Sun, 06 May 2018 18:23:39 +0000

Faisal KhanAnswered May 6, 2018

There is nothing illegal about remittances being performed, using crypto-currency as the value of choice. If both parties are willing to accept crypto as form of remittance, that is perfectly okay.

What is however required is that you have a money transmitter license in all the US States in which you will be signing up a customer from and that you conform to the federal BSA laws, CFPB laws and others mandated laws like the Patriot Act, etc.

Why did my USD transfer to a USD-denominated foreign account get converted? I sent $1,000 USD to Europe; the recipient got €820, which was then converted back to $970—why did this happen if their account is in USD?

Fri, 04 May 2018 18:23:38 +0000

Faisal KhanAnswered May 4, 2018

Shouldn’t have happened. If the account is in US Dollar, the process is straight-through and no conversion is necessary (barring any governmental rule of which I am unaware of).

The most plausible scenario could be - internal mistake - happens all the time.

Where do currency exchange businesses get the currency they sell?

Fri, 04 May 2018 18:23:36 +0000

Faisal KhanAnswered May 4, 2018

The answer is the designated bank or the central bank.

Lets take the US Dollar for example. In particular country, a US Dollar clearing is done by some commercially designated bank. Let’s say in Philippines, this would be Bank D’Oro (BDO). So BDO would be designated as the US Dollar correspondent bank in Philippines. A commercial bank in the US (say Citi) would arrange for cash US Dollars to be flown into Philippines and handed over to BDO. Yes, currency is actually hauled in specialized flights and handed over. BDO now has US Dollars.

How do cryptocurrencies help people who are unbanked or underbanked?

Thu, 03 May 2018 18:23:35 +0000

Faisal KhanAnswered May 3, 2018

tl;dr: They don’t! (at present!). Period.

Take a long hard look at that photograph above. This is how majority of the world’s unbanked population looks like. Most people who keep advocating for the unbanked have never wandered 100 miles outside their general circle of comfort, let alone 10,000 miles out of it to live and interact with the truly unbanked.

Do you really think the unbanked are looking at systems that frees them from the clutches of the banking system.

Why do banks engage in offshore banking?

Fri, 06 Apr 2018 18:23:15 +0000

Faisal KhanAnswered Apr 6, 2018

Mostly to create a product offering that is not hinged on the laws of a specific country or a certain geographic region.

Many island nations had no mechanism of generating income other than tourism, farming (pineapple, sugarcane, etc.) or fishing. Other than these three verticals, there wasn’t an industry per se.

However, what they did have was sovereignty as a country and they were pretty much free to make their rules & laws. Neighboring countries first established Merchant Banks along these island nations. Mostly in line with the ports of call for merchant shipping.

Is Circle Pay a licensed money remittance company?

Sun, 01 Apr 2018 18:23:13 +0000

Faisal KhanAnswered Apr 1, 2018

Yes, Circle Internet Financial, or Circle for short is a licensed Money Services Business (MSB) in the United States and has the necessary licensed. In the UK, Circle UK Trading Limited is licensed by Financial Conduct Authority, Reference No. 900480.

They do a pretty bad job of not showing up the license information on their website, as required by law.

Here is a list of their US licenses.

How do you pay taxes on cryptocurrency assets in Pakistan?

Sun, 01 Apr 2018 18:23:12 +0000

Faisal KhanAnswered Apr 1, 2018

You can declare them as a precious metal (like Gold or Silver) in your tax form (if you are holding them) and if you’ve cashed out and made a profit, you can treat the capital gains as you would from holding on to precious metal and making capital gains and how it is taxed.

This is the preferred method of doing it at present.

What’s Western Union’s value proposition versus competitors or alternative transfer methods?

Fri, 09 Mar 2018 18:23:06 +0000

Faisal KhanAnswered Mar 9, 2018

Based on personal market research that I have been doing for over 5 years, this is what I have found Western Union has as an advantage over the others:

In order of priority…

Brand recognition: No more second guessing. You see the brand, you trust it. It is like going to a different country and seeing Coca-Cola on the shelve along with other generic coke variants, which one would you pick?
Network Outreach: Chances are, there is a WU store near you and one near where you momma lives in the home country.
Consistency in Service / Familiarity: Like walking in a McDonalds anywhere in the world. The service is uniform, consistent and works every time.
Foot Traffic still wins: Over 84% of the transfers being done in the United States (based on my 2016/2017 study) is still via physical stores. The NKOBs are not targeting existing conversions.

Which banks offer the best travel-friendly banking (no FX fees, no international fees, no ATM fees)?

Thu, 01 Mar 2018 18:23:04 +0000

Faisal KhanAnswered Mar 1, 2018

I’ve been following banks for a long long time to see if there is indeed a bank that has no international fees and no ATM fees.

Barring same bank (like say using a Citibank network, which might have lower fees but not zero fees), I have yet to come across a bank like that.

When a Bank in US (for example) has an account holder uses a card in some foreign country at an ATM, the fees is levied by the bank that owns that ATM in the foreign country and not the US bank. Essentially, the Bank in the US is helpless when it comes to the fees that their customers will pay when using their ATM card on an ATM outside the US.

Which industries are most likely to be transformed by blockchain?

Sun, 11 Feb 2018 18:22:48 +0000

Faisal KhanAnswered Feb 11, 2018

My vote goes for Identity.

Identity is not a singular fucntion, but more or less a function of collective inputs that have a consensus around it. Sound familiar? Well that is exactly what the blockchain does.

The current identity that we have today, is nearly 100 years old. The template was derived from 1918. What have we added to it? some form of a national number that is you? (SSN, or Identity Number), a photograph and a copy of a utility bill.

Why should local banks expand internationally?

Sun, 11 Feb 2018 18:22:46 +0000

Faisal KhanAnswered Feb 11, 2018

The simplest answer would be, because it can.

However, the right answer would be, we are now embedded truly in a global economy and it would enable every local bank to do international business (to start with) and then go international.

Why would they want to do that? You might ask. The answer is the community it serves. The local community has a lot to gain, if the financial institution that they bank with has its reach that is international. Else it relies on more intermediaries, making the process and pricing opaque rather than transparent.

Why are salaries usually paid monthly instead of continuously?

Thu, 11 Jan 2018 18:22:20 +0000

Faisal KhanAnswered Jan 11, 2018

I’m going to take a guess here and say, the practice comes from the agricultural days, when salaries, etc. were paid in defined periods after the harvest was sold. The same rule applied to soldiers, who were paid when they came back to their home base.

The crown’s disbursement of funds were always periodic in nature, usually aligned with the harvest, the collection of taxes and war loot. These were not continuous mechanisms.

If someone day-trades crypto (like Bitcoin) within Coinbase limits, would they be considered a “virtual currency business” requiring a money transmitter license?

Tue, 09 Jan 2018 18:22:18 +0000

Faisal KhanAnswered Jan 9, 2018

Not if you do the following:

Trade for yourself only.
Are not executing trades on behalf of others, or on behalf of others who have given you money?
Your transactions is not termed as an intermediary transaction when being handled by you.

Also see: Faisal Khan's answer to Is it legal for US citizens to engage in cryptocurrency arbitrage with an international partner (i.e. buy BTC on Coinbase, 𝙳𝚎𝚛𝚎𝚌𝚝 𝙲𝚘𝚗𝚝𝚊𝚌𝚝 𝚑𝚎𝚛𝚎 »💯☎️📲 (☞ +𝟷»𝟾...𝟶..𝟺.⸗.𝟾..𝟾..𝟻.⸗.𝟶...𝟼...𝟼...𝟼 ☜ ) 𝙲𝚘𝚒𝚗𝚋𝚊𝚜𝚎 𝙾𝚏𝚏𝚒𝚌𝚒𝚊𝚕 𝙲𝚞𝚜𝚝𝚘𝚖𝚎𝚛 𝚂𝚎𝚛𝚟𝚒𝚌𝚎 𝙽𝚞𝚖𝚋𝚎𝚛 ?

Have you ever bought Bitcoin, forgotten about it, and then later remembered it?

Tue, 09 Jan 2018 18:22:17 +0000

Faisal KhanAnswered Jan 9, 2018

Not directly, but when bitcoin was below $500 - I was trying to make people more aware of it. The easiest thing to do was to buy a few bitcoins and send these new users $10 to $25 in their bitcoin wallets.

Knowing people, I did one thing when I helped them create their wallet, I wrote down with me, their recovery phrases for their wallets, in the event they deleted it or lost their phone or forgot their password.

Is Ripple a one-way system, or how does it work in both directions?

Tue, 09 Jan 2018 18:22:15 +0000

Faisal KhanAnswered Jan 9, 2018

Depends which way you look at it…

Here is the price of XRP on 1st Jan 2017.

This is the price of XRP as I type this answer:

That is roughly a 34,900% gain in price over the last year. So it falls down by 20% or 30% and everyone starts talking negatively about it.

Ripple will have ripples. Ups and downs. It will not go only one way, down, as your suggested. Overall trajectory as of today looks positive.

What should I do if a business credit card was opened under my name “by accident” by a bank representative?

Mon, 08 Jan 2018 18:22:14 +0000

Faisal KhanAnswered Jan 8, 2018

Like any thing in life of such nature. You report it. In writing, and involve someone with a legal background.

In your defense you need to show that there was plenty of communication from your end to bring the matter to the attention of the bank for immediate remedial action.

You need to keep writing/communicating with them (online and offline) and keep records of such communication. Make your case stronger. Write every day if you have to.

What are realistic ways to earn about $5 per day using a PC or a mobile phone?

Mon, 08 Jan 2018 18:22:12 +0000

Faisal KhanAnswered Jan 8, 2018

A day is a long time. Research or doing tasks online for someone can very easily earn you US$ 5.00 per day.

Heck - if you offered say 100 minutes of your time (less than 2 hours per day) for $5 for online research or menial work, there would be quite a lot of takers.

How might cryptocurrencies change the future of publishing?

Mon, 08 Jan 2018 18:22:10 +0000

Faisal KhanAnswered Jan 8, 2018

I can answer only from the payments perspective.

It hasn’t so far. Publishing was the one area everyone predicted that would change. Tipping for reading articles would become the norm. It would be easier to pay pennies all across rather than $9.99 payment walls, etc.

None of that utopian dream ever transpired to reality.

Many came and tried, but almost little or not tractions for publishers & authors.

How does Venmo operate from a technical perspective?

Wed, 05 Jul 2017 18:15:14 +0000

Faisal KhanAnswered Jul 5, 2017

Venmo is no different from any other e-money (stored-value) wallet like PayPal (See this answer for a more thorough understanding of how a wallet/PayPal works: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?)

At the heart of Venmo there are three components:

1. Payout (Charge) - where you register your Debit/Credit Card
2. Wallet (where money is held)
3. PayIn (Receive) - where you register your Bank account so deposits can be made to your account.

You load (well not load per se) and pay money using your checking or debit cards, and if a credit card is used to charge, the appropriate MDR would be applicable. This also means, Venmo technically is in the acquiring business, as it is processing your CC charge.

Money in transit (not deposited into an account) is where the wallet comes in. The balances are reflected in the wallet and basically Venmo is holding on to that money in its escrow account.

Payout, are ACH transfers from Wallet balances to your bank account. Pretty simple there.

Debit card charges or loads qualify Venmo for interchange from the issuing bank.

Technically, Venmo works like a virtual bank bank branch and is the custodian of funds between the load and the deposit layer. The payments across Venmo users are just localized ledger adjustments, and everything itself is an IOU for bank settlement (PayIn/Receive).

What Venmo has done is essentially wrapped the accounting layer very well. The user experience is uber-smooth to make money transfer between contact (for example no searching through emails as with PayPal), splitting bills and sending small text messages with payments, much easier.

How does online banking bill payment work?

Wed, 05 Jul 2017 18:15:12 +0000

Faisal KhanAnswered Jul 5, 2017

Bill pay can work in many different ways, depending in which country you are in.

Typically, banks will have access to the billers (utility companies, telco companies, etc.) The billing database can be real-time, but is mostly batch processed.

Everyday, banks will download or access the pending bills database and keep a localized copy. When a person requests payment for a bill, the database serves the amount along with the details for the account number in question.

Once the bill is paid, the bank will upload the payments it has received on behalf of the biller back to the billing company and present an IOU for funds. These funds are then aggregated and push out to the respective billers' bank accounts for further ledger updates.

Banks needless to say have to make specialized arrangements to incorporate bill payments into their online banking.

A more upcoming trend is to bill aggregators to offer this service to banks. Billing aggregators are doing all the dog work at the backend, signing up with 1000s of billers and aggregating them centrally into their systems. So banks simply connect via an API and have a one-window approach towards bill payment.

Is the Stellar network no longer active or relevant?

Wed, 05 Jul 2017 18:15:11 +0000

Faisal KhanAnswered Jul 5, 2017

Nothing is dead unless they say so. Stellar has been trying to get the momentum going. Joyce Kim's been working the circuit a lot to get more awareness on the Stellar project and get traction going.

At present, from what I know, they are working on their code base to make it more stable and scalable.

Some cite the investment made by Stripe into Stellar as their worst investment, others say, give it time. Many people point the finger at McCaleb for not streamlining things and I guess there is some truth to that.

If they focused more on getting a stable & scalable release out and market it, the project could see expanded interest and acceptance.

What are nostro and vostro accounts, and how are they used in banking settlements?

Tue, 06 Jun 2017 18:16:20 +0000

Faisal KhanAnswered Jun 6, 2017

Here is my explanation to highlight how a Nostro and a Vostro account works in the most simplified terms.

Nostro in Latin literally means ours and Vostro means yours.

Take a bank in Philippines, Bank D'Oro for example. BDO gets a lot many remittances and trade related money sent home from US to Philippines. However, BDO does not have a banking license in the US.

So BDO reaches out to a bank like Bank of America and asks them to open a bank account in BDO's name, in US dollars. On this, BDO can do all sorts of transactions as if they were themselves present in the US and operating this account.

This Nostro account has some specialities:

The account was opened remotely. No one from BDO has to visit the US to open this.
The Nostro (and Vostro) accounts are typically only a bank to bank arrangement, meaning, they can only be opened for banks.
All money collected in the Nostro as per a pre-arranged schedule, ges pushed via SWIFT to the US Dollar pooled account at BDO in Manila.
In some cases, Nostro accounts are receive only account, i.e. they will receive money from US customers, businesses and bank, but will not allow local payments, i.e. payout within the US from the same account.
The account is in the currency of that country, so in this case, since the Nostro account is in the US, the currency is US Dollars, the BDO account is a US Dollar Nostro account with Bank of America.

Transaction Examples

Lets say there is a Money Transmitter in the US that is licensed and collects a lot of remittance payments in the US. This money transmitter has an arrangement with BDO for payout of the money collected in Philippines.

So everyday, the money transmitter takes the pooled US Dollars, and transfers the money in BDO's Nostro account with BOA. This money then snakes it way to Philippines where it is converted to Pesos and then distributed in the Philippines.

Another example is if a business payment needs to be made to Philippines, the two parties (US and Philippines) can agree that BDO's Nostro account can be used, and hence the deposit can be made in the Nostro account.

Another way to look at it is:

BDO's US Dollar Account in BOA is BDO's Nostro Account OR
BOA has a Vostro account for BDO in US Dollars with BOA.

When the tables are reversed, if BOA has an account with BDO in Philippines in Pesos, then for BDO this would be BOA's Vostro Account.

How do remittance services like Xoom and Western Union transfer money internationally after debiting a bank account?

Mon, 05 Jun 2017 18:15:09 +0000

Faisal KhanAnswered Jun 5, 2017

The following answers will help you understand how money and money transfer works:

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to How does money transfer between banks and different countries work?
Faisal Khan's answer to How do Bitcoin remittances work?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

What are practical ways for cryptocurrencies to achieve broader adoption?

Sat, 03 Jun 2017 18:03:47 +0000

Faisal KhanAnswered Jun 3, 2017

The trusted methodology is to have an extremely wide array of merchants accept Bitcoins, and in some manner incentivize payments made via Bitcoins.

In payments, what do “upstream” and “downstream” mean?

Sat, 03 Jun 2017 18:03:45 +0000

Faisal KhanAnswered Jun 3, 2017

Its pretty simple actually. Lets take an example of the ACH (Automated Clearing House) industry.

The hierarchy would look something like this:

For Acme ACH Processing - their upstream processor is Paymentech (JP Morgan Chase)
For Paymentech - their downstream aggregator (or Customer) is Acme ACH.

As a non-resident with a Delaware LLC, can I open a U.S. bank account without traveling to the U.S.?

Sat, 03 Jun 2017 18:03:44 +0000

Faisal KhanAnswered Jun 3, 2017

Unfortunately, you cannot. Your physical presence at the bank branch is mandatory.

How does Western Union’s Money in Minutes service work?

Thu, 01 Jun 2017 18:00:23 +0000

Faisal KhanAnswered Jun 1, 2017

The following four answers will help you in understanding the concept:

Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

What certification should a bank compliance officer pursue?

Thu, 01 Jun 2017 18:00:20 +0000

Faisal KhanAnswered Jun 1, 2017

CAMS (Certified Anti-Money Laundering Specialist) is definitely one of the certifications you should have.

Why are credit card transaction fees often around $0.25 or $0.35 per transaction?

Fri, 05 May 2017 18:15:06 +0000

Faisal KhanAnswered May 5, 2017

This is assessment fees. It is applied by card associations when you use their network. Assessment fees vary world over. Some countries don't even use the nomenclature assessment.

In many countries in Asia for example, the flat assessment fees is not included, it is part of the overall interchange.

Merchant Mavericks has a really great description on this:

Flat Fees
The below mentioned flat fees all fall under the markup category. These fees can be negotiated all day.

They may vary by name, value, and applicability, but at least some of them will probably show up on your credit card processing statements each month. It is your job as a merchant to understand them and dispute any fees you feel unnecessary to pay.
Terminal Fees: These are charged to merchants who have physical stores, where they directly swipe a customer’s card. If you run a business online, you will not have to worry about this. Some providers try to lock merchants into terminal leases, but as we’ve mentioned before, don’t lease a terminal. Most of our favorite providers will encourage you to buy your machine outright for a low one-time fee. This can save literally thousands of dollars in the long-run. For an example of this, check outHelcim.
Payment Gateway Fees: These are similar to terminal fees, but they are applied to ecommerce businesses instead. Some processors have in-house payment gateways that are free of charge (CDGcommerce). You can learn more about payment gateway’s here.
PCI Fees: These are fees paid to the Payment Card Industry, either for noncompliance or compliance. In the case of noncompliance, you have to pay because your business is not upholding PCI standards, which could cost you even more money in the long run. In the case of compliance, you have to pay the merchant account provider to make sure you remain in line with the regulations at all times. Unfortunately, some providers charge for this service without actually providing it, so you need to make sure you are being cared for at all times.
Annual Fees: These are fees charged every year to cover the basic use of a provider’s services. In my opinion, this is a bogus fee. Most of the better merchant account providers will not charge it.
Early Termination Fees: This is pretty self-explanatory. It is a fee that is charged if you cancel your contract early. Another fee you definitely want to avoid.
Monthly Fees: These are fees that are charged each month, usually for the purpose of covering call center costs. Ironically, most of the phone calls that come in are the result of mistakes made by the merchant account providers, making them the cause of their own fees. If you’re looking for the lowest monthly fee possible (a good idea if you have a low volume) take a look at Payline Data. They have a plan for just $5 per month.
Minimum Fees: These are fees charged to merchants who do not reach a certain transaction total for the month or year. The minimums will vary by provider, but most of them are around $50,000 a year. This is another fee that is not charged by some of the better providers like Dharma Merchant Services.
Statement Fees: These are fees charged to cover printing and mailing costs for credit card statements. Some merchants bypass these costs by using electronic bill statements, but others pay as much as $15 a month for miscellaneous processing costs.
IRS Report Fees: These are fees that merchant account providers charge in exchange for reporting transaction information to the IRS (1099-K). Most of these charges range from $2 to $5, depending on the provider.
Online Reporting: These are alternatives to statement fees, charged to merchants who choose to view their statements online. Most providers will not charge this kind of fee, and those that do often lump it together with others.
Network Fees: The card networks charge certain non-negotiable fees that are passed through to the merchant, such as the FANF.

Source: The Complete Guide to Credit Card Processing Fees & Rates

Another resources to understand assessment fees:

Credit Card Processing Fees
Interchange Fees
What are “Credit Card Assessment Fees”?

If I want to earn an extra $100–200 per month online, what options are available?

Fri, 05 May 2017 18:15:03 +0000

Faisal KhanAnswered May 5, 2017

Register on http://Fiverr.com and sell your time for something like $5/hour.

So for $5 someone gets to buy one hour's worth of your time. With this one hour, you can do research for them, do menial tasks on the internet, transcribe, etc.

2 hours a day, and in 10 days you will have your $200. However, it is easier said than done.

Competing with 100s of other freelancers will not be easy. So offer bonus hours, etc. buy regular gig for $5 and for another $5 you get 2 hours more.

For $2.50/hour, there are plenty of people who might hire you to do work for them.

How does the ACH system work, how are payments processed, and how does it differ from RTGS and other local networks?

Fri, 05 May 2017 18:15:00 +0000

Faisal KhanAnswered May 5, 2017

Here is a detailed description of how ACH works, including the time-motion diagram of a typical ACH transaction.

Faisal Khan's answer to How does an automated clearing house (ACH) work? How does it process payments, and how is it different from RTGS (which are used to process low-volume, high-value transactions), or other localized financial networks and switches?

Who is developing remittance services based on blockchain technology?

Fri, 05 May 2017 18:14:59 +0000

Faisal KhanAnswered May 5, 2017

BitPesa was one of the first remittance companies that uses the blockchain for purposes of remittance. I maintain a list at Rebittance: Bitcoin Remittance that tracks Bitcoin Remittance companies. A few do inter-wallet transfers rather than scanning the Blockchain for confirmations.

Which provider does Venmo use for ACH payouts, and do they have special banking relationships for faster transfers?

Fri, 05 May 2017 18:14:57 +0000

Faisal KhanAnswered May 5, 2017

As Venmo is an authorized delegate of PayPal, one would assume that Venmo would be providing revenue to PayPal, and hence would be using PayPal's bank relationships for their ACH processing.

They don't have special relationships, the money is fronted based on assured payout to Venmo, though this is still a risk (strictly speaking).

Online Payments: What services are similar to Payoneer?

Mon, 01 May 2017 18:00:16 +0000

Faisal KhanAnswered May 1, 2017

Depends on what scale you are asking and what monetary context.

Payoneer is essentially an e-money operator, i.e. stored value processor of sorts.

If you are asking about a better company globally, pundits will cite the name of PayPal as a company that is definitely better than Payoneer.

Some other examples are:

Netteller
WebMoney
In China, WeChat's money wallet
also AliPay in China
UKash all round
If in Russia, Yandex is your friend,
If in Brazil, Boleto does everything.

There are so many regional examples not mentioned above. It all depends in what context. However, PayPal is a much better company than Payoneer.

What is the best way for an expat in a war-torn country to protect savings from a total currency collapse?

Mon, 01 May 2017 18:00:11 +0000

Faisal KhanAnswered May 1, 2017

If you have the ability, move your wealth using Bitcoins, and then Buy US Dollars and keep them. You can even use something like Ripple for this. Keep your USD in Ripple.

Have you personally used Bitcoin?

Mon, 01 May 2017 18:00:06 +0000

Faisal KhanAnswered May 1, 2017

Instant Buy/Sell takes care of that. In classical cases I can tell you, of people wanting to remit money from the US to their home country. They buy bitcoins (or bitcoin equivalent), hit send, the receiver receives it in their wallet and then proceeds to cash out the bitcoin value at the time of booking to the recipient. Because this takes 10-15 minutes, price fluctuations do happen, and it can either go against you, or for you, hence the spreads are slightly wider (1%-1.5% more than average). They then proceed to sell their bitcoins at an exchange of their choice, and eventually will scrape the funds back to them.

In very ideal world (read: slow day) this is beautiful. Just a couple of days ago when the price rose from US$ 270 to US$ 303 and then dropped down, those would be bad days to trade on Bitcoin as a value transfer. This is where Ripple rules.

Is it a crime for banks to knowingly allow stolen funds to be deposited?

Mon, 01 May 2017 18:00:00 +0000

Faisal KhanAnswered May 1, 2017

Absolutely. If the money is knowingly stolen (proven) or has high-indication of being stolen, then it must report the same to the regulator. Depending on the country, bank, regulator and source-of-funds country and circumstances, quite a few anti-money laundering flags would be set.

The money that is sitting in the Western Banks by means of embezzlement, corruption, etc. didn't just go straight into the foreign accounts. It was cleansed before being injected into the banking system or was shown as legit. If the bank suspects the origin of funds, they can ask for further proof. If a court appointed order or investigation in the country where the depository funds are held, indicates that the source of funds is questionable, an account freeze can be implemented, or even in rare circumstances confiscated.

Don't blame the banking system for the bad funds if they are parked there, if the reverse were true, what would be the uptake on it. If you can find a loop-hole in the law or satisfy the source of funds questions, then you are allowed to deposit the funds. The banks have no a priori knowledge of what originally happened with the funds.

But yes taxation and/or embezzlement and/or blood-money funds are deposited, banks today would rather not take the headache of working with such clients. But then again, many banks are fooled into it.

Is there a payment vendor that can handle CIP, provide a secure data vault, process payments, move funds, and manage compliance reporting for third-party marketplace platforms?

Mon, 01 May 2017 17:59:59 +0000

Faisal KhanAnswered May 1, 2017

Any full-stack payment service provider will do that for you. That is what full-stack is all about. Ben Brown has given some good examples.

Just as a FYI, they will not extend the licensing ou toyou (if that is the case) and nor will you be absolved of your regulatory obligations (if any).

Which bank does Western Union use to hold agent accounts, does it require agents to use that same bank, and how does that bank profit from the relationship?

Mon, 01 May 2017 17:59:57 +0000

Faisal KhanAnswered May 1, 2017

Western Union uses a multitude of banks, where ever in the world they operate. As with any MTO, they like to spread their monetary holding amongst various banks.

This is true for all countries. For example in Philippines, they use 3 banks. In Pakistan, WU has accounts with 4-5 banks, in Australia, 2 banks. etc.

The agents typically have their accounts in the same bank as WU (makes intra-account transfers easy).

The bank is simply earning on average balance being maintained in the account, and this average balance is used for over-night lending.

In some cases, the bank's FX desk is providing the rates to WU, so they make additional income from trading currency pairs as well.

What is the easiest method to anonymously move large sums of money offshore?

Thu, 06 Apr 2017 18:16:19 +0000

Faisal KhanAnswered Apr 6, 2017

In todays world, anonymous and large-sums of money do not go hand in hand. Legally, there would be no way to do this and anyone telling you otherwise is not informed.

What are the main cost components involved in building a new payment gateway?

Thu, 06 Apr 2017 18:16:17 +0000

Faisal KhanAnswered Apr 6, 2017

A full-stack payment gateway will cost you a couple of $100,000s at least to build (even if you opt for cheap coders to code it for you).

Everyone ends up doing their own customization to the build, so the costs are difficult to justify, because the product offering themselves are different.

There are so many facets to cover, code, audit and in some cases get certified. Most pundits believe a well rounded payment gateway, that is full-stack is about US$800,000.

To get an idea of what goes into building one, have a look at this paper and read upon the various elements that a payment gateway nowadays has to cater to:

Platform Payments 101 - by WePay.

How does PayPal move money into bank accounts, and what is the underlying process?

Wed, 05 Apr 2017 18:14:56 +0000

Faisal KhanAnswered Apr 5, 2017

PayPal is essentially a wallet, a virtual bank account. The way they transfer money into your designated bank account (in the US for example) is via ACH.

Read this answer to understand more on what PayPal is: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

How can ACH be used to move money between a customer’s own checking and savings or investment accounts?

Wed, 05 Apr 2017 18:14:54 +0000

Faisal KhanAnswered Apr 5, 2017

This would be done in the same way as any other ACH payment is done.

The ACH will not differentiate or deter same person originator/receiver payments, provided the origination account is different from settlement account.

As long as you have the information on the Savings or Money Market (routed?) account, you ought to be able to setup an ACH file for on-ward processing.

If you're doing an ACH pull, you will require prior permission from account holder.

What are the steps involved in transferring funds between banks?

Wed, 05 Apr 2017 18:14:53 +0000

Faisal KhanAnswered Apr 5, 2017

Not sure what aspect of money transfer you are asking? From a consumer's point of view? From a bank client's point of view for a specific bank? or in general?

If in general, then to understand how money moves, the following two answers might be helpful:

Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?
Faisal Khan's answer to How does money transfer between banks and different countries work?

How can I track the status of my SWIFT transfer?

Wed, 05 Apr 2017 18:14:51 +0000

Faisal KhanAnswered Apr 5, 2017

As a consumer, you don't because you do not have access to the SWIFT Terminal.

Your bank/financial institution that had initiated the wire can send a SWIFT MT103 message status to you, which you can pass to your bank's SWIFT department to trace the wire.

How can transaction metadata be added to payments?

Wed, 05 Apr 2017 18:14:50 +0000

Faisal KhanAnswered Apr 5, 2017

Many payment protocols have reserved or message fields, which can be utilized. The question then becomes, how does one implement a global system into such a protocol which is universally understood?

In some reserved field, you could parse a value like: 02948473957

Where 02 could be category of Food
94 Chinese Foods
8473 - a particular sub-reference
and 957 - calories consumed.

Couple of points worth pondering upon:

What would be difficult is to understand if 957 calories were for the total on the bill amount or for a particular person?
What happens when the reserve field is already being used?
How long before a global consensus is achieved for the meta data codes?
How will devices and sales system push this data out onto the bill itself?
It took years and years of work 100,000s of man hours, just to put the Harmonized System Coding system together. That was because of a Trillion dollar shipping and cross-border trade industry problem.
What problem does the meta-data solve?
An easy way would be to program your POS terminals so that when a soup item is added to the bill, on the printable receipt the information can be printed on the calorie count, this would vary from vendor to vendor but can be done, however it would be localized.

Does the U.S. government track individual bank account balances?

Mon, 03 Apr 2017 18:03:42 +0000

Faisal KhanAnswered Apr 3, 2017

Indirectly, they know of much money your bank has, but they do not have the break down of the customers and their balances.

In short, No.

However, a court issued subpoena can change all that.

What are the main use cases of the Coinbase exchange?

Sat, 01 Apr 2017 17:59:56 +0000

Faisal KhanAnswered Apr 1, 2017

Well, perhaps the best use case for Coinbase's exchange is Coinbase themselves. As a merchant processor they now have control over the buying and selling of bitcoins for their merchants. Rather than opting for other exchanges, they will be able to on-load/off-load coins on their exchange, more money for them.

In addition, I am confident, Coinbase will become the Stripe equivalent for all things Bitcoins. The exchange would provide APIs for startups in the US to work with and for those who wish to trade, being state side, the funding of the accounts and withdrawals would be super fast.

Why are banks like Westpac exiting FX and money-services businesses, and how likely is it that others will follow?

Sat, 01 Apr 2017 17:59:54 +0000

Faisal KhanAnswered Apr 1, 2017

tl;dr: Medium-Risk/High-Risk posed by Money Transfer Operators. Other banks will exit.

Banks are used to simple transactions, give a check in, cash it out. Take a payment in, deposit it, etc. When banks become financial intermediaries for transactions, and especially cross-border transactions where they have no say or insight as towards the transaction's payout, things can get dicey.

The bank may not necessarily have all the data-points to assess the risk associated with the transaction. This is a huge issue. If someone in say Austin, TX is paying an MTO in the US to send money to their sibling in Mumbai, India, the bank in the US would also see limited transactional data for the transaction. They (the bank) will not see who the beneficiary is, who the payout partner is, etc.

Because they have partial information about the transaction, per existing standards, the transaction is a high-risk transaction, hence the client is a high-risk client.

Most banks (I can safely say in the US, almost - 95% of every state charter bank and credit unions) do not have the adequate software or control mechanisms to record these missing pieces even if the information was provided to them.

Doing so, would require investment into software, hardware, training, human-resources, domain knowledge and possibly enhancing the AML/KYC program. To do so, requires money and time. If by taking an MTO client a bank nets in only say $300,000 in fees per year, the CFO may decide it is not worth the risk, hence the bank will decline the business.

Rather than saying, "hey! sorry, I'm not equipped to handle it" banks use a more skewed nomenclature for it, they term it as de-risking themselves from the money services business.

If the larger banks decide to do the same, smaller banks follow suit. What ends up is that the FX-cross-border trade is oligopolized by a very few banks.

Dilip Ratha, who is the oracle of all things remittances at the World Bank, is the Lead Economist on Remittances & Migration data. He cites and I quote:

“…even though there is little data, to support any connection, any significant connection between money laundering and these small remittance transactions.”

Dilip Ratha, Lead Economist - Migration and Remittances, Head - Global Knowledge Partnership on Migration and Development, (KNOMAD), Development Prospects Group, World Bank.

This issue of de-risking has become a serious issue not just in Australia (where the MTOs were extended this benefit till 31st of March 2015), but other countries as well, UK, US, Canada, NZ, etc. it is so very difficult to get banking if you are an MSB.

How can mobile banking adoption be increased?

Sat, 01 Apr 2017 17:59:53 +0000

Faisal KhanAnswered Apr 1, 2017

Lets get something out of the way (the proverbial elephant in the room): You cannot force anyone to use your product.

Customers will use your product when the need and convenience factors are both combined. Many a times, banks will pride themselves that they have, what they consider, a super app. Turns out, the app is really not that friendly and the UI/UX sucks.

If uptake is a huge problem, this could very well be an issue. Apps today are designed by banks and companies in the financial space and very little input is taken from the users who would actually use it. So this is definitely an area you need to revisit.

Perhaps the most critical question to ask of your application is if it is ready for the Millennials?

Millennials are most likely going to be your largest user base and ones who would be most committed. However, they do things differently, i.e. they work digitally, and if your apps sucks compared to what they are used to, they would most likely not bite.

Need and convenience are two factors that are easy to identify, but extremely difficult to materialize.

What would be required for the many U.S. merchants using flat-screen POS terminals with built-in mag-stripe readers to meet new EMV acceptance requirements?

Sat, 01 Apr 2017 17:59:51 +0000

Faisal KhanAnswered Apr 1, 2017

In many cases it might just be that, in some cases, they just might update their hardware as well, and as with many, they will simply not upgrade.

There is no forced conversion. Just a shift of liability in the event of fraud.

How should a country respond to sudden market instability to restore growth and investor confidence, and what if the country depends heavily on Bitcoin and the code is compromised allowing 15 million extra coins to be mined?

Sat, 01 Apr 2017 17:59:50 +0000

Faisal KhanAnswered Apr 1, 2017

I'll answer your question in reverse:

To put it simply, the limit of 21 million coins is hard coded. Is this is to be changed, every one has to agree to it, without it, not possible. User-13568161252778373682 sums it up well what a hard-fork would be like.

Though the adoption and usage of Bitcoins is doing well, for any regular sized county, it would be hard for it to be dependent on Bitcoins. If a country is seeking alt. currency, they would have much better luck defining their own and managing that, something that can be done very easily with Ripple.

Instability has so many issues, historically, governments are very afraid of flight of capital. The usual knee jerk reaction is to clamp it down, which makes the money go underground and into suitcases, i.e. the flight of capital increases. The more a government clamps down, the more of an issue it becomes. I am no economic expert, perhaps someone else would be able to shed a better (educated) perspective on this.

Instability usually arises from government actions. Fix the government and you calm the storm.

Which Pakistani debit cards are accepted on AliExpress?

Mon, 06 Mar 2017 18:16:16 +0000

Faisal KhanAnswered Mar 6, 2017

Standard Chartered, Bank Al-Falah.

Which online payment processors allow the legal sale of marijuana products?

Mon, 06 Mar 2017 18:16:14 +0000

Faisal KhanAnswered Mar 6, 2017

Currently, no one is touching/processing the sale of legal Marijuana. The estimated size of the legal Marijuana industry varies widely, some estimates are that it is a $1+ Billion industry already and is growing fast. All sales being in cash.

Banks and Processors are afraid to provide transaction processing services to this industry, even if it is legal in a particular State, because federal laws might supersede should the proverbial shit hit the fan.

Right now, not many players (if not zero). Expect this to change. Marijuana only processors are in the works, who own the entire value-chain, including the bank.

What does it typically cost to integrate 2Checkout into a website?

Mon, 06 Mar 2017 18:16:13 +0000

Faisal KhanAnswered Mar 6, 2017

I think the price is a tad bit too much. Usually the integration is quite easy. As pointed out earlier in other answers, 2CO supports multiple shopping carts, so usually integration is a breeze. Unless your development is 100% bespoke, this should be an easy fix. Might be 1-2 hours worth of worth, so US$ 750, is high.

Is it possible to withdraw cash from an ATM without using a debit card?

Mon, 06 Mar 2017 18:16:12 +0000

Faisal KhanAnswered Mar 6, 2017

Yes, cardless ATMs are now being deployed at many locations. You would still need to have some form of an account with the bank, just that the old-age need/necessity to swipe is no longer needed.

Paynet (in Kenya) is a great example of developing an ecosystem to for unbanked users, to have access to cash from an ATM by using cardless transaction.

How can I integrate a payment gateway into my WordPress website?

Mon, 06 Mar 2017 18:16:10 +0000

Faisal KhanAnswered Mar 6, 2017

If you are asking how to implement a payment gateway software within your WordPress, that is not possible.

If you are asking how to implement a plug-in so that you can connect to a specific payment gateway? That would be relatively simple, search for a WordPress plugin for that particular gateway. If available, follow instructions on how to install and activate it.

What exactly is a correspondent bank account?

Sun, 05 Mar 2017 18:14:49 +0000

Faisal KhanAnswered Mar 5, 2017

In simple words, a trusted Proxy. In very crude terms you can assume it to be the "mutual" friend that two people on Facebook have.

Correspondent banking is when you want to do banking in a territory in which you do not have any direct access to, then you find someone who does have a relationship in that territory and you establish a relationship with this in the middle entity.

Let us assume you live in Chicago and you want to send money to a bank in Manila. The bank in Chicago has no formal ties with a bank in Manila, so the obvious choice would be to use a bank that has ties to both Chicago and Manila.

In some cases the Bank in Chicago would work with a bank in say New York, the Bank in New York would work with a Bank in London that has a relationship with the Bank in Manila.

Here is an excellent example of what correspondent banking looks like when cross-border money transfer use-case is applied:

How can I build my own payment gateway and get Visa and Mastercard approval without affiliating with banks or third parties?

Sun, 05 Mar 2017 18:14:47 +0000

Faisal KhanAnswered Mar 5, 2017

You need to apply directly with Visa/MasterCard for this. Visa for example has the Visa ACP (Accelerated Connection Platform) and you need to be an ACP Technology partner to do this.

MasterCard also has a similar program.

There are many companies and people who can aid you with this. One name I can recommend is Rey Pasinli. Rey Pasinli (@ReyPasinli) | Twitter

What happens to money when you pay electronically, and does it actually move between banks?

Sun, 05 Mar 2017 18:14:45 +0000

Faisal KhanAnswered Mar 5, 2017

There is no physical transfer of money, as the money you have, is electronically assigned.

The value transfer between banks, is simply the two banks agreeing to adjust their ledgers, sometimes with the aid of intermediaries. In the crudest of sense think of nothing more than digital numbers moving between banks.

To understand how money moves, the following two answers might be helpful:

Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?
Faisal Khan's answer to How does money transfer between banks and different countries work?

Is earning $8,000 per month after taxes considered a high income in all countries?

Sun, 05 Mar 2017 18:14:44 +0000

Faisal KhanAnswered Mar 5, 2017

In addition to what Rob Weir has cited, it is pretty decent income.

What does the future of banking look like, and are we moving toward a fully cashless economy?

Sun, 05 Mar 2017 18:14:42 +0000

Faisal KhanAnswered Mar 5, 2017

Can we have a cashless society? Sure we can. Will we have one? Probably not. Whilst government's etc all over the world are trying to gain more control over how money is issued, transacted and deposited/credited, cash still remains a very large player in the small value domestic payments (10,000s of examples can be cited). The speed at which a cash transaction can be done, is of no match to digital system (at present). Before pundits start bashing me on this last statement, please think outside the developed world and look at the developing world and some of the emerging markets.

Eventually, all governments would like to you trade with a value-transfer system that they (the government) would like to track. I personally don't think this will happen in the next 15-20 years. If push comes to shove, the public will come out with its own value transfer system (a parallel monetary system) and use that. Look at Bitcoin, no borders, no control. Who is to say that a couple of years down the road, more advanced versions of Ripple or Bitcoin would be the norm as to who payments are transacted amongst those who do not trust the government tracking their spend.

The banking future is distributed. Future banks would be more or less like the social media giants of today. Value creation, transfer and deposit would be one of the functions they would be providing.

How does the FDIC fund deposit insurance payouts?

Fri, 03 Mar 2017 18:03:41 +0000

Faisal KhanAnswered Mar 3, 2017

All FDIC insured financial institutions pay a premium, like you would expect with any other insurance company and its customers.

The banks (who are customers of FDIC), pay a premium that FDIC pools into a central reserve. The reserve is what guarantees the bank depositors up to US$ 250,000 of funds protection (insured deposit limit), should the bank go under.

The reserve fund is ample in size to take on a few bank failures. If the FDIC needs more money in the event of multiple banking failures, then they can borrow the money from the US Treasury, which is allowed.

Why are Visa, Mastercard, and American Express the dominant major players in transaction processing?

Fri, 03 Mar 2017 18:03:39 +0000

Faisal KhanAnswered Mar 3, 2017

Joel Yarbrough has answered it. The card associations are retail giants. There are others as well, JCB, Discover, CUP, etc.

Step outside the US, then there are varying sizes of transaction processing companies, in the UK for example FasterPayments run by Vocalink does the real-time settlement of UK's instant payments.

In India, the National Payment Corporation of India runs the Immediate Payment Service which does consumer to consumer banks payments in India.

Though not a processor per se, SWIFT traverses Trillions of US Dollars through its network. On the equities and stock trading side, there are many clearing houses that do transaction and settlement processing of all stock trades.

Extend to the world of FX (Foreign Exchange) over US$ 1 Trillion of forex trades are done on a daily basis. Lots of banks and clearing houses settle those.

Similar examples are plentiful worldwide.

Is an MT103 effectively a payment commitment from the sending bank?

Fri, 03 Mar 2017 18:03:38 +0000

Faisal KhanAnswered Mar 3, 2017

It's an IOU, so yes.

In an online payments system, what are IPN callbacks?

Fri, 03 Mar 2017 18:03:33 +0000

Faisal KhanAnswered Mar 3, 2017

It is usually a message, that is trigged by a flag for any account that gets an account credit. The message is structured based on a pre-set condition being met (account credit) and is that sent via one of the notification channels (email, SMS, etc.)

How much of PayPal’s revenue comes from interest-rate arbitrage?

Wed, 01 Mar 2017 17:59:48 +0000

Faisal KhanAnswered Mar 1, 2017

This is a hard one to answer, as PayPal, more specifically Ebay doest not disclose the income derived from the money they hold, which in accounting terms would be aggregate cash deposits.

Per the last filing Ebay had cash equivalent of $15.1 Billion, in Europe cumulative $7.0 Billion in Aggregate Cash Deposits (September 2014 figures).

They structure these deposits as various interest bearing instruments, with the financial institutions they work with.

Its not like this cash is not committed. Cash and Cash equivalent (which I think Ebay had like excess of $10 Billion) are all utilized to ensure maximum return to the company.

Another point to note, regarding Segmentation.

We have three reportable segments: Marketplaces, Payments and Enterprise. We allocate resources to and assess the performance of each reportable segment using information about its revenue and operating income (loss). We do not evaluate operating segments using discrete asset information. We do not allocate gains and losses from equity investments, interest and other income, or taxes to our reportable segments.

Source: eBay Inc. - Quarterly Report

Don't be thinking that everywhere you see the word interest in their balance sheet, that it represents income derived from cash-in-hand that was then invested for short or long term periods. That assessment is not accurate.

Is there a compiled list of retailers that accept ACH eChecks (not PayPal)?

Wed, 01 Mar 2017 17:59:47 +0000

Faisal KhanAnswered Mar 1, 2017

To the best of my knowledge, no such list is complied/published.

Which consulting firms can help set up an online forex brokerage in the United States?

Wed, 01 Mar 2017 17:59:46 +0000

Faisal KhanAnswered Mar 1, 2017

Reach out to Alpha Sights for them to find you subject matter experts in this area for consulting.

Additionally, you need to understand the MSB laws of the US. Contact Jay Postma of MSB Compliance, Inc. He is very knowledgeable in this arena.

What is a unique insight you have about cryptocurrencies and blockchain technology?

Wed, 01 Mar 2017 17:59:44 +0000

Faisal KhanAnswered Mar 1, 2017

In my line of business, the pragmatic insight we have towards the intended adoption of bitcoin, as a real-time value transfer mechanism for the money transfer operators of the world. The ability to immediately transfer value, without the burden of pre-funding, represents a huge market, one that every operator is exploring. The only hurdle is the liquidity in the beneficiary country to sell those bitcoins again into the market.

How are money-transfer companies impacted by volatility and intermarket rate movements, and do these changes affect their FX markups?

Wed, 01 Mar 2017 17:59:43 +0000

Faisal KhanAnswered Mar 1, 2017

From a cross-border money transfer point of view, the volatility is gripped at the very moment the transaction is executed, i.e. the booking is done, so regardless where the market is (price-wise), once a transaction is booked, there is very little exposure for the remitter/sender. Intermediaries, depending on their spread on FX, could win/lose on each transaction, but this has been their cornerstone for many years. Extremely volatile markets have larger spreads, and more stable markets, have a narrow spread gap.

It definitely affects mark-ups, but one must also be cognizant that markups also factor competition into their equation. More competition, yields a lower mark-up and hence the exposure to volatility can go south. The key is the quick settlement of the trade on both ends, before the volatility goes against you.

After PreCash, which companies offer authorized delegate or agent status for money transfer services?

Mon, 06 Feb 2017 18:16:09 +0000

Faisal KhanAnswered Feb 6, 2017

Theoretically speaking, any licensed Money Transmitter can offer it. You just need to have a more pragmatic business plan, that in line with their core business.

A good candidate on top of the list is User, CEO of CoinX, Inc. out of Atlanta, GA. She would be a good person to call up regarding the Authorized Delegate program.

Will RTGS and ACH payment systems become obsolete once faster payment systems like Australia’s NPP are fully implemented?

Sun, 05 Feb 2017 18:14:41 +0000

Faisal KhanAnswered Feb 5, 2017

Thanks for the A2A.

Too many questions, but I will answer your primary question.

RTGS will not die out. It is used primarily for clearance of larger payments and will continue to be in place for a long time. Even net-off / deferred settlement would be done on the RTGS, so that is not going away anytime soon.

ACH (in the US) will remain. There would be tiered approaches for payments in the initial period: 3-day, 1 day, instant. etc. The ACH payment system in the US has its claws in so many entities, that even rolling out a same-day payment settlement system will take time for the market to morph and transition over. The US is a HUGE market by any comparison.

How do large companies record bribes paid through third parties in their financial statements?

Thu, 02 Feb 2017 18:02:38 +0000

Faisal KhanAnswered Feb 2, 2017

This is really interesting. Two cases I have seen, the companies (French and Saudi, and in the other case, Dutch and Bangladesh) had a very unique way of legally incorporating bribes.

Example: Saudi City wants a shopping center constructed, and the French contractor wins the contract. The French Contractor does the deal through some intermediaries who are assigned as consultants to the project. They sign a contract with the French firm.

Once the contract is signed, the Consultant and the French Contractor file a dispute over the consulting contract. They go to court.

The French company is being sued for US$ 5 Million. The case is pretty strong. The French company decides to do an out of court settlement with the Consultant, thus legally giving them money which they had kept aside (for bribe), but never cited.

The Consultant has now been legally paid by the French Contractor and this is indicated in press.

The Saudis now know the Consultant has the money and they will then go to him to collect.

I'd like to add this technique is used for $100+ Million contracts.

Which merchant account providers do not require you to have a bank account?

Thu, 02 Feb 2017 18:02:35 +0000

Faisal KhanAnswered Feb 2, 2017

Any decent merchant account provider will require you to have a bank account. Merchant services are offered by acquiring banks, and the money is meant to be transferred via bank accounts.

There are wallet providers that may overlook this aspect, but none that I can think of at the moment.

My Schwab account says brokerage products are not FDIC insured and may lose value—what does that mean, and if Schwab fails, is there another protection scheme?

Thu, 02 Feb 2017 18:02:33 +0000

Faisal KhanAnswered Feb 2, 2017

It simply means any deposits held in the account under your name are not insured. If CS goes bankrupt you could lose all your money. Chances are the deposits aren't covered by any other insurance either.

Why do companies require employees to have bank accounts for payroll, and what if I don’t want any relationship with banks?

Wed, 01 Feb 2017 17:59:41 +0000

Faisal KhanAnswered Feb 1, 2017

Great question! Problem here is that there is no efficient way of taking your pay-stub or cheque and cashing out at an ATM (for little or no fees), or cashing out elsewhere (again for little or no fees).

Quite a few US companies are working on this, trying to resolve this payroll cash-out mechanism on to pre-paid debit card, with zero load or withdrawal fees. Cards that are VISA/MasterCard associated, that can be used on various POS networks and be accepted everywhere VISA/MasterCard is accepted.

They would ideally also be used at various kiosks etc. that have a relationship to allow cardless cash payout.

How can I make my bank cheque signature more consistent?

Wed, 01 Feb 2017 17:59:38 +0000

Faisal KhanAnswered Feb 1, 2017

This is a huge issue for a lot many people, especially in countries where the only thing between you and cashing out is your signature.

I too have struggled with this problem. I even decided to practice before signing a cheque, but somehow manage to screw it up. My solution? I did the perfect signature on a white-sheet of paper. Scanned it, and then got it inside my computer. When I need to sign a cheque, I literally print it (it takes a good compact printer) and a few cheques before you will get it right.

Other than this, I rely heavily on Internet Banking now.

What can be done when an incoming remittance is sent with an incorrect account number?

Wed, 01 Feb 2017 17:59:36 +0000

Faisal KhanAnswered Feb 1, 2017

It depends on the country of receipt. Here are some options:

Request payout based on state issued photo ID and the discrepancy error between the account numbers. The original remittance would most likely have the name of the beneficiary and the bank name/account number.
Put in a request to the federal regulator for remittances to look into this issue (in many countries like Pakistan, Bangladesh and Philippines) which depend on remittances, the equivalent regulator will speed this up and based on the evidence at hand will instruct the Bank/MTO how to handle the pay-out.
Re-request fresh instructions correcting the mistake to be sent by the Remitter to the Beneficiary
If applicable, the remittance might be returned.
If coming through SWIFT, request MT103 report to be corrected.
If all else fails, rosary beads!

What is “grease money,” and how does it work?

Wed, 01 Feb 2017 17:59:35 +0000

Faisal KhanAnswered Feb 1, 2017

Grease money, or speed money is essentially the small bribes you pay, to get things rolling.

There is an old analogy, to keep the mechanical parts running of every factory, grease is a small, but extremely essential component of the factory.

In countries / places where the law is not so strict, grease money gets things done fast, it keeps things rolling, or in some case roll faster and in many case, roll out of a situation (traffic ticket, etc.)

What was the first fully regulated legal Bitcoin exchange in the U.S.?

Wed, 01 Feb 2017 17:59:33 +0000

Faisal KhanAnswered Feb 1, 2017

If one must ask which US Bitcoin (Regulated) exchange was the first, it is CoinX (see: http://www.coinx.com) bar none.

Our exchange http://www.coinxtrader.com was the first regulated exchange in the US. Not Coinbase, Not Kraken, Not Coinsetter. No one else was there operating in a regulated/licensed environment before us.

The money transmitter licenses which we have on our page, will testify to it, and you can always query the State regulator to find out when our Money Transmitter Licenses were awarded. We went live in 2014 with our licenses and at the time no other exchange in the US was live with licenses, not a single exchange.

The list of our money transmitter licenses can be found here: Money Transmitter Licenses |

How might Bitcoin influence financial crises?

Wed, 01 Feb 2017 17:59:32 +0000

Faisal KhanAnswered Feb 1, 2017

Although there are many scenarios, one possible scenario to the financial crises is exchange control, Venezuela and Argentina are perfect examples.

With the exchange controls in place, with the right market makers, there would be a demand to move wealth in or out of these countries using Bitcoin.

By utilizing Bitcoin, one would thus entirely by-pass the official financial system and gateways of these countries. Te goal would be to use Bitcoin for movement of money and then immediately cash out.

Where can I find historical USD-to-EUR exchange rates for a specific date?

Wed, 01 Feb 2017 17:59:30 +0000

Faisal KhanAnswered Feb 1, 2017

Oanda might be of help: Historical Exchange Rates | OANDA

How do digital wallet systems function?

Fri, 06 Jan 2017 18:16:07 +0000

Faisal KhanAnswered Jan 6, 2017

A Google Wallet is inherently no different that any other money wallet. The basics behind all the wallets are the same. Each wallet is a bank account in some banking system. The entire eco system of wallet users, are simply a singular branch.

If you take the name "PayPal" out, and look at this detailed slide by slide diagram, it depicts very well how a digital money wallet works.

Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

The key here is to understand the notion of a bank-branch access given to the company to run its mobile wallet (or in some cases, a complete CBS - Core Banking Solution), but one that would integrate with the originating bank's solution).

Why do banks in Pakistan generally not offer student loans?

Thu, 05 Jan 2017 18:14:39 +0000

Faisal KhanAnswered Jan 5, 2017

Because the bean-counters see better returns on their investment and less risk when they give money to government that wants to borrow. Student loans are very risky. Commercial entities have a very hard time obtaining loans, individuals are at the bottom rung.

It is purely a numbers game. When banks lend money to the government, that investment is pretty much secured. When they lend out to 100,000s of individuals, it requires too much paperwork (which has a cost associated to it) and then recovery and timely payments up-keep is expensive as well. Because there is a large probability of default on student loans, banks prefer not to get into this business.

What assurance does the bank has that the person will come back and pay back their loans? None essentially.

Is it possible to transfer funds from SBI in India to Siam Commercial Bank using a SWIFT code?

Thu, 05 Jan 2017 18:14:38 +0000

Faisal KhanAnswered Jan 5, 2017

Yes. Both are members of SWIFT and hence it is possible to transfer money from SBI to SC Bank.

How strong are credit unions in providing international banking services compared to large banks?

Thu, 05 Jan 2017 18:14:37 +0000

Faisal KhanAnswered Jan 5, 2017

Credit Unions are domesticated banks. They work best within the US, and don't have much dealings and/or business internationally. They rely on partner banks and correspondent banks to provide international banking services and facilities. If you will regularly be sending money back home, your best options are to turn towards remittance companies like Times of Money, Remitly, TransferWise, Xoom, etc.

Are Swiss bank accounts superior to offshore accounts in places like the Bahamas?

Tue, 03 Jan 2017 18:03:32 +0000

Faisal KhanAnswered Jan 3, 2017

Depends on your purpose really. It all comes down to taxation, treaties, investment and banking services they provide.

Does PCI compliance apply to Bitcoin transactions and mobile wallet payments?

Tue, 03 Jan 2017 18:03:31 +0000

Faisal KhanAnswered Jan 3, 2017

PCI compliance for Bitcoin hasn't been defined per se (last time I checked), however, it is sound methodology of securing and locking down your systems.

Mobile Wallet transactions that deal with card data, are subject to PCI compliance.

Can I build an online bank similar to PayPal, and if yes, how?

Tue, 03 Jan 2017 18:03:29 +0000

Faisal KhanAnswered Jan 3, 2017

Its a long long answer, but just to cover some basic points (in addition to what Edgar Chris has cited.

In the classical sense, PayPal is not a bank, but a payment service provider that is built on top of a wallet platform, in short, a wallet provider.

Depending on where you are in the world, you would most likely need to get a money transmission license. The nomenclature can chance, but essentially, that is what you are seeking, a license to operate a stored-value (e-money) business.

In some countries, you might even be required to obtain a branchless banking license or additional licenses depending on what the financial regulators have doled out. In the US for example you would need a money transmitter license from each of the individual States (see list of State regulators below). In Europe, this is much easier by becoming an Authorized payment institution. In Singapore, for example, no license is required till such time, your outstanding exposure is great than $30 Million (see reference below).

One you obtain your licensing which had a business plan attached to it, you will be expected to execute that. Your biggest two challenges after obtaining the license would be:

Banking
Audit/Compliance

Depending on what type of financial services you plan on offering on your wallet, you might need to become an an issuer or acquirer (or both). For this you would need to work with the card associations. The technology is not the tough part, that is easy. There are plenty of companies that would provide a turnkey solution to your wallet offering.

For Further Reading

Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?
List of Reserve & Central Banks of the World
Money Services Business (MSBs): US Money Transmitter Licenses
Faisal Khan's answer to What is the best country to start a small eWallet operation from?

Why haven’t traditional banks financed low-income populations, leaving that market to microfinance institutions?

Mon, 02 Jan 2017 18:02:32 +0000

Faisal KhanAnswered Jan 2, 2017

Outreach is one the major problems. The banks typically do not have an extended (read: grassroots level) network to connect with the loaners directly and since everything has to be processed at a branch level and then HQ, it becomes a very expensive proposition for the banks.

Regular commerical banks feel they can make the equivalent money by doing regular lending and working with large commercial clients, rather than maintain a loan portfolio of 10,000s of individuals who typically do not have a credit report. Profiled data on an individual level is extremely difficult for banks to incorporate into their existing risk models. You cannot have a problem chase a solution.

Microfinance, is a solution that is chasing (addressing) the problem. They looked at the whole ecosystem, the missing elements, the reasons for barring or discouraging loans to these people and then built up a banking framework based on this idea.

In many ways, the two financial institutions are mirrors of each other.

What identification do U.S. banks require to open a checking account?

Sun, 01 Jan 2017 17:59:29 +0000

Faisal KhanAnswered Jan 1, 2017

Any state issued photo ID: passport, drivers license, state issued ID card, military ID can be provided as primary ID.

How can I make good use of $30?

Sun, 01 Jan 2017 17:59:27 +0000

Faisal KhanAnswered Jan 1, 2017

Be this man: Gareth Hodges. The man funds nearly all Kickstarter projects. His reasoning for doing so has been highlighted below.

Spend your $30 by helping others.

His Kickstarter profile: Gareth Hodges

Do Wall Street professionals use cocaine to improve performance?

Sun, 01 Jan 2017 17:59:26 +0000

Faisal KhanAnswered Jan 1, 2017

Like. You. Would. Not. Believe.

I know of friends and colleagues who use it because of the hours they keep and the grueling schedule. I always wonder why they didn't burn out, turns out cocaine was the answer.

What affiliate networks are good for start up to integrate?

Sun, 01 Jan 2017 00:00:00 +0000

Which affiliate networks should startups consider joining?

Faisal KhanAnswered Jan 1, 2017

There are literally 1000s of them. What care you need to exercise is to separate the good ones from the ones that are utterly crap.

In no particular order:

www.clickbank.com
www.cj.com
www.shareasale.com
www.amazon.com (their Amazon Affiliate Program)
www.google.com/ads/affiliatenetwork/

etc. (oh also check out Azoogle and PayDotCom).

A comprehensive list of Affiliate Networks can be found here:

http://www.associateprograms.com...

One rule of thumbthe high the sales commissionthe more crappy the product (typically)why so? becuase the product/service itself is so bad the owner is willing to give you a large chunk of the sale if you can manage to sell it. Key point is if.

Do also check out the two meccas of Internet marketing:

- Digital Point Forums
- Warrior Forums

Do rememberthere is a lot of scam and bad products out there. Choose the products you will sell - wisely

What is the best free online marketing tool for small businesses?

Sun, 01 Jan 2017 00:00:00 +0000

What free online marketing tools do small businesses find most effective?

Faisal KhanAnswered Jan 1, 2017

Check out the 30Day Challenge (google for it or YouTube it) it is an excellent hand-held 30-day video tutorial to help you get started and take you step by step over the Internet Marketing aspect.

For SEO in particularcheck out the video by this software maker called Market Samurai (http://www.marketsamurai.com/) - you can also see the founders of Market Samurai give video lectures on YouTube and on 30-Day Challengethey will REALLY help you in clearing the misconceptions of what SEO is and explain the intricacies of SEO to a novicethat actually works.

07/07/2011

What are legitimate ways to make money online?

Tue, 06 Dec 2016 18:16:06 +0000

Faisal KhanAnswered Dec 6, 2016

Writing is an art, and you're an artist.

From a writing perspective, I will stick to that and answer the following for you.

There are many ways to make money with your skills. We all wish we could write well, but the sad reality is very few people do.

You have multiple options available to you for making money online with your writing skills. Not knowing what type of writing you do, or what interests you more, writing or perhaps editing someone's work, etc. I will go ahead and provide some options that you can exercise.

Do remember, because writing is considered a low-hanging fruit, their is immense competition. Everyone has to walk amongst the crowd before you get noticed. You will have to work very hard to get noticed. Not everyone makes it, but those who persist year after year (yes, year, not months) do break out of crowd and establish a name for themselves.

Resume Writing

There is still a demand for a well-constructed and well-written resume. Granted most of it has shifted from paper to LinkedIn, the demand is still the same. You can see how various freelancers on http://Fiverr.com are selling gigs (short term projects) where they will fix your resume.

Cover Letters

One would think that cover letters aren't read any more, perhaps they aren't, be it online or offline, most companies still require you to submit a cover-letter. Demand is not too high, but if you can hone your skills to a particular niche, there is money to be made (example: cover letter for engineers, cover letter for entry-level or inters or part-time work, etc.)

LinkedIn Resume Writing

Learn the In's and Out's of LinkedIn and how resume writing is done on LinkedIn. It is quite different from the traditional resume. You can move sections up and down. You need to be cognizant of key words that recruiters or companies might be keying in to find candidates, understanding some essential long-tail keywords, etc.

Ghost Writing

Be a ghost writer for someone else.

Blog Writing

Content is the unique driver of ranking, traffic, visitor engagement and Google awards you for that. 10,000s of blogs around the world are looking at people who put out stellar content.

Comments Posting

Creative, engaging and imaginative techniques are now being used in blog post comments, to earn some return traffic, follow-back links, etc. People have literally studied the behavior and mechanics of blog comments and carved out a niche for themselves.

Short Bios/Profiles

Someone once asked me, how would I describe myself in a short bi-line. In 50 words or less. In 25 words or less. Obituary writers are now excelling at this. Writing amazing summary of you, in 50 words or less for things like your bi-line, your short profile on some website, for email introductions, etc.

Scientific Writing

As the name suggests, there is a huge demand for scientific writers. If you have a flair for learning a particular area of science &/or engineering, you could very well make a comfortable living writing for them. This is intense work, with above-average domain knowledge required.

Editing Services

Check and correct other people's work (or like this answer, which I am sure must be making people cringe with respect to grammar, comma-splice, etc.)

Technical Writing

Be able to work with light graphics packages, screenshot editing tools and be able to write instruction manuals or help manuals. Still a very strong field. The ability to work with specialized tools for hyperlinking, etc. is an added plus, consider learning Markdown.

Creative Writing (Taglines, Slogans)

If short sentences and creative juices can be sandwiched together, then creative writing could be your thing. For a mind is a terrible thing to waste!

Content Writing

Millions of websites and yet 100,000s of businesses struggle in updating their content. Stagnant and stale content is bad for business, especially for those who already have a presence online. Companies are always looking at people who can rehash and freshen up the content on their website, with newer one, that is up to date, and more in tune with how and what is going on in the company today.

Press Release

Press Releases done today are mostly all electronic. Sometimes companies have very few hours within which they have to submit their press releases and this could be a area you might want to break into.

What is the most effective way to transfer $180,000 from the United States to Israel?

Tue, 06 Dec 2016 18:16:03 +0000

Faisal KhanAnswered Dec 6, 2016

Tipalti or Payoneer - both Israeli based and would love to take this transaction off your hand and move the money for you.

What does FOB mean exactly?

Sat, 03 Dec 2016 18:03:28 +0000

Faisal KhanAnswered Dec 3, 2016

Indicating "FOB port" means that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination.

Source: Wikipedia: FOB (shipping)

Was HSBC involved in money laundering?

Thu, 01 Dec 2016 17:59:24 +0000

Faisal KhanAnswered Dec 1, 2016

Was HSBC itself laundering money. No it wasn't. Was the bank being used to launder money, yes it was.

Why you ask? Simple answer: loophole/hack of having a bank with weak-controls.

The main issue at the time was the deficiencies in the anti-money laundering system within HSBC that cause its bank to be used for money laundering. Such deficiencies resulted in over 17,000 suspect transactions that should not have gone through (or at least be flagged), to go through.

All in all, HSBC did not have adequate controls in place, which it should have to monitor the US$ 60 Trillion in wire activity that the bank performed.

Because HBUS (HSBC US) was the conduit, the US financial system was exposed to the laundered money.

Which asset class does gold fall under?

Thu, 01 Dec 2016 17:59:23 +0000

Faisal KhanAnswered Dec 1, 2016

It doesn't fall in any of the classical three asset classes.

The extended asset classes include real-estate and commodity and gold falls in the latter.

What did the Dutch banking system look like in the 18th century?

Thu, 01 Dec 2016 17:59:21 +0000

Faisal KhanAnswered Dec 1, 2016

English and Dutch ships taking on stores at port by Jacob Knyff

To understand the Dutch banking in the 18th century, one needs to understand what the Dutch were predominantly engaged in during the period: Trade.

The Dutch banking in the 18th century was predominantly what we would call today trade banking and commercial banking,

Because of the emergence of Vereenigde Oostindische Compagnie, VOC, better known as the Dutch East India Company, merchant banking was the most active segment in banking at the time.

The Dutch built their ships (called: Fluyts) faster than anyone else (England being their closest rival). This meant more cargo and people, at a prices less than the competition.

Figure 1: A Dutch Fluyt

All this needed banking.

Ships needed to be built and hence financed.
Voyages needed to be financed.
Cross-country trade relationships needed to be established (bater, gold/silver and promissory notes).
Insurance (which was also handled by the banks).
Letter of credits for the trade houses all over Europe, and those working with the Dutch colonies all over the world.
Manufacturing within Netherlands (shipping especially) also needed financing.
Correspondent Banking for the Dutch East India Company.
Etc.

Figure 2: The shipyard of the Dutch East India Company in Amsterdam. 1726 engraving by Joseph Mulder.

Because of the trade that was happening in Europe (started by Marco Polo, with currency notes), banking & finance was slowly taking shape. As new markets opened up and presented new opportunities, the Dutch, British and Italian bankers found niche and innovative means to finance trade. Many a times this resulted in a totally new banking element (for example correspondent banking was established when the colonies expanded and banks established branches within these colonies).

Figure 3: Colonial Trade Routes

17th century saw the start of the trade, but 18th and 19th century saw the Dutch coming of age in trade and banking. Anyone and everyone in Netherlands at the time wanted to make money in trade, for Dutch manufacturing was very limited at the time, and the one thing they were good at was shipping and ship building.

All ancillary industries and branches because of traveling the high-seas, especially trading, put banking on a new plateau every few months. A lot of genuine innovation for the very first time in banking, happened during this period.

What is the difference between CIP, IDV, and KYC?

Thu, 01 Dec 2016 17:59:19 +0000

Faisal KhanAnswered Dec 1, 2016

IDV (ID Verification) is the verification of an ID to determine its authenticity. Passports for example have a passport reader / scanner that will determine if the passport is fake or genuine and could possibly also include checking against a database.

KYC (Know Your Customer) is the process by which you need to know the customer. This includes ID verification, taking other ancillary information like where you currently live, your employment (optional), copies of utility bills (optional), address verification, etc. It is ideally suppose to provide you a better profile of your customer.

CIP (Customer Identification Program) is the KYC + checks against various blacklists or other government watch lists.

How easy is it for a non-resident to open a bank account in Singapore?

Thu, 01 Dec 2016 17:59:17 +0000

Faisal KhanAnswered Dec 1, 2016

For tourists, it is not possible (last time I checked). You need residency proof to open an account (utility bill, employment letter, etc.).

Which regulated financial company in the EU offers an excellent onboarding experience?

Sun, 06 Nov 2016 18:16:02 +0000

Faisal KhanAnswered Nov 6, 2016

iZettle - their onboarding experience is superb!

iZettle – Accept credit card payments with your iPhone, iPad or Android

For SEPA Direct Debits, Sign2Pay which solves the mobile commerce problem as far as SEPA Direct Debits payments are concerned. Their onboarding experience for merchant is smooth.

http://www.sign2pay.com

Are U.S. banks generally willing to open accounts for U.S. companies owned by non-residents?

Sun, 06 Nov 2016 18:16:00 +0000

Faisal KhanAnswered Nov 6, 2016

As long as you have the right documentation for your company and are present in person with the correct KYC documents, you will not have any problems opening an account.

There are, however, a couple of exceptions:

If your business comes under one of the categories defined in Operation Choke Point, you would be hard pressed to find banking.

If the Relationship Manager does not seem convinced as to the nature of your business, you might be declined or your application would be put on hold, till such time you can provide additional information.

If your source of funds are questionable, they might deny you banking.

If your name is listed on any of the block lists, you would be denied banking and reported.

How can I find a payment service provider whose services I can resell?

Sun, 06 Nov 2016 18:15:59 +0000

Faisal KhanAnswered Nov 6, 2016

Barring the technology integration you are talking about, you seem to be defining what is essentially an ISO program.

You would be hard pressed to find a PSP that is a principal member of VISA &/or MasterCard and is registered with them as a Payments Facilitator to allow you to white-label their services with a markup.

Most PSPs are full-stack solution providers and the rates etc. that they have are as per VISA/MC defined rates. They, the PSPs are already working on discounted margins as they split with the acquiring bank on the fees earned and in some cases take a little bit of money from being a gateway.

The VISA/MasterCard rules prohibit marking up rates on already defined merchant categories, so no PSP is going to risk that with you.

If you have adequate volume, etc. they might white-label it for you, but then you'd have to be talking of significant volume for them. They would be happy to sign you up as an ISO (if they offer one), and would much underwrite and interact with the client directly.

What are the requirements to become an ACH processor?

Sun, 06 Nov 2016 18:15:57 +0000

Faisal KhanAnswered Nov 6, 2016

You need to have a working relationship with a licensed financial institute (read: a bank) that is a member of NACHA.

You build your offering on top of the file protocols that the bank will provide to you for submission and clearing.

Many banks offer this as part of a payments institution program. You do not have to be licensed as a money transmitter to do, as you are not touching the funds, the bank is and they are forwarding the funds. If you are engaged in an ACH Pull, then you follow the guidelines of the bank for underwriting and approval of all ACH Pull clients.

Simply inquire within a bank that offers an ACH program onto which you ca build as a SaaS provider for their financial product, which is an ACH.

Why is Simple not classified as a bank?

Sun, 06 Nov 2016 18:15:56 +0000

Faisal KhanAnswered Nov 6, 2016

Are you asking why they are not a bank (i.e. why did they not opt for a bank themselves and build their product natively?) in that case the answer is that it is an extremely long go to market strategy.

If you are asking why in their current form they are not classified as a bank, it is because they are a wrapper of sorts to an already existing bank. They negotiate wholesale pricing and then work on the differential pricing to offer stellar services, whilst at the bank-end, the depository, transaction and reporting functions are governed by the bank. What Simple does is that it provides you with a kick-ass interface, signup, status screens, Internet Banking, Customer Support, etc. so all your touch points make it seem like you are dealing with a new bank itself, when in reality you're not.

Because they don't touch the money in any shape/manner or form, they are not required to be a bank, there already is a licensed bank at the backend. Think of them as a financial SaaS.

Which debit card works best for online shopping in Pakistan?

Sun, 06 Nov 2016 18:15:54 +0000

Faisal KhanAnswered Nov 6, 2016

MCB Lite by MCB Bank.

Which prepaid cards in the United States allow receiving money from individuals?

Sat, 05 Nov 2016 18:14:35 +0000

Faisal KhanAnswered Nov 5, 2016

Payoneer card. Www.payoneer.com

Is making a wire transfer through Chase secure, and how can I verify its safety?

Sat, 05 Nov 2016 18:14:34 +0000

Faisal KhanAnswered Nov 5, 2016

Millions of people do it every year, so you should be safe. If it is your first time and you want to know the best (read: safest) way to conduct the transaction, visit your bank branch and ask them to assist you.

How does a bank connect into the broader financial system?

Sat, 05 Nov 2016 18:14:32 +0000

Faisal KhanAnswered Nov 5, 2016

Almost every bank in the world will first have a ledger account with the Central Bank of the country. This is how wealth distribution and recording starts.

By having a ledger with the central bank implies that the banks, deposits, etc. are now being tracked by the financial regulator on a daily basis. The next step usually is for the bank to get on board the RTGS system. Universally, almost all countries have some form of a real-time gross settlement system, this allows large payments to be settled via the system with other banks.

The next logical step is to connect the CBS (Core Banking Software) to the central payments switch. In some countries they don't have it (US for example), and in other countries they do (India, Pakistan, UK, etc.). Needless to say, this varies in each country. Some may have a single payment system other multiple, etc.

From here onwards, it is just a matter of how many payment systems and networks the bank would like to connect to. The central bank usually assigns a minimum criteria.

What is school banking, and how is it practiced in Asia?

Wed, 02 Nov 2016 18:02:30 +0000

Faisal KhanAnswered Nov 2, 2016

Basically, an early adoption program for children whilst still in school, to learn how to save. Pennies a day or week, add up.

Banks believe that teachings kids early about the aspect of financial management and responsibility would be a good thing.

In Asia, it is being implemented in pockets. Nothing major. Its the same flavor all around the world.

Is it common for small banks or credit unions to fail or shut down?

Wed, 02 Nov 2016 18:02:29 +0000

Faisal KhanAnswered Nov 2, 2016

Yes, it is common. The FDIC steps in, and pitches the assess/deposits of the bank to a much larger bank who would be willing to absorb the deposits and the accounts of the depositors.

What is the MT103 SPP format for funds transfers, and why don’t most banks support it?

Wed, 02 Nov 2016 18:02:27 +0000

Faisal KhanAnswered Nov 2, 2016

This is the SWIFT message format for a transfer. All banks that connect to the SWIFT network, support it.

Why do people accept extremely high bank service charges for ATM usage?

Tue, 01 Nov 2016 17:59:16 +0000

Faisal KhanAnswered Nov 1, 2016

If you are referring to using 3rd party ATMs, i.e. ATMs not owned by your bank, consider the following:

The ATM in question is allowing you to access your bank account.
It does so by connecting to interbank networks and then connect to your bank's ATM host for the transaction.
This transaction could be international (in which case, an FX component might be involved).
The cash being presented to you by the ATM also has a cost to it.

Factor all this in, to make it convenient for you, banks or ATM operators will levy a charge. This is what you're paying. Believe me when I say, there are a lot of parties involved in this transaction, so if you're being charged $1 or $2 to access the ATM, it is rightly so.

How much black money has moved through hawala channels?

Tue, 01 Nov 2016 17:59:14 +0000

Faisal KhanAnswered Nov 1, 2016

Using 2011 data and extrapolating it for 2013, the number was US$ 415* Billion through Hawala remittances. Needless to say this is as always an estimated number.

By all fair accounts, it can be said with relative confidence, that the black market for Hawala for illegal funds transfer is equal or nearly equal to the formal remittance market size.

*Source: Anthemis Newsletter, June 2013.

Do merchant accounts support third-party billing, and does PayPal allow this?

Sun, 09 Oct 2016 18:20:13 +0000

Faisal KhanAnswered Oct 9, 2016

You're aggregating payments on your marketplace. For VISA/Mastercard you need to become a PF (Payments Facilitator) yourself, if you plan on completing and processing payments, without the use of a third party payment processor.

You can use full-stack platform providers like WePay (no affiliation), who enable processing for marketplaces. The underwriting would still be done, but you would most likely need to apply as a marketplace with VISA/MC directly as an aggregator by becoming a principal member.

What actually happens behind the scenes during an international money transfer?

Sun, 09 Oct 2016 18:20:11 +0000

Faisal KhanAnswered Oct 9, 2016

The following set of answers, answer just that. In all aspects. Read these and you will thoroughly understand how money transfers happen:

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to How does money transfer between banks and different countries work?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How do Bitcoin remittances work?
Faisal Khan's answer to Where are countries' bank accounts held?

How can I get my Payoneer debit card delivered to Ghana?

Sun, 09 Oct 2016 18:20:10 +0000

Faisal KhanAnswered Oct 9, 2016

When you sign-up, they will ship one to you, at your address for which you have supplied your KYC information. If you haven't received it (it takes about 2 weeks) then you can always ask for a replacement card (which might carry a cost to it).

Can India issue a national ID in the form of a debit card like Nigeria has done?

Wed, 05 Oct 2016 18:14:31 +0000

Faisal KhanAnswered Oct 5, 2016

The answer is yes. It can be done. Will it be done? Probably not. Whilst the RuPay vs Card Association battle rages on, I don't see the government issuing a national ID tied into a debit card.

There is much collusion in such a scenario, and with a market as big as India, it begs a lot of questions to be asked. Will it be an association? Will multiple cards be linked to it? Will it be purely domestic rails or international or both? Will interchange still matter? etc.

How can you cash a personal check if you don’t have a bank account?

Wed, 05 Oct 2016 18:04:53 +0000

Faisal KhanAnswered Oct 5, 2016

If the check is a bearer name check and is not endorsed as Payees Account Only, you can visit any branch of the bank on which the check was drawn and present your ID and cash out.

Needless to say, the check has to have your name on it.

What are good rule-of-thumb guidelines for selling stocks?

Mon, 03 Oct 2016 18:03:26 +0000

Faisal KhanAnswered Oct 3, 2016

The golden rule above, needless to say always works. For anyone who buys and sells stocks, you need to have a strategy and commit to that strategy.

For example I know a lot of day traders, who have a day-trade strategy of -3% (sell), and +1.5% (sell). So if a stock they buy at US$ 100, hits US$ 101.50, they sell. If the stock goes down to US$ 97.00 they sell. They do not enter into the market till the next trading day. It is self-discipline that they exercise, because at the end of a losing day, they still have 97% of wealth.

Some buy stocks for the long run, if that is the case, then buy and forget - till such time you have allowed yourself to sell it off. For example, some people will buy a stock and would like to own it for a minimum of 5 years, and they do just that. They simply do not bring that stock into trade for 5 years. All this is backed by reasoning in form of dividends, research, your outlook, etc. So YMMV.

A very important point when considering selling stocks is to ask, what will you do with the money next? Enter the market again? Is the market too high? Is a correction due? etc.

Are services like P2PCash or Abra close to disrupting the international remittance market?

Mon, 03 Oct 2016 18:03:25 +0000

Faisal KhanAnswered Oct 3, 2016

I cannot stress this enough, nothing is free. Just because it says it is free, does not mean it is. What an average user probably cannot see or decipher is how a company may be making money somewhere in the transaction value chain.

Some companies introduce a promotional time regime where they will subsidize the cost of the transaction, because it is cheaper that way to acquire a customer versus say traditional customer acquisition methods. But that would be time limited. For sure.

Facebook's payments are not free. They are onboarding clients. Once enough clients have been on-boarded they will spend money at merchants, and this is where Facebook Payments will make money. Brian Roemmele has already covered this in:

Brian Roemmele's answer to How can Facebook Messenger payments be free?
How Facebook Payments Will Become A Micro-Merchant Payment System And Change Everything.

Payments within the same ecosystem can very easily be made free, as it is nothing more than a container movement of record. Quite a few companies offer international remittances for $0 fees, and equally no fees charges on the receiving end, but this also means, that money has to be made somewhere, and that somewhere is the Foreign Exchange Rate (FX). So if one company says, it is $0 to send, rest assured, they are making money on FX, which implies the FX rate is not the very best.

The free-send model was started in Pakistan and is the basis of perhaps 25%-to-30% of all remittances coming in. (See: Faisal Khan's answer to What does "free send model" in remittance/money transfer imply?)

P2PCash nor Abra are not disrupting the international remittance market. The free-send model, the pre-fund instant model, the 3-day settlement-instant pay model, etc. all have been there for a while now. Its just that companies are trying to repackage the same with different payment rails, marketing or payment routes.

The real-disruption will come when crypto currencies etc. are legalized in the all the countries/territories through which they traverse.

The ability to do value transfer does have it advantages, but the opposing force is licensing and legal reforms.

What happens to a country if it is disconnected from the SWIFT system?

Mon, 03 Oct 2016 18:03:24 +0000

Faisal KhanAnswered Oct 3, 2016

Needless to say the ability to use the SWIFT platform for any form of international wire-transfers is no longer an option.

The banking impact is that wiring money in to and out of the country which has no SWIFT becomes inherently very difficult. It is not impossible, just extremely difficult.

If a country X has say 50 banks and the country has been cut off from the SWIFT system (for some reason), the 50 banks and the central bank now may no longer have an option to service SWIFT wire transfers directly. However, think about another country Z which has good trade & banking relations with country X, might act as a proxy for all SWIFT transfers.

What country X & country Z would need to do is agree on how to settle funds, etc. (which is not a big deal).

However, political and/or other sanctions can result can be placed in such a way, that proxy payments into country X are not allowed.

The alternate is for country X is to establish correspondent relationships with other regional countries and their banks to do a one-on-one trade and entirely give up on international wire transfers via SWIFT.

Good ol' telegraphic transfers do still work and are implemented in banks. SWIFT just happens to be a very efficient method of exchanging money.

Which bank does Facebook use to process payment transactions?

Sun, 02 Oct 2016 18:02:26 +0000

Faisal KhanAnswered Oct 2, 2016

Not sure about the bank, none of Facebook's 10-K filings mention the banks that they work with, though their primary bank is JP Morgan Chase.

Their credit/debit card processor has been Adyen for long.

http://www.adyen.com

Which countries have the most advanced banking systems?

Sun, 02 Oct 2016 18:02:24 +0000

Faisal KhanAnswered Oct 2, 2016

Personally, I rank the UK, Germany and the Nordic countries as the list toppers. Their offering of services, regulation (especially the UK) and technology used in many cases is 5-10 years ahead of their counterparts.

This is purely from an overall banking point of view and not isolating a specific bank, incident or product.

The UK regulations are perhaps one of the best in the world. They can be summed up as: easy peasy lemon squeezy!

The product offering, again UK and Germany are probably ahead of everyone else, with the UK taking an edge.

Technology, all equal, with perhaps Denmark and Germany having an edge.

I'm not sure what the OP means by power, but if you mean, the overall regulatory framework that protects the consumers, and financial oversight, then Germany, Sweden and Norway top my list.

Which types of payment methods are safest?

Sun, 02 Oct 2016 18:02:23 +0000

Faisal KhanAnswered Oct 2, 2016

I've been working on a mindmap for all things money, and one branch is Payment Methods. Snapshot attached below. It is still a work in progress.

I want to become a risk manager at a bank or company—does this offer strong long-term career growth?

Sun, 02 Oct 2016 18:02:21 +0000

Faisal KhanAnswered Oct 2, 2016

Solid path. Add to this two areas:

Anti-Money Laundering (CAMS)
Banking & Payment Law

Study these two fields and you will have a career that is always in demand.

What should eBay’s business model become in a world where PayPal is no longer part of it?

Sun, 02 Oct 2016 18:02:19 +0000

Faisal KhanAnswered Oct 2, 2016

Agnostic. People ought to be able to pay with any payment instrument that Ebay is able to process. In a competitive world like today's being tied to a singular payment method doesn't make sense any more.

If I give my virtual assistant access to my SunTrust business online banking for reconciliation, could they view my account number or initiate transfers?

Sun, 02 Oct 2016 18:02:18 +0000

Faisal KhanAnswered Oct 2, 2016

If he/she access to the OTM (Online Treasury Module) then they would need a transaction PIN to be able to do any transfers, I suggest, do not share the PIN.

Can central banks own assets like real estate, or would that conflict with their mandate or relationship to markets and government?

Sun, 02 Oct 2016 18:02:16 +0000

Faisal KhanAnswered Oct 2, 2016

Most central banks would only buy property for establishing a bank's branch or training office.

Central banks are not in the business of buying/selling real-estate. The only exception to this rule would be a government/board backed decision to do so.

In a modern banking era, why are wire transfers still limited over weekends and take multiple days?

Fri, 09 Sep 2016 18:20:07 +0000

Faisal KhanAnswered Sep 9, 2016

Talking from a global perspective, switched payments are automated, but wire transfers, where ledger balances need to be adjusted, are done only during work days, during the appointed time when the batches are processed.

Most of this has to do with the legacy systems and legacy thinking that manual intervention, assessment of all transactions coming through must be done. Some of the concerns are genuine, some are not. The actual wire transfer is just a message format, and is instant (in 90%+ of the cases). It just that the receiving party then needs to process this and acknowledge it, and the correspondent banks involved then need to work with all to settle the ledger differences.

In some instances, the answer is different weekends, for example if a wire transfer is done on a Thursday afternoon from Chicago (USA) to Abu Dhabi (UAE), Thursday is essentially a half-day in UAE as Friday/Saturdays are off days (weekend), so the wire would not arrive or be acknowledged till Sunday and then processed till perhaps Monday to reflect into the account.

What factors influence how people choose a channel for international money transfers?

Fri, 09 Sep 2016 18:20:02 +0000

Faisal KhanAnswered Sep 9, 2016

Very open-ended question, as the variables differ from territory to territory. In general, some of the common factors are:

Strong endorsement (recommendation) from someone they know they can trust or have a rapport with.
Receive side recommendation
Cost, speed and ease
Familiarity

Other factors do come in play, but these (IMHO) are the most important ones.

How difficult would it be to seriously disrupt Western Union’s core business?

Thu, 08 Sep 2016 18:18:09 +0000

Faisal KhanAnswered Sep 8, 2016

It would be pretty difficult to disrupt WU's model, purely because of their brand recognition and distribution network.

To roll-out a model that is homogenous to appear as one, even when dealing with 1000s of different networks and entities, takes a lot of money and time. Other MTOs are trying to set themselves apart on this very fact, but turns out, it is not easy.

To have a ubiquitous solution similar to WU, today almost seems like a utopian dream.

Put 5 people in front of a white-board and they will come out with a disruptive enough business. The question that then begs to be asked is: How many people will use it? (i.e. traction).

Is it realistic to start a business with little or no capital, and how could it be done?

Thu, 08 Sep 2016 18:18:08 +0000

Faisal KhanAnswered Sep 8, 2016

Become a broker, an intermediary who finds the Buyer and connects them to the Seller (or vice versa).

What are the practical steps to execute a bill-payments startup idea?

Thu, 08 Sep 2016 18:18:06 +0000

Faisal KhanAnswered Sep 8, 2016

I would second what Hillary Quirk has cited. Synapse Pay. 25 cents, direct ACH.

What would happen if the U.S. dollar lost its position as the world’s primary reserve currency?

Tue, 06 Sep 2016 18:15:53 +0000

Faisal KhanAnswered Sep 6, 2016

Eventually? Perhaps Yes. If more trade and demand moves East, China's Renminbi would be the next reserve currency of choice for many. This could particularly be of value if some of the OPEC states decide to shift the Renminbi way.

For the next two decades, the US Dollar remains dominant.

What is the best method to transfer $200,000 from the Philippines to the United States?

Tue, 06 Sep 2016 18:15:51 +0000

Faisal KhanAnswered Sep 6, 2016

If you have a genuine audit trail for the source of the money, I usually advise clients to wire transfer (bank transfer) the money using your bank in Philippines to the bank in the US.

Some try using 3rd party money exchange companies, which is also okay, but go with reputed FX money transfer companies, not the shady kind. The risk with shady businesses is that the money being wired into your US account could be coming from various different sources and the audit trail will be broken, it will not all converge to your original amount back in the PH.

What are the national benefits of plastic money and cashless transactions compared to cash?

Tue, 06 Sep 2016 18:15:50 +0000

Faisal KhanAnswered Sep 6, 2016

The basic premise is for the government and the regulatory institutions to have a better insight as to the transactions / commerce taking place inside a given economy.

It also makes money laundering that much harder when all the load points are monitored.

The penultimate goal is to have better tracking & records for purposes of taxation.

In developing markets and in some cases in emerging markets, there is a high price to pay for currency circulation. Cash management costs should also not be forgotten.

In certain geographies (India/Pakistan for example) there is a huge mistrust between the two countries and there are alleged incidents where counterfeit currency has been printed and flooded across the border. Electronic money mitigates this threat.

Corruption is another arena. Cash based transactions would be difficult to structure.

What are the best Check 21 processing providers for startups?

Fri, 02 Sep 2016 18:02:15 +0000

Faisal KhanAnswered Sep 2, 2016

Difficult to answer based on the lack of information supplied. It all depends what sort of business you are in? Are you processing Check21 for out of state? for payroll? for over-seas US checks? On behalf of an aggregator processor? etc.

Your best bet as a start up is to talk to your bank and see if they can facilitate in your Check21 processing needs. The bank will let you know if they can or cannot process for you, based on the nature of your business.

Are all paper checks processed through the ACH network?

Fri, 02 Sep 2016 18:02:12 +0000

Faisal KhanAnswered Sep 2, 2016

No. Not all. The bulk of the checks processed today are Check21 cleared checks, i.e. via check truncation, with the image letter going forward for processing.

What role do central banks play in today’s globalized financial system?

Fri, 02 Sep 2016 18:02:11 +0000

Faisal KhanAnswered Sep 2, 2016

Same as it was previously. To regulate so that rogue or reckless financial institutions can be controlled, to ensure public safety of money, to be the authorized entity for your specific currency and to keep ledger checks with the rest of the world banks.

All this is done through a monetary policy which is then enforced and regulated.

A good paper to read on this subject is: Page on ecb.europa.eu [Working Paper No. 412, The history of interbank settlement arrangements: exploring central banks’ role in the payment system by Ben Norman, Rachel Shaw and George Speight (June 2011)]

What do the Winklevoss twins understand about Bitcoin beyond wanting to profit from it?

Fri, 02 Sep 2016 18:02:10 +0000

Faisal KhanAnswered Sep 2, 2016

Probably more than an average investor. Because they have invested so much, they have come into contact with more information and avenues concerning bitcoin than you and I would.

It is a classical case of put your money where your mouth is and they certainly have demonstrated that. They believe it will take off and be worthy of the investment they have made in it.

How do remittances impact the country where the immigrant is employed?

Fri, 02 Sep 2016 18:02:08 +0000

Faisal KhanAnswered Sep 2, 2016

Not so much. A county's daily transaction of money is probably much larger a number than the amount of remittance that leave it. Unless a county has an extremely large diaspora living amongst it, the effect are negligible.

How can an online B2B portal position itself as an intermediary in payments?

Thu, 01 Sep 2016 17:59:13 +0000

Faisal KhanAnswered Sep 1, 2016

From a VISA/MasterCard point of view, if you are already a merchant, to become an intermediary (or a marketplace) is to qualify for the PSP (Payment Service Provider) program, or more specifically, become a PF (Payments Facilitator).

So, the first step is to contact your acquiring bank and see if they would on-board you as a PF? (also would help if you talked to VISA/MasterCard rep in your area).

Secondly, look if there is any central bank / financial regulator legislation that would require you to get a PSP license for becoming an intermediary in payments.

Is Bitcoin dead or declining?

Thu, 01 Sep 2016 17:59:11 +0000

Faisal KhanAnswered Sep 1, 2016

No. Bitcoin is indeed growing. Don't look at the price, as that is not indicative of the growth or lack-thereof.

Whilst many people will argue against the indicator below, I always look at transaction volume growth for new systems as good short-term indicator (5 years) to understand if the technology is growing or not.

Bitcoin: Number of Transactions Per Day

The trend is clearly growing.

Is there a way to bypass Venezuela’s strict FX controls using Bitcoin?

Thu, 01 Sep 2016 17:59:10 +0000

Faisal KhanAnswered Sep 1, 2016

Legally: No. Period.

Why can’t ACH transfers be processed instantly?

Thu, 01 Sep 2016 17:59:09 +0000

Faisal KhanAnswered Sep 1, 2016

The US does not have a centralized switch to which all its 9,000+ financial institutions connect to and settle electronically.

There is a great podcast on this, one that you would enjoy listening to a lot: Episode 489: The Invisible Plumbing Of Our Economy

What does “core capital” mean for a bank?

Thu, 01 Sep 2016 17:59:07 +0000

Faisal KhanAnswered Sep 1, 2016

Its Assets minus its Liabilities. That's the bank's capital.

What would happen if a government issued a tender to an individual to set up a privately owned central bank?

Thu, 01 Sep 2016 17:59:06 +0000

Faisal KhanAnswered Sep 1, 2016

There sure would be a lot of hue and cry over it. I'm pretty sure, someone will try to go to court to stop it.

No to question your question, but why the government would like to setup a private central bank, I don't know, but let us assume that is the case, then this person's credentials for setting up the bank would have to be very good.

The greater question is, what would this private central bank be doing? Would it be the official bank for this country to set the monetary policy and control money supply? Dangerous precedents one is setting. It would be too non-transparent, and would most likely be open for review.

There are a host of problems with such an undertaking.

Possible? Yes! Probable? No.

What are the most affordable ways to do international bank or money transfers?

Thu, 01 Sep 2016 17:59:04 +0000

Faisal KhanAnswered Sep 1, 2016

For US$ 500 Million (Dollar to Dollar transfer), your bank should be able to facilitate this transfer via SWIFT, would probably cost you under US$ 100 to do it. For a transaction of this size, it would be most likely run through direct settlement (bank-to-bank).

For US$ 500 Million (Dollar to Some-Other-Currency), pick up the phone and call up your bank's FX/Treasury department and find out what rate you are getting? Additionally call up folks like USForex and many other currency FX brokers and let them fight over your business.

Which US bank is best for a foreign worker with no US credit history?

Tue, 09 Aug 2016 18:19:58 +0000

Faisal KhanAnswered Aug 9, 2016

Credit history is not a prerequisite to opening a bank account. You can open an account with any bank. The big four are usually the recommended ones (Bank of America, JP Morgan Chase, Citibank and Well Fargo), other than this there are a ton of regional or small national banks you can opt for.

BoA is not a bad option.

How does Droplet Pay work from a technical architecture perspective?

Tue, 09 Aug 2016 18:19:57 +0000

Faisal KhanAnswered Aug 9, 2016

It is presumably a bluetooth enabled app, if not on bluetooth, then it will connect via the internet.

Based on proximity, the merchant app initiates the payment, which you receive on your phone (via your droplet app) and authorize the payment.

The payment token is sent to the merchant, which is then sent to the backend processor for processing giving both you and the merchant a successful authorization.

How does Kash function at a technical or system level?

Tue, 09 Aug 2016 18:19:55 +0000

Faisal KhanAnswered Aug 9, 2016

Kash is no different from say Synapse Pay. Basically, you're logging into your bank account, and the app then pulls out your bank account, routing number, and other necessary information from your supplied login to then create an ACH pull request and pull the money out from your account, the self-login is the basis of your authorization (via the terms of service).

When you login into your internet banking, it can also check to see how much money you have, thus assigning you with a score with regards to risk, to see if the ACH will actually be honored or not.

How can I recover funds from an offshore bank account that has completely stopped communicating?

Tue, 09 Aug 2016 18:19:54 +0000

Faisal KhanAnswered Aug 9, 2016

Find out who the regulator of the bank and see if this bank is properly chartered/licensed. Writing to the regulator is sure to solicit a response.

In addition to the emails you might be sending, also send them a registered letter, highlighting your previous communications (print them out).

In addition see there is banking ombudsman in the area and write to them as well.

They must have a telephone number, call them up, let them know you are recording the call (and do make arrangements to record it) and speak to someone to find out why they are not communicating back to you.

If all else fails, go to bank branch and meet them in person, at the same time formally register your complaint via a letter that should be stamped and received by the bank.

Why is financial inclusion especially important for developing economies?

Tue, 09 Aug 2016 18:19:53 +0000

Faisal KhanAnswered Aug 9, 2016

I'll start by giving an example of what Bill Gates said:

https://www.youtube.com/watch?v=...

To touch upon certain points...

"Poor people do have assets, their intellect, their labor, their savings, the problem is they don't have financial tools to capitalize on these resources. They are trapped in an inefficient cash economy that robs them of opportunities to insure themselves against risk, invest in their productivity and ultimately to help uplift them out of poverty"

"...innovations like vaccines and high-yielding crops have changed the future for billions of people. Here in the cusp of another breakthrough innovation including the poorest in a financial system that increases, instead of limiting the value of their assets."

People who are unbanked or are not financial included, don't have access to various financial services like:

Building Credit
Access to Loans
Savings
Insurance
Investment plans
Retirement planning
Access to emergency loans (for things like medical emergencies, etc.)
educating them how to be financially better at what they do
Understand how money works in a digital world and how they can do more in the digital world.

Two excellent resources, that I would recommend to learn more about financial inclusion are:

Maya Declaration (See: Page on afi-global.org)

and CGAP's FAQ on what financial inclusion is all about: Microfinance Frequently Asked Questions

Can Stripe, PayPal, WePay, or Braintree be used by companies that aggregate third-party payments?

Tue, 09 Aug 2016 18:19:51 +0000

Faisal KhanAnswered Aug 9, 2016

Yes, they can be used, however, they will need to see how much you're processing, what sort of a marketplace (or aggregation) you're running, and if you are offering services that would be classified as money transmission, or would require you to be an MSB (Money Services Business). If that is the case, they may/may-not take your business.

As per my knowledge and please if this has changed, correct me, according to VISA/MasterCard rules, an aggregator (for payments processing) cannot take on another aggregator (for payments processing) if the latter is not registered as a principal member with VISA/MC as a PF (Payments Facilitator). This is essentially saying a payments aggregator on top of a payments aggregator needs direct approval.

Which payment gateway platforms allow regulated financial services businesses to operate?

Tue, 09 Aug 2016 18:19:50 +0000

Faisal KhanAnswered Aug 9, 2016

There are a few providers who would allow processing and gateway services for MSBs / Financial Services Business (as you put it).

Many processors don't allow MSB business because of the risk associated with it, considering they don't have complete visibility into all the transactions, since you're aggregating them (in most cases).

Most consultants I know charge a pretty penny to introduce you to companies who do provide processing for MSBs, and this would include Check21 clearing, ACH and Debit/Credit Card processing.

Between PayPal and Visa/Mastercard, which is more likely to remain dominant long-term?

Tue, 09 Aug 2016 18:19:48 +0000

Faisal KhanAnswered Aug 9, 2016

I think both will survive. To have one single monopolistic payments company would be unlikely (especially in Europe). If both the companies are kept on their toes (which they are) and they keep on acquiring (which they are), it would be difficult to displace them. I agree with Keith Sibson regarding PayPal, PayPal is a contender, but it still has a long way to go.

VISA seems to be more active, but then MasterCard is not behind, they are very much involved in inserting themselves in major payment networks and solutions, so at this time, extremely difficult to predict if one of them will go bust or be acquired.

How can I check the status of a Western Union money order?

Mon, 08 Aug 2016 18:18:05 +0000

Faisal KhanAnswered Aug 8, 2016

Western Union provides a MTCN (Money Transfer Control Number). Every WU receipt carries the number. You can track it here: Track a Transfer | Western Union

How can someone receive money online from PayPal-based companies if PayPal is not supported in their country?

Mon, 08 Aug 2016 18:18:03 +0000

Faisal KhanAnswered Aug 8, 2016

At present a system like this is not in play. However, various organizations are working towards enabling PayPal to allow this, and Paypal is cognizant of the demand.

Joel Yarbrough can answer better.

How do Western Union agents deposit customer cash into Western Union’s banking system?

Mon, 08 Aug 2016 18:18:02 +0000

Faisal KhanAnswered Aug 8, 2016

Western Union usually has a designated bank (sometimes multiple banks) for each territory they operate in. Agents are required to open an account there. These accounts get replenished every day based on the net settlement of the transaction that an agent does.

In some countries, you are not required to open an account with the same bank, you just get the funds credited to your bank account.

Do gift card companies need a FinCEN money transmitter license for reloadable cards funded with cash?

Sun, 07 Aug 2016 18:17:08 +0000

Faisal KhanAnswered Aug 7, 2016

First of all, FinCEN does not provide you with any money transmitter licenses. FinCEN is a federal regulator/oversight body and you need to register with FinCEN, but that does not mean you have money transmitter licenses.

To obtain money transmitter licenses, you would need to apply for the same with all the individual US States.

Regarding your question, if your gift card is closed loop, then no license is required, however, if it is multipurpose and open-loop, then a money transmitter license is required.

If you would be loading Litecoins, that would deem it to be open-loop as Litecoins can be exchange for value-transfer, hence money transmitter licenses would be required.

What is the best online payment method to pay a U.S. company’s Russian employee?

Sun, 07 Aug 2016 18:17:06 +0000

Faisal KhanAnswered Aug 7, 2016

Yandex Money & QIWI are your best options.

Яндекс.Деньги (Yandex Money)
Visa QIWI Wallet (QIWI)

Can a bank avoid liability if a bank executive commits a scam in the bank’s name?

Fri, 05 Aug 2016 18:04:51 +0000

Faisal KhanAnswered Aug 5, 2016

If a bank executive (read: employee) commits a scam, then the burden of proof lies on the bank and the investigating LEA to establish just that. If the account owner had no part in the scam and were genuinely scammed by an employee of the bank, by their actions, then the bank is responsible.

This is why banks have Errors & Omissions insurance, in addition to their own risk & compliance assigning and setting aside money for such unforeseen events in which the bank may be liable.

What lesser-known services does Bank of America offer?

Fri, 05 Aug 2016 18:04:50 +0000

Faisal KhanAnswered Aug 5, 2016

They have a concierge service for their Bank of America Accolades American Express Cardmembers, called WorldPoints.

Why does TransferWise charge around 0.5%—is it purely operating costs or are there intermediary bank fees involved?

Fri, 05 Aug 2016 18:04:48 +0000

Faisal KhanAnswered Aug 5, 2016

They are a for-profit company, they will charge a fee to make money. They may incur one or multiple parties during the trace of the transaction and the fees is to cover that and make them money.

How does online banking work, and why can’t a hacker simply increase an account balance without stealing from somewhere else?

Fri, 05 Aug 2016 18:04:47 +0000

Faisal KhanAnswered Aug 5, 2016

The whole banking system is based on multiple ledger. Every person has a ledger. All the accounts in a branch have a ledger. In some cases, all branches in particular geographic zone have a ledger.

When you add balance into an account, but hacking into it, the other ledgers don't have the same time stamps and ledger movement, thus denoting an anomaly.

Even though the system is closed, it is ledger positions that are consensus based amongst the multiple ledgers in the CBS as well as between banks.

Banks: How difficult is it to start a bank?

Fri, 05 Aug 2016 18:04:41 +0000

Faisal KhanAnswered Aug 5, 2016

Its not a matter of how difficult it is, but the question of Is it allowed by your financial regulator?

The online portion is just a means to access, the tough part is getting the license and regulatory approval to start one. It requires serious amounts of funding, the ability to demonstrate that you understand banking, risk and compliance (this is where your team comes in), and how will you handle the deposits and other facets of banking (loans, etc.)

Its difficult, but definitely doable.

If I form a Payment Facilitator, do card networks require assigning individual merchant IDs to each sponsored merchant?

Fri, 05 Aug 2016 18:04:39 +0000

Faisal KhanAnswered Aug 5, 2016

Yes, for purposes of tracking it makes it all easy. Since as a PF, you are still having them under-written by the bank, a separate merchant ID is assigned.

How can a non-resident non-citizen open a U.S. bank account?

Fri, 05 Aug 2016 18:04:38 +0000

Faisal KhanAnswered Aug 5, 2016

You need your valid passport, your VISA copy and some form of photo ID (secondary - if required). It is a pretty simple process.

Walk into a bank, say you are a foreigner and would like to open an account. They would ask you for a mailing address, you can provide your friends/family address and tell them to hold all mail. Or alternatively, opt for a mail forwarding service.

They would most likely ask for an initial deposit, no harm in taking US$ 1,000 in cash to get the account up and running.

Is blockchain technology energy-inefficient, and if so, how severe is the impact?

Wed, 03 Aug 2016 18:03:22 +0000

Faisal KhanAnswered Aug 3, 2016

Not sure how bad it is, but it certainly isn't energy efficient.

10,000s of machines are running worldwide, mining coins. In terms of computing power, we all know that the Bitcoin computing power is 256 times more than the Top 500 Super Computers combined! (and this is 2 year old news).

Assuming we have about 100,000 computers/devices in play here, @100 Watts each we are looking at power capacity of 10MW/hour. However, I feel this figure might be grossly underestimated.

I feel pre-mined would have been a better option. But this is just the mining portion of it.

Once all the 21 Million coins have been mined, a lot many nodes would be switched off or taken off the network. Then transaction processing and recording keeping would be the main thing and mining power won't come into play (to the best of my understanding). Then it is more or less a storage issue if Bitcoin really takes off the way it is prophesied.

What solutions let online customers pay using their online banking login instead of routing and account numbers?

Wed, 03 Aug 2016 18:03:21 +0000

Faisal KhanAnswered Aug 3, 2016

Synapse Pay and Knox Payments, both utilize the ability of having to login to your bank account, so that an ACH can be constructed.

The part that sucks is still the 2-3 days settlement.

What are some simple ways to earn money?

Mon, 01 Aug 2016 17:59:03 +0000

Faisal KhanAnswered Aug 1, 2016

Curated Information Arbitrage: The ability to find information for free or a lower price and be able to sell it to another party for a higher price. This is a classical case of consultancy.

It's all about knowing where to look.

What is an outward remittance?

Mon, 01 Aug 2016 17:59:01 +0000

Faisal KhanAnswered Aug 1, 2016

Money exiting the country. So if someone quotes you a figure saying that US Outward remittances for year 2012 was USD 125 Billion, this means USD 125 Billion was wired from the United States to other countries.

When a credit card company says it “processes” a transaction, what does that include, and does it involve fraud or legitimacy checks?

Mon, 01 Aug 2016 17:59:00 +0000

Faisal KhanAnswered Aug 1, 2016

There are many steps towards an authorization. Elements like is the card valid? Is it stolen? Is the card expired? etc. Transaction processing is 3-part and not just the authorization part to which you are highlight above.

Here is what the 3-part process looks like:

Courtesy: Transaction Authorization

Which currency banknote is considered the most beautiful?

Mon, 01 Aug 2016 17:58:58 +0000

Faisal KhanAnswered Aug 1, 2016

Ideally I would like to answer "...the one in your pocket", but I digress.

I love the Norges Bank's selected design for Norway's new currency notes, the pixelated design palette on the back of each note.

What I like about them is the photograph element on one side and this color pixelation on the other:

The notes were designed by: Snøhetta and themetricsystem.no. You can read more about this project here: Norway's New Banknotes – Snøhetta

On the hypothetical scale:

US dollar notes redesigned to honor science, rather than Presidents.

Front side: (large image, takes time to load)

Backside: (large image, takes time to load)

Why do banks and payment services sometimes ask users to enter the same details twice?

Tue, 12 Jul 2016 17:56:52 +0000

Faisal KhanAnswered Jul 12, 2016

It lessens the errors & omissions risk associated with the transaction.

What would be a good name for a bank’s fraud and risk management team?

Tue, 12 Jul 2016 17:56:51 +0000

Faisal KhanAnswered Jul 12, 2016

I say let it be as is. Let me give you an analogous example.

Many years ago when American Express was debating the title for its frontline managers, the title at the time was Manager Loyalty & Retention. Through excessive research, American Express found that changing the title lessened the impact of the job description and often caused confusion as to the purpose of the work the person was suppose to carry out each day.

In somewhat of a tangential reference, many war veterans preferred the title of Shell Shock to the condition that they were under-going rather than the softer term of Post Traumatic Stress Disorder. It lessens the impact.

The titles are not randomly chosen or arbitrarily assigned. The Fraud & Risk nomenclature adequately encompasses the job responsibility of the department - very well.

Are you generally satisfied or dissatisfied with your bank and the banking system overall?

Tue, 12 Jul 2016 17:56:49 +0000

Faisal KhanAnswered Jul 12, 2016

Being a consultant for the banking & payments space, the answer will always be a No.

Too many factors.

How can banks send funds to legitimate overseas charities without violating anti–money laundering rules?

Tue, 12 Jul 2016 17:56:48 +0000

Faisal KhanAnswered Jul 12, 2016

Banks are extra cautious when it comes to international money transfers.

Most banking financial institutions (be it small or large) have a very myopic view of the entire money transfer ecosystem. For a vast majority of mid-to-small banks, the AML officers, etc. have just CAMS training, etc. but no practical on-ground interaction & experience with the MTO/MT market.

The common bias is that, small amounts of international P2P (person-to-person) wire transfers that are sent internationally are high-risk payments because the probability of these payments turning out to be payment for terrorist financing is very high.

Most of the transfers that are small value (SVT - Small Value Transfers) are for purposes of home-maintenance, there is little or no data to suggest that there is any connection with anti-money laundering and these small value transfer payments (typically US$ 200 or less).

When banks or specifically AML officers fail to understand this (and why would they?) the bank's stance is to treat it as high-risk and deny such banking clients.

The client is deemed high-risk because of the fact that the US Regulators demand an extra-ordinary set of scrutiny on international transfers that most small and medium banks cannot afford to provide (in terms of technology, HR, processes, etc.).

A simpler way to avoid this allegedly risky business is not to take it all together, and hence the de-risking of business.

Charities, do however pose a problem. I will list some of them below:

How do you know the end charity is bona fide?
How do you know the funds will end up where they are being promised?
How do you do extra due-diligence on a charity that does not operate in your country?
How do you do due-diligence on the owners and/or operators of the charity if these people are not listed or do not reside in your country?
Was this charity operating by any other name previously?
What are the baseline amounts that are being funneled into this charity?
Is the charity licensed and monitored on its end by the financial regulator?

Because of the fact that large amounts of money can pass through charities in the form of donations, regulators fear this money could snake its way for terrorist financing and/or money laundering for nefarious purposes.

Because this guarantee cannot be given with a high-degree of certainty, banks will refuse business for processing transfer for charities.

Small amounts that are capped (lets say US$ 200 or US$ 500) are still okay, but uncapped transfers pose a greater risk.

One way to lessen the threat posed by such transfers, is to have an adequate mechanism in place of screening the charities (which is not available today for the greater part of the world), and to be able to cap the transfer limits.

Why is it difficult for merchants outside the U.S./EU to support international payments?

Tue, 12 Jul 2016 17:56:46 +0000

Faisal KhanAnswered Jul 12, 2016

The merchant account that most providers qualify for, are for Merchants within the US, or EU, Canada (yes, they actually have to qualify for each region). When you onboard merchants outside the region, your payment processor must be licensed and registered to do so.

Secondly, they require information for purposes of KYC/AML. The information they are collecting on the form above is basic KYC information about the business as well as base Wire Transfer information. How else would you get paid? It would have to be a wire transfer, unless you know of another cross-border business payment settlement function.

What happens if two people withdraw cash at the same time from different ATMs linked to the same bank account?

Tue, 12 Jul 2016 17:56:44 +0000

Faisal KhanAnswered Jul 12, 2016

The bank will let them draw, two different people, two different accounts, etc.

However if it is the same account with two cards, then the one that connects first. Even if initiated at the same time, one connecting packet at the ATM host switch will come in first and make the connection. When the connection is established, the account would be locked from other accesses on the ledger till the existing session at the ATM is over.

How can I get access to ACH APIs?

Tue, 12 Jul 2016 17:56:43 +0000

Faisal KhanAnswered Jul 12, 2016

You need to work with an ACH processor that is providing APIs. Each processor will have their own unique API flavor, but more or less they will all look the same.

Are there any “loopholes” to reliably make money in the stock market?

Tue, 12 Jul 2016 17:56:41 +0000

Faisal KhanAnswered Jul 12, 2016

Any form of arbitrage.

If money sits on a prepaid debit card (e.g., Payoneer), where is that money actually held before you spend or withdraw it?

Tue, 12 Jul 2016 17:56:40 +0000

Faisal KhanAnswered Jul 12, 2016

All the money issued on cards (be it prepaid, open looped wallets, etc.) the money lies within a bank. Banks are the only money repositories, especially when it comes to debit cards.

As debit cards are issued by an issuing bank, the money would be with that particular bank. Regardless of what sort of a license the operator may have, when it comes to money custody, you can bet that banks will be the end custodians.

If your Prepaid Debit card has a VISA or MasterCard logo on it, then turn the card around and the bank's name should be provided for. That is the bank that is holding your money.

How does someone obtain a debit card?

Sat, 09 Jul 2016 18:19:47 +0000

Faisal KhanAnswered Jul 9, 2016

You just need to be of legal age and qualify to open an account with a bank.

Open a bank account (do ask before that if they offer a debit card, most banks do).

Barring some small microfinance banks, most banks will offer a VISA or MasterCard Debit card with your bank account, from which you can debit the money.

In addition to this, there are a host of providers who provide pre-paid Debit cards.

What does it practically take to start a money transfer business?

Sat, 09 Jul 2016 18:19:45 +0000

Faisal KhanAnswered Jul 9, 2016

It all starts with licensing. No matter which country you are in, chances are the money-transfer business is not only regulated, but one also required a money transmitter license to operate one.

Getting a money transmitter license is no easy feat, universally, it is one that takes a bit of doing before one is awarded by the regulator.

Understanding the money-transfer licensing regime in your country, before doing anything else, and find out what it will cost you (not just fees wise, but HR, experience, minimum net worth, minimum paid up capital, etc) and how much time before you are awarded one.

I've written a detailed, yet summarized post on this on how to go about setting up a remittance business: How Do I Set Up A Remittance Money Transfer Business?

How realistic was same-day ACH becoming widespread in 2016?

Sat, 09 Jul 2016 18:19:44 +0000

Faisal KhanAnswered Jul 9, 2016

Very unlikely. There is a lot of opposition to the immediate deployment from the incumbents. Almost everyone on the board of the faster payments initiative, is pushing their own solution or lobbying one.

Most pundits that I have spoken to, including folks at Vocalink, various bankers at SIBOS and some independent ex-regulators, do not see a solution beginning to take shape before perhaps 2017 and maybe a roll-out by 2018/2019 as a system that would be offered in parallel to the existing ACH system.

Fed (Boston I think, can't be 100% sure) put out a report that US is losing out on the advantage of real-time payments and there is a lot of consumer pressure on this issue as well, so eventually the US banking system will gravitate towards it, just not in the schedule that they are writing about.

I believe the situation will get more ugly before it gets better.

Also see my reply on this: Faisal Khan's answer to Why do bank transfers take so long these days still?

How can funds be withdrawn from a very old or dormant bank account?

Sat, 09 Jul 2016 18:19:42 +0000

Faisal KhanAnswered Jul 9, 2016

The account may be deleted. For accounts with money in them and no movement, a bank has the legal right to close the account down and move the money into an escrow account for a number of years. They will provide you enough notices and if you have not claimed them, depending on how they are regulated, these unclaimed deposits in most cases go back to the central bank or become part of the banks' long term liability.

Having said this, the situation does differ. If you left US$ 1,500 back then, the bank could simply attach a $25/month charge to the account and the US$ 1,500 gets depleted in a number of years, so you have nothing to go back to.

If you left say, US$ 45,000 into the account, this would most likely be now either with the central bank (within the unclaimed deposits) or with your bank (and long term liability) under unclaimed deposits.

Is Stellar likely to become mainstream, and why or why not?

Thu, 07 Jul 2016 19:07:39 +0000

Faisal KhanAnswered Jul 7, 2016

Looks promising. Since Stripe is involved, I believe the product would be well polished. Adoption remains the key of any protocol. With Stripe's success and brand name, they might just be able to pull it off.

... but too early to tell.

From what I've read and re-read. It really does look very nice.

Why is there so much buzz around Bitcoin?

Thu, 07 Jul 2016 19:07:38 +0000

Faisal KhanAnswered Jul 7, 2016

The same fuss there was over the Internet when it came out. Imagine the world without the internet today? Same fuss, except this time its money. Data which can move instantly across borders and carries value with it. Its the first time we have figured out to do this. Give it time and you'd be pleasantly pleased as how it transforms.

If I want to launch a Bitcoin startup in Pakistan, what do I need to understand first?

Thu, 07 Jul 2016 19:07:37 +0000

Faisal KhanAnswered Jul 7, 2016

If you're in financial services you would need SECP NOC (No-Objection Certificate) from SBP. This process itself is between 2-6 months long (they will cite 2 weeks, but that would be a cold day in hell when that happens).

After SECP registration (assuming you are clever enough not to mention the words bitcoin, crypto-currency, money, currency, et. al.) then you're golden.

The only question ow is, that you must be aware that SBP has a no-action on Crypto-currencies. That means, whilst they are not legal nor illegal, however, dealing in crypto-currencies can get you into trouble if you were to compare it to the FE Manual (Foreign Exchange Manual) as issued by the EPD (Exchange Policy Department) of SBP.

How long does it usually take to receive a Payoneer card in Pakistan?

Thu, 07 Jul 2016 19:07:35 +0000

Faisal KhanAnswered Jul 7, 2016

I applied for my Payoneer card via Fiverr and got it about 16 days from the date they cited it was sent out.

Are there startups actively trying to disrupt the traditional banking industry?

Wed, 06 Jul 2016 18:15:49 +0000

Faisal KhanAnswered Jul 6, 2016

There is a lot of activity happening in the fintech arena that is poised to disrupt banking. CB Insights published a great infographic showing the unbundling of a bank. These firms are hell bent on disrupting the space.

If an ACH debit fails but the funds were already credited to the destination bank, what should be done?

Wed, 06 Jul 2016 18:15:47 +0000

Faisal KhanAnswered Jul 6, 2016

You have an IOU and they are now asking for it.

Regardless of what it costs, you will have to make payment. The very best you can negotiate is a check payment.

If you don't do it within a certain time-frame, they will hit your bank with an NSF request and this will come on your bank's report. From a legal standpoint (and I think you are talking about Xoom here), they have all the information to go after you (regardless of how small the transfer was).

Why do business bank accounts usually not earn interest on deposits?

Wed, 06 Jul 2016 18:15:46 +0000

Faisal KhanAnswered Jul 6, 2016

Business &/or Checking Accounts (also known as Current Accounts) are weighted average money that is kept in the bank. The bank determines three things from these deposits:

Overnight at Vault for Payout - money that has been deposited, but it would most likely be withdrawn tomorrow when funds are realized, so they cannot use these funds for further investment.
Overnight at Vault for Deposit - money that has been deposited and then can be used for further investing.
Tomorrow's Requirements - money that needs to be made available for purposes of payments / payouts the next banking day.

So the money deposited in business/checking accounts is used for overnight lending, pre-funding short-term borrowing, etc. and this is why you don't earn an interest on it.

Banks can only earn money on your account when they are reasonably sure, you will not take the money out the next day, hence the savings accounts and other interest bearing instruments.

Why do some people believe that Bitcoin is illegal?

Tue, 05 Jul 2016 19:05:34 +0000

Faisal KhanAnswered Jul 5, 2016

What law does the Bitcoin (protocol) break? None! What law does Bitcoin Money break? (depending upon which country you are in, the interpretations could be a few). But if I decide to take something and attach value to it, universally speaking no law is broken.

The ability to send information across a distributed environment is accepted (think how data travels on the Internet). But when we figured out how to send information that has value attached to it - is it supposed to be illegal? Of course not.

Because of the decentralized nature of Bitcoin, governments fear that their fiat currencies, trade and taxation are at threat (for those with an obtuse outlook) and hence they try to declare any trade (on or off) from the existing fiat currency onto/off-to Bitcoin as illegal. The protocol itself cannot be made illegal.

How do people in Pakistan typically receive remittance payments?

Tue, 05 Jul 2016 19:05:32 +0000

Faisal KhanAnswered Jul 5, 2016

The following are the sanctioned methods of receiving remittances via PRI (at State Bank of Pakistan):

MTOs (Money Transfer Operators), like Western Union, MoneyGram, RIA Financial, et. al. - This is termed as an MTO-COC (Cash-Over-Counter) transaction.
Most of the large above MTOs also have relationships with Banks, so you can visit any one of the bank branches that is displaying their logo, and cash out as well.
Direct Account Credit
Remittance Card (Watan Card)
Money Order Delivered
Cash-Over-Counter
SWIFT Wire Transfer

Where is the European Central Bank headquartered, and why was that location chosen?

Tue, 05 Jul 2016 19:05:30 +0000

Faisal KhanAnswered Jul 5, 2016

Frankfurt, Germany.

The bank is based in Frankfurt, the largest financial centre in the Eurozone. Its location in the city is fixed by the Amsterdam Treaty along with other major institutions. In the city, the bank currently occupies Frankfurt's Eurotower until its purpose-built headquarters are built.

Source: European Central Bank

The exact reason for being headquartered is not mentioned in the Amsterdam treaty btw.

Is Bitcoin considered a fiat currency, and what backs it, if anything? What exactly happens when a new bitcoin is mined?

Tue, 05 Jul 2016 19:05:28 +0000

Faisal KhanAnswered Jul 5, 2016

No. It is not a fiat currency, no government or law has made it legal tender for general use within their specific geographic boundaries.

It does not have any backing of any sorts (as of yet). Its price is based on supply / demand (be it speculative or genuine).

Some institutions or players might decide to back their bitcoins with some currency and/or commodity, but that would be a very narrow band and only for those who are part and parcel of that ecosystem.

Two great reads on process involved for new bitcoins mined (in plain English).

Can someone explain mining like I'm 5 please?
Bitcoin Mining in Plain English

Does Monitise genuinely have traction in mobile payments, or is its strength mostly in mobile banking?

Tue, 05 Jul 2016 19:05:26 +0000

Faisal KhanAnswered Jul 5, 2016

Monitise has about a 20 Million end-user base (spread over 300 financial institutions) that are using a Monetise based solution. This is a pretty small number considering the number of mobile phones in the world.

Whether a solution is m-banking or m-payments, this is based on a client's requirement, not Monetise's ability or capability in a particular sector. They are a decent name in the mobile payments/banking space, but certainly not the dominant one.

They are not struggling, but they do get some serious competition in the markets they venture out in by global incumbent players or regional / geographic specific solution providers.

Most of the consulting payment professionals I know, are not too eager on Monetise because of their pricing policy.

Source on Statistics: Monetise PLC Volume Soares Yesterday

Who is likely to make the biggest leap in improving Bitcoin’s usability?

Tue, 05 Jul 2016 19:05:24 +0000

Faisal KhanAnswered Jul 5, 2016

This is a question a lot many people are trying to answer. Cracking the bitcoin usability code is a work in progress. A lot many theories have been put to case as how to increase trade/acceptance of Bitcoins.

In my opinion, a good sector to consider are: Freelancers!

If freelancers can adopt and use Bitcoins, you would have a very large user base that would start acting like a catalyst for Bitcoin usage.

Freelancers are very innovative (read: adaptable). They would like to save every penny they earn. One of the biggest fears they have are chargebacks. By the time they use conventional payment methods and actually use the money they earn, they have given up anywhere from 3% - 7% of their original value/income.

Websites like oDesk, Elance, Fiverr, Freelancers.com, etc. if all were to embrace and actively promote transactions in Bitcoin, i.e. incentivize it, Bitcoin's usability would no doubt rise.

One of the hurdles in this scenario is that a large swath of freelancers are from the developing world, India, Philippines, Bangladesh, Pakistan, Eastern Europe, etc. --- owning Bitcoins doesn't seem pragmatic, if you cannot easily trade out of it and spend (charge or cash it). Solve this problem and add the solution to the original Freelancer's eco-system and you could very possibly see an increased traction in Bitcoin trade.

As Americans, what can we do to increase the strength or value of the U.S. dollar?

Sun, 03 Jul 2016 19:02:10 +0000

Faisal KhanAnswered Jul 3, 2016

Print less money. Reduce Current Account Deficit. Reduce Government Borrowing Deficit.

What is the difference between the term “banking area” and “banking industry”?

Sun, 03 Jul 2016 19:02:08 +0000

Faisal KhanAnswered Jul 3, 2016

One and the same. Though area might constitute a small vertical within the industry.

Do any banks use processing rails other than ACH?

Sun, 03 Jul 2016 18:03:19 +0000

Faisal KhanAnswered Jul 3, 2016

Sure. If by ACH you imply American banks, then they do Debit/Credit card processing, Fedwire, Check21, L/C, SWIFT, etc.

What risks would the Bank of Russia face if it ran its own SWIFT-alternative messaging system?

Sat, 02 Jul 2016 18:02:07 +0000

Faisal KhanAnswered Jul 2, 2016

No danger. The Russians are simply looking for an alternative system that cannot be subject to sanctions and that they continue to do transactions.

The problem would be two fold:

Getting more and more banks on the payment network
Existing banks in the West may shun membership because of fears of getting disconnected from SWIFT.

Bitcoin in 2015: With Bitcoin’s price dropping sharply, can it still be a sensible business decision?

Sat, 02 Jul 2016 18:02:06 +0000

Faisal KhanAnswered Jul 2, 2016

The value of bitcoin really doesn't matter to many who just use it to either trade and cash out instantly or use bitcoin as a payment rails. The price could be $1 or $10,000 it wouldn't matter.

What is disturbing for the 10,000s of speculators who are hoarding their coins in the hope of making it big, is the downward price trend that has been existing for the past couple of months.

Speculative investing in bitcoins at best is going to be a 50/50 game for you. Either price will go up, or down. You'd probably have a better chance to make more money (imho) in day trading of Bitcoin on margins, than holding on to BTCs and waiting for the price to jump.

How do mobile banking apps that support check-deposit-by-photo compensate for the loss of physical anti-fraud controls?

Sat, 02 Jul 2016 18:02:04 +0000

Faisal KhanAnswered Jul 2, 2016

Check fraud is a huge business, by some estimates over $800+ Million.

The onus of the check fraud will fall onto the account holder, or the bank. Banks have so many disclaimers and CYA policies that it usually ends up on the account holder's desk, unless they fight for it.

RDC (Remote Deposit Capture) is no exception to this fraud menace. If proper controls are exercised, the risk can be minimized but not eliminated.

Two worthy articles to read are:

New Wrinkle in Remote Deposit Capture: Duplicate Check Presentments
Page on bankfirststate.com (PDF)

I have a Visa Inc. interview next week—how should I prepare?

Fri, 01 Jul 2016 17:58:57 +0000

Faisal KhanAnswered Jul 1, 2016

Couple of things you can do:

Read the VISA 10k filing with the SEC (See: SEC Filings Details)
Search through Twitter #hashtag for #VISA (most would be immigration visa related tweets, but you can find a lot of gold otherwise).
Skim through like 1-2 months of VISA's official Twitter accounts (they have quite a few)
For the geographic region you're in, learn all about VISA's products & services.
Pay special attention to VISA press release section
You most likely cannot polish up on the technical know-how in a week, but you can be well prepared for everything VISA.
Use Google News to search for VISA related news
Learn about the top management, if an interviewer were to ask who is the CEO of VISA, you should be able to answer (as useless of a question that may be).
Take notes with you. A cheat sheet if you will. Surprise! Surprise! No one has ever told me not to consult with my notes. Note takers are respected in a lot of circles. There is no rule or law that says you cannot bring notes to a corporate company's interview, unless it is a testing service.
Did I mention take well written notes with you?
Prepare some solid 4-5 questions that you can ask the interviewer regarding VISA. You'll have to sift through a lot of data, but for example here is a question you might ask (depending on the mood), "What's VISA's parallel plan to compete with the all digital services that American Express would be rolling out for payments and its cards?" (add to this: "I was researching this but could not find concrete information")
Learn about the history of VISA and how it came into being.
Look through the Jobs / Career section to get a sense of semblance as to what else they are hiring at, titles, descriptions, locations, responsibilities.
Under no circumstances indicate your preference towards a flat-fee payments ecosystem.
Question: How many cards did VISA mail to its customers in 2014? Trick question: Zero. VISA does not mail any cards to its customers. The issuing banks do.
For each product of VISA, try finding a competing product of MasterCard, American Express, Discover, CUP, etc.
Get some latest statistics from various sources on card related payments. Take them along with your notes.
Don't forget to take your notes, you can take as many pages as you like. 10-20, 30. Just make sure you tab them so you know exactly where each information lies.
Question: How can you improve the VISA card? Unless you're the top 0.1% in cards & payments, don't even attempt to answer this question. You have scanty knowledge and not enough experience &/or background information to answer this conclusively. Tell them, you're not qualified (yet!) to answer this. But if they insist you take a shot at it, then prepare an answer, and put it in your notes.
Please keep your notes in a tidy and decent looking document carrier.
Wear a suit. Period.

Best of luck.

Is there a company that lets you accept bank transfers globally or across several countries?

Fri, 01 Jul 2016 17:58:55 +0000

Faisal KhanAnswered Jul 1, 2016

Envoy Services (200 countries) - Envoy Services Ltd - see if they will be willing to accept payments for many-to-one aggregation.

What legal steps and requirements are needed to build a PayPal-like service in the U.S. and globally?

Fri, 01 Jul 2016 17:58:54 +0000

Faisal KhanAnswered Jul 1, 2016

In order to become a PayPal (or equivalent) provider in the US, you need to apply with each State's regulator and obtain a money transmitter license. You will also have to register with FinCEN (Financial Crimes Enforcement Network) as an MSB.

The road to licensing is a long and arduous task. You have to submit the following (in no particular order):

Fill out detailed application on obtaining a money transmitter license with each State.
Submit your Business Plan
Get Background checks done
Submit fingerprints
Satisfy the minimum net worth requirements
Be able to provide E&O insurance
Be able to provide Surety Bonding for the amount slated by each State Regulator
Be able to manage your permissible investments on a daily basis
Obtain access to banking
Have extremely detailed process and funds flow diagrams and descriptions of your transaction set
Have a comprehensive AML/KYC policy
Have an AML/Legal Officer on board
Impart AML training to existing employees

You do this for all 50 States and additional US Territories. (List of all the State Regulators can be found here: Money Services Business (MSBs): US Money Transmitter Licenses).

In addition to this, you will have to undergo a couple of Audits (Financial, FISMA, etc.) Some State Regulators will do their own audit.

The entire process can take between 3-6 months for the smaller (more easily obtainable States), 6-12 months for medium States, and 1-2 years for States like Texas, New York, California.

This would essentially enable you to run wallet services in the US.

In Europe, the process is much easier with passporting rights. You obtain one license in UK, which is called the E-money license, and you make sure you apply for passporting rights, which basically allows you to onboard transactions from all over the EU, on a single license.

In Singapore, if your net outstanding is less than $15 Million (IIRC), you don't even need a license, you can get started right away.

Everywhere else, it is the same nightmare. Getting these licenses is no easy task. In South Asia for example it is extremely difficult for a 3rd party to obtain one of these licenses. Some countries have a closed licensing regime (like Kenya, etc.)

What is the difference between a current account and a savings account?

Fri, 01 Jul 2016 17:58:52 +0000

Faisal KhanAnswered Jul 1, 2016

A current account is a checking account, one that does not give you any interest on your deposits. A savings account is just that, savings! it gives your daily interest on the money deposited in the account.

What is Google doing well in payments, and what is it doing poorly?

Fri, 01 Jul 2016 17:58:51 +0000

Faisal KhanAnswered Jul 1, 2016

Robert Oswald nailed it. One point I would like to add to this is Google's shortsightedness when it comes to international payments.

Despite the wallet having a high-enough demand, Google for some reason hasn't stepped outside its comfort zone as far as payments is concerned. The wallet has (had?) so much potential, yet Google remains steadfast in keeping it stateside and not promoting it in emerging and developing markets.

The data insight that google has vis-a-vis from search engines searches "when will paypal come to pakistan", "alternatives to paypal", "best payment provider in india", etc. Google can very easily extrapolate where the demand is and for what, yet for reasons best known to them, they refuse to make any traction in this space.

What does a letter-of-credit issuing bank do if the buyer fails to repay after the credit period ends?

Fri, 01 Jul 2016 17:58:49 +0000

Faisal KhanAnswered Jul 1, 2016

This comes under the purview of the risk assessment that was done prior to the issuance of the LC.

Most banks will prefund the LC and not work on credit (the terms credit can be misleading here).

For other clients, the LC would be subjected to the client's credit rating, and if the client defaults on the LC, whatever the bank has in collateral would then be used to off-set the default, and possible legal action or lien on wealth.

Is there market space for another major payment service provider like PayPal?

Fri, 01 Jul 2016 17:58:48 +0000

Faisal KhanAnswered Jul 1, 2016

The answer will always be yes, with a caveat, what is it that you are wanting to do differently that PayPal (or others like PayPal) are not already doing?

In short: What problem are you trying to solve? If you're not trying to solve any problem and just want to be in the payments pool, chances are it would be money down the drain. If there is no incentive (differentiator) for a user to sign-up, then chances are they won't.

Before delving into any solution, determine if there is a problem with the existing systems in play and a market for the solution you intend to deploy.

How do banks settle foreign-currency transactions—what mechanisms and steps are used?

Fri, 01 Jul 2016 17:58:46 +0000

Faisal KhanAnswered Jul 1, 2016

In very few countries is this FX (settlement) a central bank function. Predominantly it is a treasury (FI) function. The mechanism used to settle is no different from any other settlement that the bank does on a deferred basis, except a currency pair is involved.

The most common aspect of this is an FX dealer in between. This FX dealer is primarily the market maker. There are many scenarios as to how a transaction can happen.

Consider the following diagram:

Scenario: American Bank wants to send 500,000 Thai Baht to a Bank in Thailand (both banks are denoted by the blue square).

The American Banks' options are:

The American Bank's FX Desk can buy the Thai Baht directly from the Thai Bank in Thailand.
The American Bank can use another US Bank to buy Baht (other American Bank denoted by red square)
The American Bank can work with another Thai Bank (correspondent bank) to buy Thai Baht
The Bank can also use a 3rd Party FX dealer in the US
The Bank can also use a 3rd Party FX dealer in Thailand.

In all these scenarios, there is someone who is willing to sell 500,000 Thai Baht to the American Bank in exchange for US Dollars.

I'll run through a singe example here. Just to make the numbers easy, lets assume that 1US$ = 32 Thai Baht.

This is the prevailing rate in the market.

In this example the US Bank will buy 500,000 worth of Thai Baht from another US Bank which will deliver the same to the Bank in Thailand:

Here are the steps (caution it is a very crude settlement example):

Blue American Bank FX Desk sees an FX Rate of 31.50 Baht for 1 US$ being quoted by the Red American Bank.
The FX dealer for the Blue American Bank confirms the deal.
Blue American Bank wires US$ 15,873 to the Red American Bank. This is US Dollar Transaction.
The Red American Bank confirms the transaction.
The Red American Bank has a rate of 32Thai Baht to 1US$ from the Blue Thai Bank. (This is FX cost to the Red American Bank as offered by the Blue Thai Bank).
The Red American Bank confirms 500,000 Thai Baht Buy against US Dollars and the transaction amount is: US$ 15,625.
Blue Thai Bank instructs the Red American Bank to deposit the amount in its US Nostro Account in the US the amount US$ 15,625 which the Red American Bank does. (Again a domestic US transfer).
Blue Thai Bank now releases 500,000 Thai Baht into the beneficiary's account as required by Blue American Bank.
The difference of US$ 248 is the income by the FX Desk at Red American Bank.
The Blue American Bank probably quoted 31.0 Thai Baht to 1US$ to its customer who was wanting to buy 500,000 Thai Baht in the first place. The difference in price between quoted and the price bought, is the Red American Bank's profit.
The US Dollars sitting in the nostro account in the US for the Blue Thai Bank would then either be reused (consider the reverse example), or eventually they would be wired via SWIFT bank in Thailand at a later settlement date/day.

Roughly this is how the transaction is done.

List of Central Banks: List of Reserve & Central Banks of the World

What are the key differences between conventional banks and Islamic banks?

Sun, 12 Jun 2016 17:56:38 +0000

Faisal KhanAnswered Jun 12, 2016

At the very core, traditional banking is about hoarding money and then lending it out as loans (interest based), Islamic banking is about creating an environment where a transaction-ready (trading) framework exists, so money does not sit still, it is circulated and transacted in the economy.

What registrations and licenses are required to run an electronic money business?

Sun, 12 Jun 2016 17:56:37 +0000

Faisal KhanAnswered Jun 12, 2016

HM Revenue & Customs: HM Revenue & Customs

Banks are going to be extremely challenging for you.

How do electronic payments companies operate?

Sun, 12 Jun 2016 17:56:35 +0000

Faisal KhanAnswered Jun 12, 2016

Your regulatory authority is FCA (Financial Conduct Authority) in UK, See: Home - Financial Conduct Authority

FCA has a Registered membership of obtaining an E-money license (Emoney license is the ability to issue stored value). If that is not something you would like to do, you can get a Payment Institution (PI) license, which essentially is a PSP (Payment Service Provider) License.

Neopay (See: http://neopay.co.uk/) in UK is a great company to work with, and they aid start-ups in obtaining an e-money license. This one particular slide from them is very helpful and I cite it often:

The entire process takes between 6-9 months. 1 year if you did not follow all the instructions in the application down to the dot.

When might we see mainstream Bitcoin-based remittance that feels seamless for users and matches today’s experience for (a) bank-to-bank and (b) cash-to-cash transfers?

Sat, 11 Jun 2016 17:54:07 +0000

Faisal KhanAnswered Jun 11, 2016

The simplest answer for this is once Bitcoin has full-legal coverage in both the sending and the receiving country.

The technological bit is ready for many money-transfer companies. The legal is not. Large banks have yet to implement the technology that will allow Bitcoin to be added to their banking & payment rails.

However, this does not mean it is not happening. In a crude sense, quite a few companies are already providing this service:

Two examples that comes to mind are:

Rebit
BitPesa

When a card is swiped, what data does the reader capture and in what format is it transmitted?

Sat, 11 Jun 2016 17:54:05 +0000

Faisal KhanAnswered Jun 11, 2016

Card readers will read the Track 1 & Track 2 data. The format for the Track 1/2 data can be seen here: Magnetic stripe card

Also see:

What data is stored on a payment card's magnetic stripe?
Magnetic Stripe Track 1, Track 2 Data Description

Bank accounts are verified via micro-deposits—who initiates those deposits and how does the verification process work?

Sat, 11 Jun 2016 17:54:04 +0000

Faisal KhanAnswered Jun 11, 2016

The institution which is trying to verify you, would do this.

Let's say you're applying for some financial services product, and part of your application requires you to put up a credit card and a bank account.

You supply both. However, the bank needs to know that they really belong to you. So here is what they would usually do.

They would charge your card for say $1. Now they are holding on to $1 of your funds with them.
They Divide this into two numbers randomly so that they add us to $1, lets say for this example, the two amount are: 32 cents and 68 cents.
They then push these two deposits (via ACH) to your account. The company pays for the ACH fees (this is part of the client acquisition cost).
Your bank now has two deposits sitting in the bank 32 cents and 68 cents.

Since you've claimed ownership of the bank account, there should be no trouble in you logging and authenticating yourself to let the company know what the two deposit amounts are. Alternatively, you can call in, via the bank's call center and do the same.

Because you would be subjected to a series of authentication measures as provided by the bank to be able to verify the two deposited amounts, the company would assume that the account is yours and you had the necessary credentials to log-in and verify the amounts.

By confirm the the two deposits back to the company, you complete the loop of authenticating your bank account.

What is the most common logo size used for Visa, Mastercard, AmEx, Discover, JCB, and UnionPay on standard bank cards?

Sat, 11 Jun 2016 17:54:02 +0000

Faisal KhanAnswered Jun 11, 2016

Each card scheme has its own branding guidelines and how to put up the log. More of less they are the same to the casual eye, but each scheme has put forth very rigorous rules on how their logos, etc. should be placed etc.

For example the most common size is that of the VISA logo, 9.75mm x 20.5mm

Others have their own standards. You may want to consult with their brand identity guidelines to gauge the exact size.

Why do bank transfers still take so long today?

Thu, 09 Jun 2016 18:19:40 +0000

Faisal KhanAnswered Jun 9, 2016

Presumably you're talking about banking in the US? Elsewhere in the world, slowly and surely banks and regulators are attending towards the needs to faster payments (read: instant payments).

Quite a few countries have implemented faster payments, the UK is a shining example, where payments are made from account to account in under 15 seconds.

In UK the company that implemented faster payments for the consortium of all the banks is Vocalink (See: VocaLink - operator of the UK national payments infrastructure).

Elsewhere, real-time payments (sub 30 seconds settlement is bearing fruit). Because US is such a large market with 1,000s of banks, getting them onto a single switch is quite a task.

As the US banking system processed trillions of dollars per year via their ACH system, there has been a lot of reluctance to move away from it. Why let go of the easy float you get for free?

The US is now tackling the faster payments challenge and have constituted a study group/committee for it. Nearly everyone within the committee wants to promote their own solution, so it will be some time before we see a consensus, and then open for additional comments amongst the various parties before we see a faster-payment switch initiative from the Government or the Federal Reserve.

There is a lot at stake here, so lobbying efforts are in full-swing and some are even arguing that instead of one switch, two switches might emerge. NACHA is of the opinion that a same day ACH ought to be rolled out rather than instant payments.

So clearly, everyone has their own agenda. I personally think things will get ugly before they get better. The hope/goal for the US to have a faster payments switch by 2018/2019 still seems doable, but it all depends on the cooperation of all those involved and the technology chosen, etc.

What technology does Venmo use to pull funds from user bank accounts, and does it rely on bank APIs?

Thu, 09 Jun 2016 18:19:39 +0000

Faisal KhanAnswered Jun 9, 2016

They don't use APIs, they use ACH. As per your user agreement, you're authorizing Venmo to do an ACH pull from your bank account, and in the case of cashing out, Venmo does an ACH push into your bank account.

Is it plausible that an independent PayPal could acquire Square?

Thu, 09 Jun 2016 17:51:14 +0000

Faisal KhanAnswered Jun 9, 2016

Resident expert Brian Roemmele thinks so: PayPal To Aquire Square: Headlines From The Future.

Where can I earn an annual return of 10–20% on my money?

Wed, 08 Jun 2016 19:08:43 +0000

Faisal KhanAnswered Jun 8, 2016

Invest in emerging markets mutual funds. They will easily yield 10% and some do exceptionally well. You would need to research around, but try finding funds that invest in emerging market equities stock.

What conditions would need to be met for another virtual currency to overtake Bitcoin?

Mon, 06 Jun 2016 19:06:50 +0000

Faisal KhanAnswered Jun 6, 2016

Greater adoption with equal or better features.

What is the broader significance of Bitcoin in economics and technology?

Mon, 06 Jun 2016 19:06:48 +0000

Faisal KhanAnswered Jun 6, 2016

To be very honest, we don't know. If you are talking about Bitcoin (the protocol), the use-cases (at present) are almost endless. We can take some many current scenarios and juxtapose them on to the Bitcoin protocol &/or blockchain and marvel at its beauty.

We would talk about how easy and friction-free or government-free the money aspect of Bitcoin is. The possibility of sending across $0.00001 to $ 1,000,000 with ease and hardly any transaction fees.

We could talk about how it is the currency for the 21st century, riding on the TCP/IP protocol, where everybody contributes, etc.

The truth is, Bitcoin is like the Internet invented again. Imagine back in 1992 when the Browser came out, could we have imagined Facebook, or that Netscape would go bust and IE would emerge and then be taken over the likes of Chrome and Firefox. Could we have fathomed an app like Twitter or Uber? Would we have seen the use-case of streaming video and YouTube? Could we have predicted the ease at which we would be able to pay each other? The answer is debatable, but for many, we could not fathom.

Bitcoin is the same. I firmly believe the use-cases for Bitcoin are yet to come. They are yet to be defined. A couple of years down the road we will be having applications on Bitcoin we could not have thought possible. Fractional-Ownership will be a huge play. Imagine being able to buy 1/100th of an Ounce of Gold. How buying $358 worth of Berkshire Hathaway Shares or $18 worth of Apple/Google shares. Such ownership status is simply not available today.

Just in this arena alone (Fractional Ownership) you will see a massive shift of how financial products, equities markets and other instruments for investment and savings would change.

Universally we all tend to agree that Bitcoin is a game-changing technology. How we will implement it and use it is opaque right now and would become more clearer as time passes. Many brilliant minds, ideas and money would be put to the test, and it would be interesting to see which ideas will blossoms and which ideas will go bust.

What is the level of credit card penetration in the United States?

Sun, 05 Jun 2016 19:05:22 +0000

Faisal KhanAnswered Jun 5, 2016

Total number of credit card accounts in the U.S. as of Q3 2013: 391.24 million, vs. 457.64 million in Q3 2003

Original Source: New York Federal Reserve, Quarterly Report on Household Debt and Credit, November, 2013, Cited Source: Credit card statistics, debt statistics, industry facts

Another alternative source:

As of 2011:

Estimated number of Credit Card Holders in USA – 181 Million
Estimated number of Credit Cards in USA – 609.8 Million
One-third of Americans do not own a credit card

Source: 2012 US Credit Card Usage Statistics [INFOGRAPHIC]

Did Visa ever acquire Mastercard?

Sun, 05 Jun 2016 19:05:21 +0000

Faisal KhanAnswered Jun 5, 2016

No, they did not.

As of 8:57 PM (GMT) 30th May 2014.

What is the general attitude of banks toward Bitcoin?

Sun, 05 Jun 2016 19:05:19 +0000

Faisal KhanAnswered Jun 5, 2016

From a perspective of the developing world and emerging markets. Most banks have little or no understanding of Bitcoin. These banks are already too engross with their existing fiat currencies and the regulator, that no one has actually pursued Bitcoin (even the protocol) as a study.

There are very few Bankers who are truly in the know as far as Bitcoin is concerned, but then again, they are not paid for by the bank to know about bitcoins, they are paid to know about their own fiat currencies and work with them.

From North East Africa, GCC, South Asia and South East Asia, I know personally, less than a dozen or so banks who are even facing in the direction of bitcoin, let alone studying it or adopting it.

In these markets, Bitcoin's relative acceptance or rejection would be stemming from the role the central bank plays, and herein lies the challenge. Very few people in the Central Banks themselves are qualified enough to comprehend crypto-currencies and to further the cause.

Personally, I'm not very optimistic about the central banks siding on the positive aspects of bitcoins anytime soon. It will take lots of education, awareness and hand-holding to be able to convince the central banks to become soft on this issue.

If UnionPay and Apple work together on iWallet, what major opportunities could that create?

Sun, 05 Jun 2016 19:05:18 +0000

Faisal KhanAnswered Jun 5, 2016

Think Apple's play in China, tied into the relatively native payment rails. Then think about the slow but sure footing of CUP worldwide (as a cheaper alternative to VMC).

Impact Level: Gigatron!

How do global platforms like Facebook maintain fast access speeds from almost anywhere in the world?

Sat, 04 Jun 2016 19:03:50 +0000

Faisal KhanAnswered Jun 4, 2016

Facebook runs it's own content delivery network, in addition to this, Facebook has direct peering arrangements with large telcos and service providers.

What factors drive Bitcoin’s price up and down on a daily basis?

Sat, 04 Jun 2016 19:03:49 +0000

Faisal KhanAnswered Jun 4, 2016

Demand, Supply, Rumors and Speculators.

How can I put together a proposal for a mobile banking service?

Fri, 03 Jun 2016 19:02:07 +0000

Faisal KhanAnswered Jun 3, 2016

Unless you're from the industry, you'd mostly likely to have hire someone to do this for you. A knowledgeable resource would know how to put together such a proposal, including the regulatory element of it.

How can I test demand for a new online payment solution without actually building the product first?

Fri, 03 Jun 2016 19:02:05 +0000

Faisal KhanAnswered Jun 3, 2016

On-ground surveys, where you ask the relevant questions and do it all across. Nothing beats on-ground level data. The more the merrier.

You don't have to immediately build an MVP to validate it. In my opinion, survey-validate the issue as broadly as possible.

The most important aspect of the survey is not to influence it in any manner. You negative influence the survey by either not incorporating the right (tough!) questions or by not asking the right target market, etc.

Its the problem and the solution that you need to validate. Not the technology bit, which is just an enabler.

How do services like PayPal and Square move money into and out of their users’ bank accounts?

Fri, 03 Jun 2016 19:02:04 +0000

Faisal KhanAnswered Jun 3, 2016

They use ACH for deposits and withdrawals.

How do card networks like Visa, AmEx, and Mastercard handle cross-border transactions?

Fri, 03 Jun 2016 18:03:17 +0000

Faisal KhanAnswered Jun 3, 2016

Their transactions / authorizations are routed on their own proprietary networks, whilst the payments aspects are handled through their designated bank(s) in the regions they operate in.

How do Bitcoin-based remittances work?

Fri, 03 Jun 2016 18:03:16 +0000

Faisal KhanAnswered Jun 3, 2016

Here is a detailed slide deck that explains how Bitcoin Remittances (or Rebittances as they are affectionately called) work.

Understanding different types of Bitcoin Remittances

Ex: Sending US$ 100 from USA to Philippines

About the Author: Faisal Khan is a banking / payments consultant and digital money evangelist. He is the co-host of Around the Coin, a weekly podcast on banking, money and payments. He is also a frequent contributor to popular Q&A site Quora. His official website is at www.faisalkhan.com

The original article is at: How do Bitcoin Remittances work? (You can download this slide deck from there in Keynote, Powerpoint or Plain PDF format also).

What are the implications of a telco like Smart (Philippines) partnering with Rocket Internet to launch a payments product, and is it likely to succeed?

Fri, 03 Jun 2016 18:03:14 +0000

Faisal KhanAnswered Jun 3, 2016

The implications can be mixed. Rocket Internet already owns a payments company called: Paymill (see: https://www.paymill.com/). One of the architects of the this deal would most likely be Mohamed Omaizat, who is Director Global Venture Development. Mohamed comes from a payments background and used to be at Skrill previously.

If Rocket had tried to just push a vanilla payment system by juxtaposing one of Paymill's capability into Philippines, it would have been a disaster. Perhaps it can be said with a lot of certainty, Omaizat is responsible for ensuring this does happen, i.e. foolish payments related decisions are not made.

Omaizat has travelled to all the countries where Rocket has significant presence, so he has on-ground feedback, which many companies ignore or have very little of.

I think Smart brings to the table, that crucial feedback as to what sort of payment solution is in need, for which Smart would find it appropriate to partner with someone external. There is no shortage of resources (human or otherwise) that Smart could not have acquired on its own.

I think it will be interesting to see how it rolls out. Rocket certainly has its own properties in Philippines on which this payment system can run.

I think if Rocket+Smart can get the traction they need, this payment system could become a catalyst of how payment could be done in the region!

I for one, am optimistic about it.

How do debit and credit transactions flow between two different banks?

Thu, 02 Jun 2016 18:02:03 +0000

Faisal KhanAnswered Jun 2, 2016

Trusted ledger adjustment.

Either directly, or via a reporting or trusting entity, like a payment settlement switch or the central bank.

Both banks are able to see each other's ledger balances and can then adjust accordingly (a very simplistic way to understand how this works).

How are nostro and vostro accounts reconciled?

Thu, 02 Jun 2016 18:02:01 +0000

Faisal KhanAnswered Jun 2, 2016

Pretty much like any other account. You check against your own ledger what payments were due, and you will Credit/Debit Nostro the first time around (Credit in Nostro Account, Debit in your Ledger Account), and once transfers are done, Debit/Credit check again (Debit in Nostro, Credit in your Ledger account).

For transactions that are credited to the Nostro account, without having a Debit entry on your Ledger, then the transaction(s) need to be traced to find out from where the extra money came in, and vice versa, if the credit is less than what you were expecting, then you need to break down your aggregate ledger entries and see which ones were not posted.

For an incorrect ACH transfer, how should the sender notify the receiving bank under UCC § 4A-205(b) to recover the funds?

Thu, 02 Jun 2016 18:02:00 +0000

Faisal KhanAnswered Jun 2, 2016

Your bank (sending bank) should be able to assist you in this. You can file for a reversal (they will usually give you a form out). You have no access to the beneficiary's bank for reversal recourse, they will refer you back to the sender's bank.

Check with your bank what the reversal method is. In some cases they will file submit a reversal file (for erroneously submitted file). Depending on the time, the file submission for such needs to be in I believe 5 days (can't be 100% sure, but please check).

In the event you are asking for this reversal after the 5 day period, then you need to fill out the form that your financial institution has provided in which you will enlist the error and why the transaction was classified as such by you. Your bank will then reinitiate the reversal on your behalf. You can reverse the ACH transaction up to 180 days I believe. The funds on the other end may/may not be available, but that is a different matter all together.

What different methods can someone use to pay for a service via mobile phone?

Wed, 01 Jun 2016 18:55:53 +0000

Faisal KhanAnswered Jun 1, 2016

Two possible solutions I can think of.

It would be most likely that mobile wallets would be popular in the country. If not mobile wallets then some form of branchless banking which would run on USSD channel. In both these cases, it would be easy to implement the wallet transfer number or the telephone number online, on to which you would like to get paid for. Think of it as sending mobile top-up money.

There might even be a possibility of crude internet/mobile banking where by interbank funds transfer might be possible. Which again is providing your bank account information online and getting paid via an IBFT transfer.

How does PayPal manage cross-border payments in multiple currencies, who bears the FX risk, and which other payment companies offer similar cross-border handling?

Wed, 01 Jun 2016 17:58:45 +0000

Faisal KhanAnswered Jun 1, 2016

PayPal has a fully functioning Treasury & FX departments within eBay that they use. Presumably, the FX department will liaise with anyone who would give them the best rates for the daily FX buying/selling that they do.

There are many companies (in addition to banks) who can handle the FX transactions. Within the banking group, BNY Mellon, HSBC, Standard Chartered, Deutsche Bank, Mashreq Bank, Bank of China, China Merchants Bank, Citi, Bank of America, etc. all have very active FX desks.

On the companies side, there are many but one of them that I know of is USForex (http://www.usforex.com) who are licensed in all States and do a lot of B2B FX payments. Another one is Velocity Trade (http://www.velocitytrade.com/), though they are based out of Canada they still do a lot of FX business in the US.

One name in particular Hamilton Court FX (out of UK) who are also specialists in this game.

During an IBAN wire transfer (sender bank → correspondent → recipient), what manual verification steps do humans perform?

Wed, 01 Jun 2016 17:58:44 +0000

Faisal KhanAnswered Jun 1, 2016

Choosing which correspondent bank to route the transaction through.

What happens behind the scenes when you withdraw cash from an ATM?

Wed, 01 Jun 2016 17:58:42 +0000

Faisal KhanAnswered Jun 1, 2016

A typical channel management manager (or switch) is a middle layer app controller along with the ATM Host Controller will connect your transactions to the core-banking system (after validation of PIN from the HSM).

The transaction in the core banking system is no different from any other transactions. The record is locked during this period, whilst the ledger entry for the account holder, the ATM ledger and the net-deferred settlement ledger (if applicable) are modified.

Once the transaction is complete, the record lock is released.

If this is an interbank network transaction, i.e. if you are using the ATMs of another bank (other than your own), then the transaction settlement is net-deferred and it is settled as follows: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Also see: Faisal Khan's answer to How do automated teller machines work?

How do ATMs function internally?

Wed, 01 Jun 2016 17:58:40 +0000

Faisal KhanAnswered Jun 1, 2016

Quite a few things take place from the very moment you insert the card into an ATM.

First and foremost the ATM awakens. Most modern ATMs go into a power saving mode, but the very second the card is inserted, the ATM is now fully awake (from a power point of view).

ATMs (or Automated Teller Machines) are what are known as Alternative Delivery Channels.

Alternative, because they are alternative to the human teller.
Delivery because they are programmed to deliver a specific set of services, and
Channel because in the banking world, all delivery mechanisms need a channel via which the delivery would be made.

ATM CONNECTIVITY

To understand how the ATMs work, it is a good idea to know how they connect:

Needless to say all ATMs connect to some server. This is called the Host Server or Host Switch (for the ATMs):

These Host Servers may be of your own bank or another bank. Whatever the case maybe, their connectivity would usually look something like this:

ATMs on another bank network, connect to your bank's network through a network known as interbank networks (networks that connect different bank). [See: Interbank network]

A more singular connectivity diagram would look like this:

(Images from EZswitch® | CSF International (CSFi))

CHANNEL MANAGER

It is imperative that one understands the channel manager in the whole scheme of things. It has a very important function.

A typical channel management manager (or switch) is a middle layer app controller.

The above is what a multi-channel manger would look like. Again, this is nothing more than a software, middle-layer app server that is essentially doing a very crude form of financial routing.

BASIC CHECKS

When you insert a card into the ATM, the following (more or less) is checked for:

In the channel manage diagram, you will see something called the HSM, that is the Hardware Security Module (see: Hardware security module).

This is where the PIN is kept (encrypted) and from where the PIN is confirmed.

Once the PIN is confirmed, the middle-layer will request access to the core-banking server and here (like with any transaction, the user's bank account would be locked, till such time the transaction is completed, so double-spend does not occur).

If all the validation checks for you being able to withdraw money from your account are good, then the money will be dispensed by the ATM.

Where do you do most of your banking today—branch, web, or mobile?

Wed, 01 Jun 2016 17:58:39 +0000

Faisal KhanAnswered Jun 1, 2016

Most of my banking is done on the web. Branch level visits are limited to times when my physical presence is required.

The mobile banking element of my bank is not mature enough for me to use it. As a banking and payments person, I start finding flaws in it (and it does have some serious flaws).

So till then I force myself to use the web.

Do Nepal, Bangladesh, and Pakistan restrict foreign banks from processing credit card transactions domestically?

Thu, 12 May 2016 17:56:34 +0000

Faisal KhanAnswered May 12, 2016

From Pakistan's perspective, I can tell you the following:

Locally issued Debit cards usually cannot be charged online (i.e. CNP transactions are blocked) for both international and/or local CNP charing.
Credit Cards issued in general also have CNP blocked, and it must be activated upon request (true for both local and/or international CNP charging)
AVS for Pakistan issued cards (Debit and/or Credit) is blocked overall and cannot be opened.

What kinds of profit margins do remittance companies typically earn?

Thu, 12 May 2016 17:56:33 +0000

Faisal KhanAnswered May 12, 2016

Its all corridor dependent.

Between 1% to 12% on a boarder scale.

For the most competitive remittance corridors like say UAE-India, 1.0% is a good enough return considering the competition in the corridors amongst themselves and with the banks.

Most MTOs will have average earnings that are between 2% to 6%.

What are the benefits of leveraging existing money-transmitter license holders instead of obtaining a full bank charter?

Thu, 12 May 2016 17:56:31 +0000

Faisal KhanAnswered May 12, 2016

MSBs who have Money Transmitter Licenses (MTLs) have their own set of advantages/disadvantages versus owning a bank (state or national charter).

With MSBs the most immediate advantage is being able to have the ability to appoint an Authorized Delegate (aka Agent), which is an extremely difficult task to do with a Bank Charter (Credit Unions are different, a credit union can appoint an agent).

With a Bank charter, if the primary business is that of money transfer, then needless to say, you pretty much own the entire value chain of processing that transfer. One big factor to consider is that the product has to be owned by the bank to get the 50 States MSB exemption.

However, banking has its own set of challenges that comes from both the State and Federal regulator. Mortgages & Loans is one, adequacy requirement is another. With MSBs the maximum adequacy (in terms of surety bonding) is US$ 2 Million.

On a paperwork and filing mechanism, an MSB would trump a Bank any day of the week and twice on Sunday as far as the volumetric work that goes in reporting is concerned. MSBs get more regulated than Banks (think x50).

MSBs have to rely on banks to move their money, and now with the entire de-risking phenomenon that is taking place with Banks and them onboarding MSB as clients, getting access to banking is a huge issue for MSBs nowadays.

The money (or float) collected from clients, can be utilized in overnight lending by banks, with MSBs, pooled accounts cannot be used for any sort of lending/investments, etc.

How will mobile financial services achieve mass adoption among both the banked and unbanked?

Thu, 12 May 2016 17:56:30 +0000

Faisal KhanAnswered May 12, 2016

Utiba (now owned by Amdocs) had an answer to this. Recalling from memory:

Reaching a mass market will be driven by a comprehensive consumer financial inclusion.

In order of priority:

Telecom Services (Easy To Achieve - Low Hanging Fruit)
Money Transfer
Merchant Payments
Savings
Credit & Insurance (Difficult to Achieve)

The Length of the arrow above indicates effort and time required to reach the goal.

References:

Amdocs: Telecommunications | Unified Communications | Network Services | Managed Network Services
Utiba: Amdocs Mobile Financial Services

Why do most hackers never get caught—can’t providers trace where stolen funds go in bank or PayPal fraud cases?

Thu, 12 May 2016 17:56:26 +0000

Faisal KhanAnswered May 12, 2016

Kim Guldberg is spot on, when it comes to the size of the amounts being stolen. I've worked with banks who were hit with phishing attacks which resulted in lots of bank accounts being compromised and a few dozen or so unauthorized transfers were made.

At the end of the day, the following happened:

Two factor authentication was introduced for login as well as transactions
The cost associated the time and resources the bank would spend in investigating the hackers, and bringing them to justice was far more than the amount being stolen.
It made more sense to review how such attacks could be mitigated, but trying to chase the perpetrators and run them through the justice system was ridiculously high.
One huge issue that was discovered was the cross-border mechanism. In the cases I worked with, countries like Philippines, China, and Indonesia were involved. With the limited knowledge we had, it was almost an impossible task to have the police on the other end cooperate to catch thieves who stole like US$ 75,000 or so (in another country).
The money trail kept splitting up. Lots of cash-outs were done at WU in remote places in Philippines and in various towns in China. It was just getting ridiculous to try to go after US$ 1,000 payout.

The insurance company in the end coughed up some of the money, mostly it was written off by the bank. Surprisingly, the bank allocates an undisclosed amount for such events.

When money is stolen from these banks, they were channeled locally to other local banks, and then cashed out using fake credentials or fake bank accounts. Identity theft is very easy in under-developed countries. So even if we do chase after these identities, you find out, you're chasing ghosts.

Which podcasts should bankers and banking professionals listen to in order to better understand mainstream money and banking systems?

Thu, 12 May 2016 17:56:24 +0000

Faisal KhanAnswered May 12, 2016

Purely from a Banking perspective:

Financial Time's Banking Weekly is a great podcast: http://podcast.ft.com/s/44

Also, Brett King's Breaking Banks podcast: http://www.breakingbanks.com/

Can I transition my career from literature into banking?

Wed, 11 May 2016 17:54:00 +0000

Faisal KhanAnswered May 11, 2016

Yes, you can. It won't be easy, but you can. Banks require all sorts of generalized talent pools. If you learn the lingo and a bit about banking, I'm sure there is an area which would allow you entry into banking. Could be a call center, HR, field research, back-office, marketing, etc.

Now that Snapcash launched, does that imply most messaging apps will add money-sending, and should every platform do it?

Wed, 11 May 2016 17:53:59 +0000

Faisal KhanAnswered May 11, 2016

Ten years ago selfies or even group-selfies were an unknown phenomenon. Today, it is the norm for many.

Likewise, traditional banking and payment platforms were standalone apps & ecosystems, but that too has changed (read: evolved).

One of the first things humans do when they come into contact with another human is to communicate. Hence messaging apps rule the world. Others may disagree, but this is my firm opinion, that as long as we keep modeling, i.e. juxtaposing from the real-world scenarios to the digital world, we will excel.

Humans interact (i.e. communicate) with each other before they start sharing (photos, ideas, videos, songs, jokes, etc.) and then some form of commerce factors in.

I believe those with a large user-base communication (messaging) platform, will inevitably offer payments onto their platform. Its just a matter of timing.

It is not about making sense or not, it comes down to will the operator of the communication/messaging system be able to launch it correctly.

Users do not want to have 6-7 messaging apps on their phone. They may have it, but would most likely use 1 to 3 of them on a regular basis. Same goes with payments, users would most likely settle with 1 to 2 payment solutions in their messaging apps, but what they would expect is that interoperability amongst the players would enable payments to go seamlessly across to different messaging platforms.

I think if an operator or app owner has a large enough user base, they will give payments a shot.

What is the total addressable market (TAM) for micropayments in the U.S., Europe, and globally, and why?

Wed, 11 May 2016 17:53:58 +0000

Faisal KhanAnswered May 11, 2016

No one knows for sure. Even the definition of Micropayments itself is debated. Is it sub $1 payments or payments between $1-$5, etc.

Micropayments also compete with SVT (small-value transfers). SVTs are payments in the $5-to-$25 range (but with more emphasis on cross-border).

It is estimated that the SVT market is going to be about US$ 1 Trillion in the next 6-7 years, when payment platforms across the world would be able to send SVTs across.

The micropayment market is very hard to guess. Tipping (in the shape of bitcoins) is also included in the Micropayments market and no one has an idea of how big that it. All the pundits agree, micropayments will be huge. Probably around the $100-$250 Billion / year mark.

Micropayment are already picking up pace in the gaming world.

Why are micropayment fees often so expensive?

Wed, 11 May 2016 17:53:56 +0000

Faisal KhanAnswered May 11, 2016

Simply because the current payment rails were not designed for micropayments. Because the system was not designed to handle micropayments, the cost of doing one is expensive.

For a bank, is it better to offer one all-in-one mobile app (banking + PFM + NFC + wallet), or multiple separate apps for different functions?

Tue, 10 May 2016 17:53:01 +0000

Faisal KhanAnswered May 10, 2016

Single Application. Less memory used on the phone. Less version updates. If there is a function or area within the application I don't want to use, I won't. But to expect any client to download 4-5 separate mobile application borders on shooing away your customers.

What major innovations by banks or non-banks have transformed global banking, and how successful were they?

Mon, 09 May 2016 18:19:38 +0000

Faisal KhanAnswered May 9, 2016

Opening up of APIs to the banking services via middleware connects.

What regulations apply when starting an online bank in Europe?

Mon, 09 May 2016 18:19:36 +0000

Faisal KhanAnswered May 9, 2016

Starting an online bank in the established markets is difficult. You'd be subjected to the same regulations that the central bank and ECB would impose. Latvia, Estonia, Malta and Cyprus are relatively easier options. Each country has their basic framework for a banking application laid out in detail.

If you're option to do mainly money transfer and payments, you might be better off with an API (Authorized Payment Institution) license, however, then the ever present problem of getting access to banking becomes and issue.

Are there banks in Hong Kong that specialize in Africa or Middle East operations?

Mon, 09 May 2016 18:19:35 +0000

Faisal KhanAnswered May 9, 2016

For Africa Standard Chartered Bank is a good option. For Middle East, Citibank, Mashreq Bank and in some cases JP Morgan Chase Bank are good options.

Is there an international certification program specifically for payments professionals?

Sun, 08 May 2016 19:08:40 +0000

Faisal KhanAnswered May 8, 2016

The only international certification for Payments professionals that is accepted and honored worldwide is ACAMS (which is an AML certification) - See: ACAMS – Association of Certified Anti-Money Laundering Specialists.

Anything else for payments professionals are mostly vendor or geography specific. Glenbrook Partners for example do their famous bootcamps, though they are US concentric: Payments Boot Camp.

SWIFT for example has in-house training, and you get a certificate from your employer as such, but they don't have a globally accredited diploma or anything: See: SWIFT Training Qualification Programme

ETA (Electronic Transaction Association) has a CPP (Certified Payments Professional) Certification, but then again, this tilts towards the US side of things. See: CERTIFICATION

The card schemes have their own training (depending which area you are interested in).

PCI has the QSA (Qualified Security Assessor) but that has more technology flavors than payments. See: Become a Qualified Security Assessor (QSA).

The Security Standards Council, also has a Payments Application QSA Certification. See: Become a Qualified Security Assessor (QSA).

Do credit and debit card payments go through SWIFT, or do they use separate networks?

Sat, 07 May 2016 19:07:34 +0000

Faisal KhanAnswered May 7, 2016

Most Credit and Debit card transactions relay on the Card Scheme networks or in some cases closed-loop networks within a specific geography / territory. So the transaction that one does using the credit/debit card is invariable never transacted using the SWIFT payment rails.

However, when the issuing / acquiring banks decide to settle with each other, they may very well use a local RTGS or a local settlement system. If cross-border is involved, then SWIFT is used.

If I transfer $10,000 from the U.S. to India or ₹10,000 from India to the U.S., what net amount will I receive?

Sat, 07 May 2016 18:17:03 +0000

Faisal KhanAnswered May 7, 2016

From US to India, when you will transfer US$ 10,000 as remittances, Regulation E of the CFPB (Consumer Protection Financial Bureau) will ensure, you will be given a breakdown of all the costs, and especially what you will receive (net) in India in your bank account.

The rates vary from provider to provider and what the exchange rate is for the day, but full transparency is provided for.

I cannot answer on the reverse.

Why are NFC readers popular in most mobile payment solutions for physical purchases?

Fri, 06 May 2016 18:15:45 +0000

Faisal KhanAnswered May 6, 2016

It can be, but taking a token and then converting it into a barcode for further scanning, etc. are all extra steps. Authorizing that token is where the game should start and end.

The behavior for NFC payments, unbeknownst to many came from the door (access) card that is widely used in the corporate world.

What is easier?

For the door to scan the barcode on your access card or
for you to tap the access card (in near proximity) to the reader and have the door open up?

How do remittance transfers function from sender to receiver?

Thu, 05 May 2016 19:05:17 +0000

Faisal KhanAnswered May 5, 2016

Remittances work just like any other correspondent banking relationship, except with everyone taking a little slice of the pie.

Here are three detailed answers that will help you understand how remittances (cross-border money transfer) works:

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to How does international remittance work in detail, e.g. sending money from the U.S. to a European country?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?

Before wire-transfer technology existed, how were funds moved from one person to another?

Thu, 05 May 2016 19:05:15 +0000

Faisal KhanAnswered May 5, 2016

The earliest form of money-transfers were done by the Knights Templar, who are accredited with perhaps the earliest form of banking & money transfers.

Although the primary mission of the Order was military, relatively few members were combatants. The others acted in support positions to assist the knights and to manage the financial infrastructure. The Templar Order, though its members were sworn to individual poverty, was given control of wealth beyond direct donations. A nobleman who was interested in participating in the Crusades might place all his assets under Templar management while he was away. Accumulating wealth in this manner throughout Christendom and the Outremer, the Order in 1150 began generating letters of credit for pilgrims journeying to the Holy Land: pilgrims deposited their valuables with a local Templar preceptory before embarking, received a document indicating the value of their deposit, then used that document upon arrival in the Holy Land to retrieve their funds in an amount of treasure of equal value. This innovative arrangement was an early form of banking and may have been the first formal system to support the use of cheques; it improved the safety of pilgrims by making them less attractive targets for thieves, and also contributed to the Templar coffers.

Based on this mix of donations and business dealing, the Templars established financial networks across the whole of Christendom. They acquired large tracts of land, both in Europe and the Middle East; they bought and managed farms and vineyards; they built churches and castles; they were involved in manufacturing, import and export; they had their own fleet of ships; and at one point they even owned the entire island of Cyprus. The Order of the Knights Templar arguably qualifies as the world's first multinational corporation.

Source: Knights Templar

Earlier references to a parallel settlement network was that of Fei Ch'ien, affectionately called the Chinese Flying Money. It is estimated that Flying Money today, still represents one of the largest money laundering methodologies (more so than the term stuck with us now, Hawala).

The Fei Ch'ien was also in some aspects a legal note, which could be traded for hard currency when presented.

Almost all the settlements were based on a trusted network. Which even before the the days of the 20th Century was done in the same manner as it was 100s of years ago. To pay out, based on the limits assigned and agreed upon, and then to settle amongst the trusted parties (i.e. the early day banks) at a later date.

The seals and encoded information on these notes made the entire eco-system run, not to mention the periodic meeting of the bankers/lenders.

Physical movement of money would happen monthly which was then changed to weekly.

A great understanding of how the Automated Clearing House (ACH) system in the US works (pre wired times) can be learned from this podcast by NPR, on their Planet Money show:

Episode 489: The Invisible Plumbing Of Our Economy

Are there APIs that support building remittance services to Nepal, India, and the rest of Southeast Asia?

Thu, 05 May 2016 19:05:14 +0000

Faisal KhanAnswered May 5, 2016

Yes plenty of correspondent networks provide access to the payment API. It all depends how you are on-boarding to the network, i.e. what your tie up arrangement is, once you are an authorized tie up you can plug in via an API for pushing a payment transaction information. Needless to say, settlement will vary.

What licensing considerations apply when holding customer funds in an international peer-to-peer marketplace?

Thu, 05 May 2016 18:04:36 +0000

Faisal KhanAnswered May 5, 2016

You would need a UK E-Money License. Though you mimic an intermediary, the fact that a payment is made to your account, that is when you cross over into the territory of E-Money.

There are two types of E-Money Licenses, and they can be summaries as below:

Would a bullion-backed “hard” cryptocurrency meaningfully disrupt fiat currencies?

Thu, 05 May 2016 18:04:35 +0000

Faisal KhanAnswered May 5, 2016

Most likely No.

What makes the current fiat currency worth its while (despite all its flaws) is that it is accepted everywhere. That kind of acceptance or even coming "close" to it, is simply not there.

You could have pigeon feathers as a perfectly tradable currency provided everyone accepted it. Gold has been there. Served well, but even with fractional distribution of it, it was just easier for central banks to gravitate towards fiat issuance.

What you are proposing, many startups are doing or trying to attempt to improve the existing say Bitcoin-Gold-Back-Regular-Payment-Rails model.

Could a digital-currency business succeed in Pakistan?

Thu, 05 May 2016 18:04:34 +0000

Faisal KhanAnswered May 5, 2016

Currency exchange is regulated by the FED (Foreign Exchange Department) within State Bank of Pakistan. In order to deal with FX and local currency for purposes of currency exchange, you need to hold either a Category A or Category B Exchange Company License.

These licenses were last issue in 2005. Since then, no licenses have been issued. You need to submit an application in. With the fitness test that is no the application, SBP would indeed require all information from you, including 3 years tax returns, etc.

Who are the five most powerful figures in global banking today?

Wed, 04 May 2016 19:03:46 +0000

Faisal KhanAnswered May 4, 2016

Here are my nominees if you will as to who the most five powerful people in banking are (in no particular order):

Chairman of the Federal Reserve Board
President of the World Bank
President of the European Central Bank
Governor, People's Bank of China
Governor, Bank of England (almost chose Bank of Japan, but BoE has more influence on markets in my opinion).

Will WhatsApp ever offer a full API for interacting with feature phones in creative ways?

Wed, 04 May 2016 19:03:45 +0000

Faisal KhanAnswered May 4, 2016

Assuming WhatsApp goes the route of WeChat (very strong possibility of this happening), I wouldn't be surprised if Facebook then released a set of APIs to develop games on top of the messaging platform as well as payments.

Which payment gateway lets a U.S. company charge customers in multiple local currencies, including those in Southeast Asia?

Wed, 04 May 2016 19:03:44 +0000

Faisal KhanAnswered May 4, 2016

Braintree will allow you to do that. Currencies with Ruby

and so will Stripe: Which currencies does Stripe support?

What trends were expected to shape mobile payments in 2015?

Wed, 04 May 2016 19:03:43 +0000

Faisal KhanAnswered May 4, 2016

The infographic below best portrays some form of growth in the mobile payments arena. It is very difficult to predict with a high degree of accuracy about how much market share mobile payments will take, especially for each developing/emerging markets - where the mobile density is huge.

To start with this is what the mobile space looks like right now - this is a worldwide average:

The following infographic depicts the growth in the coming years.

Source: Open Mobile Media

What is the maximum amount of money I can legally send to Thailand?

Wed, 04 May 2016 19:03:41 +0000

Faisal KhanAnswered May 4, 2016

Usually no limits, unless you're brining in cash, then there is a declaration that needs to be done over US$ 20,000.

For electronic transfers into Thailand, no limit, but do be cognizant of the hard limits on some special accounts/circumstances.

Reference: Exchange Control Regulations in Thailand (Central Bank of Thailand's Website)

What stops banks from processing electronic transactions on weekends and public holidays?

Wed, 04 May 2016 19:03:40 +0000

Faisal KhanAnswered May 4, 2016

Nothing except human oversight. In most markets, switch based payments are processed 24/7. For paper-to-digital, the break is because of the weekend/public holidays when trained labor says they want a day off.

You might argue automation, but if there is an issue, and issues do prop up every single day, the back-office to resolve those issues would not be present.

When opening a joint bank account, do all account holders need to be physically present?

Tue, 03 May 2016 19:02:02 +0000

Faisal KhanAnswered May 3, 2016

Yes. For KYC purposes, both the signatories would have to be present in person.

What are the options for making foreign payments without using a credit card?

Tue, 03 May 2016 19:02:01 +0000

Faisal KhanAnswered May 3, 2016

Pre-paid Debit Cards are great. You only load what you need to spend. Some providers will provide you with a non-plastic (virtual) pre-paid debit cards, that can even be used for one-time use.

In addition to this, Bitcoins are fast catching up as a global currency-in-the-making. Easy to send, easy to receive.

How do banks manage and record very large volumes of transactions and customer accounts?

Tue, 03 May 2016 19:01:58 +0000

Faisal KhanAnswered May 3, 2016

As everyone has cited, its predominantly computers. Add to this the divide and conquer rule. Essentially each transaction (in most cases) is a two-party exchange, i.e. a transaction between the payer and payee. So on an individual level, not much is happening, a ledger gets debited, whilst another one get credited. This is what the core banking software is really really good at. It understand what rule sets to follow (which have been defined in the system on a global level by default and specific rulesets as defined by the bank and the regulator they are working with).

Now scale this system to handle 10,000s of transactions per second and you will see that large volume handling is not a problem. Most core banking software will also act as routers (in the crudest of sense), pushing a transaction on to a particular platform for it to be executed. For example a credit card charge is handled by the CTL software. A mortgage payment handled by the Loans and Mortgage software. etc. So the transaction loads are off-loaded to other system.

The database itself is optimized to handle 10,000s operations per second as well.

The part that perhaps takes the most processing power in some sense are the checks and balances and log generation. Such software are combing through logs and transactions in real-time and then generating further alerts and logs on their defined rule sets.

Whilst the concept is explained here, simply, it is a complex system, but one if tuned perfectly, works without flaws within the defined operating ranges.

Could Steam’s virtual wallet balance (or “Steam money”) become the most widely used virtual currency?

Tue, 03 May 2016 18:58:08 +0000

Faisal KhanAnswered May 3, 2016

As a closed loop currency, sure. Though I would tend to lean that for the same comparison, Linden Dollars might be more in use (kind of hard to find latest figures on the circulation of both these currencies and how big of a closed loop economy they support).

What would the world look like if borrowing money didn’t exist?

Tue, 03 May 2016 18:03:12 +0000

Faisal KhanAnswered May 3, 2016

I'd agree we would have less development, perhaps more value for money (i.e. less inflation). Islamic Banking as Jimmy Wales as cited, keeps money in circulation, i.e. you're discouraged from hoarding money. Money is either invested or transacted into the economy to keep it flowing. Think of money in Islamic banking as water. Stagnant waters are not preferred.

Because borrowing essentially had the multiplier effect on the economy, access to capital led to faster development of rural areas and brining under or undeveloped regions at par with developed regions.

Growth would definitely be slow. That's for sure.

Bitcoin in 2015: What’s the best platform for Bitcoin day trading (excluding Coinbase) for users outside the U.S.?

Mon, 02 May 2016 18:01:58 +0000

Faisal KhanAnswered May 2, 2016

Both Bitfinex and Bitstamp are great exchange to trade at. Lots of liquidity.

What are some interesting facts about Stellar.org?

Mon, 02 May 2016 18:01:57 +0000

Faisal KhanAnswered May 2, 2016

They are reworking their baseline code to improve scalability. This is going on as I write this. Should be coming out with more scalable code in the coming weeks.

Should I combine remittances, bill pay, mobile top-ups, and merchant payments into one app, or build separate apps?

Mon, 02 May 2016 18:01:56 +0000

Faisal KhanAnswered May 2, 2016

Why not. No one is doing to download multiple applications to do multiple set of payments. Single apps with multiple options bakes sense. If it makes it confusing, then revisit your UX again.

A good design will not flare up confusion! Only confidence.

What is a strong payment gateway option for a Saudi/Middle East startup besides PayPal?

Mon, 02 May 2016 18:01:54 +0000

Faisal KhanAnswered May 2, 2016

Have you looked at PayTabs? They service the Middle East - PayTabs | Accept Payments Online

How can a website or app initiate an ACH transfer without being underwritten?

Sun, 01 May 2016 17:58:37 +0000

Faisal KhanAnswered May 1, 2016

Two companies you should look at:

Knox Payments, contact Tommy Nicholas or Laura Spiekerman (See: https://knoxpayments.com/)
Synapse Pay, contact Sankaet Pathak (See: https://synapsepay.com/)

If Bank A’s debit card can withdraw cash at Bank B’s ATM, how does that work without banks sharing sensitive account data?

Sun, 01 May 2016 17:58:36 +0000

Faisal KhanAnswered May 1, 2016

The entire financial system is based on intermediary trust. In many instances, one of the two trading parties can become the financial intermediary of trust.

To answer your question, this is done through net deferred settlement. The exact question you have asked is explained here: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Why is every major tech company building its own payment platform?

Sun, 01 May 2016 17:58:33 +0000

Faisal KhanAnswered May 1, 2016

Business (and hopefully dominance).

When you have a couple of thousands as your user-base, you're a very very small player. However, when you have 100s of Millions users, a payment system can drastically increase revenue for your company via transactions that would most likely be within your ecosystem.

Very few companies have the user-base to experiment with this, and they will certainly give it a try. The penultimate goal is to have a payment system as a product of a very large user base company that has multiple products in the form of social connectivity and communication.

If successful, then more and more merchants would sign-up, because they feel the payment system would be too large to ignore.

Farhad Manjoo's article from a few years back is something one should definitely read to understand why these companies are doing what they are doing: The Great Tech War Of 2012

What is Western Union?

Tue, 12 Apr 2016 17:56:22 +0000

Faisal KhanAnswered Apr 12, 2016

Western Union is a worldwide company that is classified as a Money Transfer Operator (MTO), and operates its points-of-presence on a franchisee model.

As WU provides a singular platform to all its Agents, in all the countries, the sending/receiving of money is nearly seamless and the same at every location.

WU also provides the remittance platform software to all its Agents, so everyone is using the same central repository where payment information is held.

Is there a way to let users transfer money to each other directly from their bank accounts inside my app?

Tue, 12 Apr 2016 17:56:21 +0000

Faisal KhanAnswered Apr 12, 2016

Assuming for the US: There are two ways of doing this:

Intrawallet: i.e. all the funds are loaded to the wallet, and then intrawallet transfers happen.
ACH: You can initiate an ACH push, but for this some a priori bank account information would be required.

How does one country lend money to another—do they transfer it electronically, ship it physically, or is it just accounting entries?

Sun, 10 Apr 2016 17:53:00 +0000

Faisal KhanAnswered Apr 10, 2016

When two countries typically are involved in lending money to each other, the central bank of each country is usually involved.

If that is the case, each central bank would assign a correspondent bank to work, which can work with each other. Sometimes in both the countries, it is the same bank. Sometimes it is not.

Example: Lets say UK decides to loan GBP 150 Million to Sri Lanka. In this case Bank of England's designated bank for the transfer is Barclays Bank. However, for the Central Bank of Sri Lanka, the designated bank is Deutsche Bank. Because Deutsche Bank London and Barclays Bank London can exchange funds with each other, the loan amount is electronically pushed from Barclays Bank London to Deutsche Bank London to Deutsche Bank Sri Lanka and into the designated account or accounts as mandated by the Central Bank in Sri Lanka.

If however both Bank of England and Central Bank of Sri Lanka decided to use Deutsche Bank as the designated bank, then the movement of money is even more simpler.

If the loan requires physical shipment of cash, for the GBP lets say 10 Million has to be in currency notes, then the BoE arranges for cash movement via one of its designated banks for the secure transport of GBP Notes from London to Sri Lanka.

What impact will FinCEN regulation have on virtual-currency payment systems being treated as money transmitters?

Sun, 10 Apr 2016 17:52:58 +0000

Faisal KhanAnswered Apr 10, 2016

Well for starters it would remain to be seen that action do the individual States take. Do brokers like Coinbase, Circle, BitPay, et. al. constitute as Money Transmitters? If they do, this would have a serious set back to their ongoing operations, unless they get some form of a continuation arrangements with the States.

Legal eagles will be billing the clients in full to let them know - what they probably already know. They now need to get licensed.

If no relief is provided by the States and the opinion is that Bitcoin brokers would need to get licensed and till such time they are not licensed, they cannot transact, this would have a large impact on US based companies and their transaction volumes.

A great time for Bitcoin brokers from outside the US to get a larger piece of the pie.

For those who were about to launch and go operational and for those who were waiting in the sidelines, they will be keeping a sharp eye out on how to get MTLs in their respective States from where they want to source business.

In short, it was bound to happen.

Can an investment management company accept money (fiat and bitcoin) through a payment gateway?

Sat, 09 Apr 2016 17:51:12 +0000

Faisal KhanAnswered Apr 9, 2016

If the payment gateway in question will support Bitcoins, certainly.

Not sure what Bitcoin limits merchant gateways like Bitpay, Coinbase and GoCoin have in place, but it should be possible. Unless of course you're wanting to transact million through a single transaction in which case, liquidity might be an issue and you'll take a small hit in the price fluctuations of bitcoins at the exchanges.

You could be an asset management company, investment management company, broker-dealer, etc. the funds are still fiat to you, so absolutely legal in that aspect.

Who is likely to become PayPal’s next president?

Fri, 08 Apr 2016 19:08:39 +0000

Faisal KhanAnswered Apr 8, 2016

Two leading candidates are:

Bill Ready (CEO of Braintree Payments)
Dana Stalder (General partner at Matrix Partners)

Can Pakistani businesses use a Skrill business account to accept Visa and Mastercard payments?

Fri, 08 Apr 2016 19:08:37 +0000

Faisal KhanAnswered Apr 8, 2016

Yes, they can. If approved, Skrill's merchant services are available to Pakistani businesses for worldwide card acceptance. This was true till the last time I checked which was Nov. 2013.

How would widespread adoption of Ripple affect SWIFT and CLS in terms of market share and revenue?

Fri, 08 Apr 2016 18:18:00 +0000

Faisal KhanAnswered Apr 8, 2016

No one knows for sure. Sometimes even the best of products don't go mainstream. Intended adoption just never happens. In the mid 90s to late 90s, no one thought that Netscape's Browser would be dead in 4-5 years time.

Is Ripple a SWIFT killer? Perhaps. But do you honestly think SWIFT is sitting idle and will welcome its demise? I don't think so. Ripple might just be acquired by SWIFT (wouldn't that be ironic).

The truth of the matter, banking operates as a cartel. Anyone who is sane enough and has seen the management structures would tell you this. The keyword in your question is: adoption.

A lot would derive from there.

Is there any bank that offers insurance services through its ATM network?

Thu, 07 Apr 2016 18:17:02 +0000

Faisal KhanAnswered Apr 7, 2016

ATMs are cash-in/cash-out machines, they are not typically used to sell products &/or services. Most ATM usage would be card/cardless based transaction for payments.

I do not know of a bank offering insurance buy-in via an ATM. You could possibly make insurance payments via ATMs, but not the insurance selling aspect.

How is Mint.com able to offer users pre-approved credit card offers?

Tue, 05 Apr 2016 19:05:12 +0000

Faisal KhanAnswered Apr 5, 2016

Based on profiling. Profiled data field from your usage would allow them to statistically narrow down the probability that you would qualify for a pre-approved card. Even the word pre-approved is a misnomer, as it is still subject to approval (the fine print).

Can digital bank transfers in the U.S. be completed on weekends, and why or why not?

Tue, 05 Apr 2016 19:05:11 +0000

Faisal KhanAnswered Apr 5, 2016

Not for ACH, even the digital bank would ride the 3-day rails of the archaic ACH system, which is closed on weekends.

What challenges arise when building a client-facing financial application?

Tue, 05 Apr 2016 19:05:10 +0000

Faisal KhanAnswered Apr 5, 2016

Finding a bank to work with, regulatory approval and then traction.

What is the most cost-effective way to wire funds from the U.S. to Europe?

Tue, 05 Apr 2016 19:05:07 +0000

Faisal KhanAnswered Apr 5, 2016

Wire transfers are cheap. Barring that, look at FX Brokers who specialize in payments, eg: TheCurrenyCloud.

Do any fully open-source payment gateways exist, beyond libraries that merely integrate with other gateways?

Mon, 04 Apr 2016 19:03:39 +0000

Faisal KhanAnswered Apr 4, 2016

In so far as I know, no open-source payment gateway exists. The closest example would be Cyclos and their cards/POS module is yet to be released, though there may be some add-ons.

What onboarding fee does PreCash charge for adding an authorized delegate?

Mon, 04 Apr 2016 18:04:05 +0000

Faisal KhanAnswered Apr 4, 2016

PreCash's prices are needless to say negotiable. They don't just provide pricing to anyone, lest they be tagged by the state regulators as renting their licenses.

The pricing is as follows:

Money Transmission Processing Pricing
0-100,000, each transaction will be 25 cents
100,001-200,000, each transaction will be 20 cents
200,001 & above, each transaction will be 15 cents.

So their minimum revenue guarantee that they would like is $15,000 monthly. This equates to about 60,000 transactions per month.

One time implementation fees varies, between US$ 50,000 to US$ 25,000 - more so on the 25k side.

They expect you to sign a tight 3 year contract.

Are ATM operating costs the real reason banks charge ATM fees, or is it mostly profit-taking?

Mon, 04 Apr 2016 18:04:04 +0000

Faisal KhanAnswered Apr 4, 2016

It depends where in the world you are talking about. In certain countries and in certain geographies and ATM makes money. For banks, in most locations, especially branch, they do and they don't. Mostly, they don't. An ATM is a required prerequisite for most branches.

In places like India, Pakistan, Bangladesh, Nepal, Philippines, Indonesia, Malaysia, etc. ATMs are required by law to be installed at all bank branches, and hence rarely make money.

But, your mileage may vary depending on the location and foot traffic. The costs associated with running an ATM in one of the countries above, is high, so by no way or means is the client being ripped off, it just is expensive to operate it and make money out of it.

Why doesn’t Pakistan have local payment gateways similar to PayPal?

Sun, 03 Apr 2016 18:58:07 +0000

Faisal KhanAnswered Apr 3, 2016

To establish a payment gateway costs a lot of money. As per current rules, that number is approximately Rs. 200 Million as paid up capital for the company that would be setting it up. It takes about a year to get the license from State Bank of Pakistan and another 1 year to go and launch full-fledge.

There are companies working on ubiquitous payments, think carrier and bank agnostic frictionless payments, be it online or offline. This would include person-to-person wallet payments.

Companies that enter into this market are disappointed by the lack of data and verifiable numbers that would enable them to make strategic decisions. The online person to person market is best estimated at 50,000 wallets. This is a very small number.

To better enable P2P payments, companies are now looking at agnostic mobile wallets and natively build P2P payments inside of those wallets, where a much larger ecosystem would come into play.

Where can I exchange currency at the best rate once I arrive in Dubai?

Sat, 02 Apr 2016 18:57:06 +0000

Faisal KhanAnswered Apr 2, 2016

Anywhere. The rates are fixed, so they remain the same (in case of US Dollar)

Did Mint.com obtain consent from utility providers before scraping customer account data?

Sat, 02 Apr 2016 18:01:53 +0000

Faisal KhanAnswered Apr 2, 2016

Yes. Its not like the utility companies will provide carte blanche access to their data. In some cases, utility companies will provide API based access only, and in some cases, direct login access, in which case, an appropriate agreement may already be in place with Mint as to what, which and how the data might be extracted, used and repurposed.

How can I start accepting cryptocurrency payments as a freelancer?

Fri, 01 Apr 2016 18:55:51 +0000

Faisal KhanAnswered Apr 1, 2016

Picking a wallet is no different than signing up on Gmail, etc. As a novice you most definitely want to avoid a wallet on your PC/Laptop, etc. Just sign-up for an online wallet. Go with the more recognized wallets. Be sure to read up articles on how to store your Bitcoins offline (as in a USB, etc.) this way you will always be covered.

You can also look at services like BitPay, CoinBase, et. al. to get you started in accepting bitcoins. You don't necessarily have to use these services, your wallet will also suffice to receive payments directly in it.

How can I send money from the U.S. to the Philippines via wire for free?

Fri, 01 Apr 2016 17:58:32 +0000

Faisal KhanAnswered Apr 1, 2016

Give Remitly a try, they are offering incentives - (See http://www.remitly.com)

They have $0 fees as well:

How valuable is the CAMS certification for IT professionals in AML—does it help IT project managers, or is it mainly for compliance staff?

Fri, 01 Apr 2016 17:58:30 +0000

Faisal KhanAnswered Apr 1, 2016

CAMS would be an over-kill if you're not in the AML field. As you have indicated that you are indeed working in the AML field, it adds tremendous value (doesn't matter if you are in IT).

It is indeed very difficult to find people in IT with CAMS. So it definitely makes you more in demand and marketable.

What is the most convenient way to transfer money from a U.S. bank account to an Irish bank account?

Fri, 01 Apr 2016 17:58:29 +0000

Faisal KhanAnswered Apr 1, 2016

An international wire transfer would be one of the smoothest ways of doing this, i.e. via a SWIFT transfer.

Why are remittance inflows slowing down in the Philippines?

Fri, 01 Apr 2016 17:58:27 +0000

Faisal KhanAnswered Apr 1, 2016

They are anything but slowing down. Seasonal or temporary adjustments (or falls), are not impacting the growth patterns.

The projected growth for 2015 over 2014 is anticipated to be over 5%.

Higher remittances from overseas Filipinos together with increases in exports of goods and services will underpin current account surpluses this year and next. However, the current account forecasts are trimmed since April as imports are projected to rise significantly when reconstruction speeds up.

Source: Philippines: Economy

Will PayPal be disrupted by newer payment technology companies like Stripe?

Fri, 01 Apr 2016 17:58:26 +0000

Faisal KhanAnswered Apr 1, 2016

No, they will not be disrupted anytime soon. Here are a couple of reasons.

PayPal is constantly reinventing themselves and staying abreast with the latest developments in the payment and payment systems world.
They are very much on top of their game.
They are not complacent, which would be a very important element to consider for them to be disrupted.
In a few months, PayPal will find yet even more freedom when they become independent of Ebay. Expect more products & services to be launched.
They have the monetary power to sustain losses (subsidize transactions) to drive others out of business (in most cases).
They are always on the lookout to snap up payment solutions (acquire them).
The dilution effect. Their user base is quite large and they will fight tooth and nail to defend it. A smaller user base company has relatively low chances of disrupting them, however, a large user base company like WhatsApp/Facebook, has a very sure-shot chance of disrupting.

What is anti–money laundering?

Fri, 01 Apr 2016 17:58:24 +0000

Faisal KhanAnswered Apr 1, 2016

Money laundering is the process by which you take dirty money (money obtained from illegal / undeclared means) and launder it through the financial system to make it look/appear clean when the cycle is finished.

Anti-Money laundering are all the tools, know-how, processes, hacks, tips, formulas, checks and balances, limits, thresholds, correlation of data, etc. to detect & mitigate money laundering.

There are three essential steps in money laundering:

Money that needs to laundered, i.e. dirty-money is first collected and aggregated.

Placement occurs when this cash is broken down into smaller denominations (amounts) and then loaded on to say anonymous or semi-anonymous prepaid card schemes.

Layering is when these cards are shipped to various contact points across the border and these individuals are then instructed to cash out from the ATMs using these prepaid cards. The funds cashed out then deposited in various bank accounts and are transferred between banks. Mixing the money so to speak.

Integration is taking this laundered money (which usually snakes its way to a single or dual bank account) and is used to buy expensive things like property, boats, cars, etc.

AML is designed to detect money-laundering acts, to stop them and report them.

Is there an app that can replace everything in your wallet except cash?

Sat, 12 Mar 2016 17:56:20 +0000

Faisal KhanAnswered Mar 12, 2016

M-PESA in Kenya. There are many other examples for other MFS controlled markets, each with a varying degree of "almost" replacing your wallet. In the US, some would argue PayPal, others would say Venmo. For the unbanked, people take solace with PayToo.

Likewise in emerging markets, Pakistan has EasyPaisa, Bangladesh has bkash, Philippines has Smart, Europe has its own sets of apps. Russia has Yandex Money, etc.

It is truly difficult to find one true global app or regional app that would dominate (as much as M-PESA).

Why do countries repurchase their own currency from other countries?

Sat, 12 Mar 2016 17:56:18 +0000

Faisal KhanAnswered Mar 12, 2016

To keep money supply and inflation in check.

Is it smart to accept Bitcoin but settle into fiat immediately to reduce volatility exposure, and where can I find such a service?

Fri, 11 Mar 2016 17:53:55 +0000

Faisal KhanAnswered Mar 11, 2016

Here are some of your options:

Payment Gateway for Bitcoin and Litecoin Merchant Accounts
Accept Payments in Bitcoin
Coinbase - Your Bitcoin Wallet
Accept Bitcoin | BitPay

The above will accept payment in Bitcoin and immediately convert that into the currency of choice like USD, GBP, Euro, etc.

How do Western Union and MoneyGram operate behind the scenes?

Thu, 10 Mar 2016 17:52:57 +0000

Faisal KhanAnswered Mar 10, 2016

With Western Union and MoneyGram it is based on a pre-funded payment based on the Agent's payout capacity.

See the following three answers that explain wire transfers and money transfers:

Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?

Which Pakistani online stores are successful and have international reach?

Thu, 10 Mar 2016 17:52:56 +0000

Faisal KhanAnswered Mar 10, 2016

Two immediately come to mind:

Popinjay. Handmade in Pakistan.
Markhor — handcrafted, modern design shoes for the real man

How do foreign exchange transactions work on credit cards?

Wed, 09 Mar 2016 18:19:33 +0000

Faisal KhanAnswered Mar 9, 2016

When you purchase something in say British Pounds, using your US Issued (Dollar) card, the transaction on the FX part is handled as follows, the route is always:

Client -to- Merchant -to- Acquiring Bank -to- VISA/MasterCard (Card Scheme) -to- Issuing Bank.

The transaction amount that requires approval is presented in GBP
The acquiring bank sends the amount in GBP to VISA (let us assume it is a VISA card)
VISA send the amount in GBP to Issuing Bank in GBP
Issuing Bank will take the amount in GBP and convert it to USD
The FX Rate is provided by the Issuing Bank
Issuing Bank will check if there is enough balance in the card.
Issuing Bank will provide Authorization to the VISA, which in turn goes to the Acquiring Bank.
Authorization is complete
On the settlement date, (let us assume it is 2 days later), the FX rate on the day of settlement is applied. If the rate goes against the bank, the customer pays (as overdraft on debit card or beyond limit on credit card), if the rate goes in favor of the bank, the bank passes the applicable rate back to the customer (because by law they have to utilize the FX rate on the day of settlement).

If the card is being used in say Tanzania for Tanzania Shillings, then there is no direct way for your (issuing bank) to quote USD/TZS pair. To counter this all issuing banks, set a basket of currencies for which they will accept/quote. Mostly it is USD. VISA then manages FX pair rates for all other countries, based on USD.

VISA can then provide a rate for USD/TZS to the issuing bank. The issuing bank can also instruct VISA to always keep a margins of 3% on all FX authorizations, etc.

The settlement of FX is done as per the settlement of FX for any other transaction, except in this case VISA's settlement bank in the UK will settle with VISA's settlement bank in the US for the GBP/USD transaction.

Which banks are willing to open accounts for licensed money services businesses considered high-risk?

Wed, 09 Mar 2016 18:19:32 +0000

Faisal KhanAnswered Mar 9, 2016

Being able to find banking is going to be extremely difficult, especially if your friend's MSB business deals with cash + cross-border.

This entire de-risking exercise is happening due to something called Operation Chokepoint (Wikipedia: Operation Choke Point).

You would be hard-pressed to find a bank that would accept an MSB now, and if someone does find a bank chances are people would not be providing names (as referral fees in this business for finding an MSB friendly bank is high).

I literally know of 100+ cases where MSBs have essentially gone out of business as they cannot get access to banking. They are holding on to their licenses, but that is about it.

As a very good friend in the industry puts it: It is Strangulation by Regulation!

The most likely place where you might end up getting banking are small community banks or credit unions, however it is going to be a tough search.

Access to banking for MSBs, which ironically are one of the most regulated entities, is a major issue and there seems to be no end in sight to this problem.

Additional Reading:

Banking De-Risking: The Domino Effect Is Now In Full Force.
Can't find MSB Friendly Banks?
The Sandstorm that is blanketing the Money Services Business

Which emerging technologies are most disruptive to the banking industry?

Wed, 09 Mar 2016 17:51:09 +0000

Faisal KhanAnswered Mar 9, 2016

The payment rails as offered by the current crypto technologies like Bitcoin, Ripple, Stellar, etc. is in my opinion a powerful disruptor. Being able to move value (that is transportation and settlement at the same time) has a big advantage over the current systems.

I also think the Bitcoin type ledgers will be a disruptor. They would most likely be packaged by a group of OEMs in the banking space, but the ability to have a distributed ledger amongst the banking/financial community and the regulator, would be something that can ensure, value is always tracked in real-time in the system. Check clearing and other payment instrument might also hop on to the same.

From a technical standpoint, how was PayPal originally built, and how did the founders gain bank access to move funds between accounts?

Wed, 09 Mar 2016 17:51:07 +0000

Faisal KhanAnswered Mar 9, 2016

PayPal was built on the premise of what we now call a modern day digital wallet. The idea was simple, yet brilliant in two aspects:

The existing banking infrastructure could easily cover it
The unique identifier that the email is (to be able to use that to send/receive money)

There wasn't an issue of moving funds from one bank to another, that has been happening since the past 50+ years prior to PayPal. The breakthrough was to designate PayPal a virtual branch status, so that each wallet is an account holder and thus moving money between account holders is a non-issue.

See: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

What legal and technical requirements are needed to launch a crowdfunding platform in the U.S.?

Wed, 09 Mar 2016 17:51:06 +0000

Faisal KhanAnswered Mar 9, 2016

Depending on the volume of business you're funneling, you might be required to register directly with the card schemes, with respect to your merchant account.

You also would most likely be classified as a PF (Payments Facilitator).

If you're touching the money and holding on to it, you would be classified as a Money Transmitter, so you would need Money Transmitter Licenses.

What practical steps can I take to spend less and save more?

Wed, 09 Mar 2016 17:51:04 +0000

Faisal KhanAnswered Mar 9, 2016

If you are going to save, take a predetermined amount that you want to save from your paycheck before anything else.

Most people make this mistake (I used to too), that they will get their paycheck, spend money on utilities, rent, and other expenses, etc. and then whatever is left, they would then allocate a portion of it towards savings. This is the wrong approach.

Paycheck - Expenses = Savings

The correct approach is to take what you want to Save out first from your paycheck.

Paycheck - Savings = Amount left to Spend on Rent/Utilities, etc.

If you frequent bars and clubs to drink, you're spending money on diluted and very profitable drinks for the establishment, and they are extremely expensive on a per ounce basis.

If you have to drink, tank up at the house, take a cab to where ever you want to go and have one or two drinks there. You'll save a bunch.

Which payment gateway does Airbnb use to process payments?

Tue, 08 Mar 2016 18:17:59 +0000

Faisal KhanAnswered Mar 8, 2016

AirBnB used http://Adyen.com for its global payments.

What happens to the remaining balance when a Venmo account is closed?

Tue, 08 Mar 2016 18:17:57 +0000

Faisal KhanAnswered Mar 8, 2016

When you close your account, the legal obligation is for Venmo to cash you out, i.e. transfer the money out to your bank account (via ACH). If you've closed your bank account, check might be another option (although I am not sure if they offer it).

If the money has not been transferred in say 180 days, then the money stays with Venmo in unclaimed deposit account. How long it stays there before Venmo decides it is theirs, depends on the TOS, internal policies and what the State regulations are.

Is it possible to transfer funds from PayPal directly to any MasterCard?

Tue, 08 Mar 2016 18:17:56 +0000

Faisal KhanAnswered Mar 8, 2016

No. Not possible at this time. You could ask them to pay you through the US Payment Service (ACH), but be sure to tell them to ACH from a Business Account. That money will directly be loaded on to your Payoneer card.

How can telecom payment gateways be used to charge for digital content in countries like Saudi Arabia and Egypt?

Tue, 08 Mar 2016 18:17:54 +0000

Faisal KhanAnswered Mar 8, 2016

Both Zain and STC themselves offer publishers of digital content to be able to sell to their user base. The proposition wasn't very convincing (2 years ago 2013) when I last checked. 35% fees, and payout after 60 days.

How can funds be moved from a bank account into an app without using ACH?

Mon, 07 Mar 2016 18:17:00 +0000

Faisal KhanAnswered Mar 7, 2016

I think you already know the answer, but aren't quite convinced (yet) that this is the only solution, which is: open a bank account with every bank and then do an intra-bank funds transfer.

Most banks do not levy a charge for intra-bank transfers.

In real-time payment systems, what role does a liquidity module play?

Mon, 07 Mar 2016 18:16:59 +0000

Faisal KhanAnswered Mar 7, 2016

Payments are based on ledger positions, or simply put, when a payment is being made, one ledger is being debited, and one is being credited.

Sounds simple enough right? Well, this is where it gets tricky. When an ATM runs out of money, that is where liquidity is in short supply. You, as a user would love to insert your card into the ATM and get money, except there is none. To put it in colorful words, the liquidity pool for supply of money is dry, i.e. there is no one to offer you money.

Likewise when payments are done, in real-time, someone (some financial entity) is fronting the money in real-time, so that payments can be executed in real-time.

A liquidity module manages and keeps track of liquidity in a payment system. If money is flowing from say Chicago to Toronto, then the there needs to be enough liquidity in Toronto to make sure those payments from Chicago can be fulfilled.

When liquidity is running low, then net deferred settlement needs to be done quickly to top off the pools (this is one of 100s of many examples of how liquidity pools are managed). Another example would be to bring in a market maker that adds more liquidity to the market.

Sometimes a market only has so much liquidity, and you cannot insert more. Then this becomes an issue, for if you don't track it, you will have a lot many open IOUs in your payment system that are simply not being closed.

The general definition of liquidity differs from scenario to system, but all in all it is about demand / supply.

Historically, what final trigger causes a fiat currency to collapse?

Sun, 06 Mar 2016 19:06:47 +0000

Faisal KhanAnswered Mar 6, 2016

The Fractional Reserve system of creating money and lending. No matter what you do, you can never pay back the interest in full. That money just does not exist. Each year we print more money and it loses value. One day, the interest owed cracks will open wide.

How can a business identify the legal process required to obtain a money transfer license?

Sun, 06 Mar 2016 18:15:43 +0000

Faisal KhanAnswered Mar 6, 2016

Within the US for example, this is a straight-forward process. You can do with with the help of an attorney or without, that is entirely up to you. Attorney based knowledge will help.

For each State you wish to do business in, you will need to apply for the Money Transmitter License with the State Regulator.

A complete list of regulators can be found here: Money Services Business (MSBs): US Money Transmitter Licenses

The State regulators are pretty helpful when it comes to helping businesses apply for MTLs. Start with a smaller (read: easier) states like Idaho or Alabama to get acquainted with the process.

You would also need to register with FinCEN.

Are there Canadian banks willing to open accounts for money services businesses despite tighter MSB policies?

Sun, 06 Mar 2016 18:15:42 +0000

Faisal KhanAnswered Mar 6, 2016

Banks worldwide have clamped down, so to speak on MSB businesses. It all starts with your AML/KYC program. You need to be able to meet or exceed the requirements set internally by banks, before they will consider your business. In most cases, they would just refuse to do business with an MSB entity.

Your best shot at this are two folds:

Talk to an Attorney that is in this field and they can possibly introduce you (for a fees) to an MSB friendly bank
Work with investors who have a deep pockets, that might get the doors opened for you.

At the branch level, don't even bother, they have been instructed to essentially deny you business.

Who invented the credit card, and how did it become a widely used payment method in the United States?

Sat, 05 Mar 2016 19:05:04 +0000

Faisal KhanAnswered Mar 5, 2016

Our resident payments maestro Brian Roemmele give a great answer to this question: How did credit cards become plastic cards with embossing? (mid-way it answers how the credit cards got started).

Is there a future for mobile payment aggregators, and which industries would benefit most?

Sat, 05 Mar 2016 18:04:32 +0000

Faisal KhanAnswered Mar 5, 2016

Short answer: No.

Eventually, interoperability will just kill the mobile payment aggregators.

Why would someone choose to found a new bank, and what steps would they take?

Sat, 05 Mar 2016 18:04:31 +0000

Faisal KhanAnswered Mar 5, 2016

One would establish a new bank if one sees an opportunity. If there is room for a new player or if you believe there is a certain market segment(s) or niche product/service offering that are not being catered to correctly, you may want to setup a new bank (or buy an existing one).

The process of setting up a new bank varies from country to country, but the starting point is the financial regulator in your country. Start with determining if banking licenses are being considered. If they are, then request the prerequisites and application material for starting a new bank.

How can I create a company-branded “debit card” that works at standard point-of-sale terminals?

Fri, 04 Mar 2016 19:03:37 +0000

Faisal KhanAnswered Mar 4, 2016

You can just have a singular "card association". To have a debit card for your own company, you just need to have the numbers. You can go to a pre-paid debit card provider or to an issuing bank. Both will provide you with a card associated card, provided your business case makes sense to them and you have the minimum qualifying numbers for card commits in their territory.

Nothing really to it. A VISA/MasterCard debit card will work pretty much on all networks.

When a country devalues its currency to fix a balance-of-payments crisis, how does that positively and negatively affect people’s standard of living?

Fri, 04 Mar 2016 19:03:36 +0000

Faisal KhanAnswered Mar 4, 2016

Whilst an economist can best answer this question, here are some observable outcomes that can happen.

If the country has exports, they become cheaper, and more favorable (to both the buyer and the seller).

Inward Remittances increase, because you're getting more local currency for every US Dollar (for example) you bring into the country.

If a large portion of your current account deficit is based on oil payments, then needless to say, things will get expensive. This includes transportation, air travel, imports of raw material and eventually manufacturing.

It can be a very tough call, to have the right devaluation and to control inflation at the same time. Many countries struggle with this balance.

After Visa acquired Fundamo in South Africa, did it actually gain emerging-market share or was the $100 million largely wasted?

Thu, 03 Mar 2016 18:58:05 +0000

Faisal KhanAnswered Mar 3, 2016

Fundamo didn't pick sales as they had projected. Had VISA not acquired, they (Fundamo) would be in a pretty pickle from what I hear.

Fundamo's market/sales rests on a few countries and even within such countries, they do see a lot of competition from other wallet/mobile-banking providers.

Waste of $100 Million - probably not.

How can I set up a conditional payment?

Thu, 03 Mar 2016 18:03:11 +0000

Faisal KhanAnswered Mar 3, 2016

The only time you can make a payment conditional is via either escrow (do be cognizant of the party agreeing to escrow, have they been licensed to do that).

The other method is letter of credit (albeit, in many ways an L/C is an escrow).

You essentially then to structure a contract, If-Then-Then-Do-This-Else

I’ve worked at State Bank of India for six years as a forex assistant—what are my chances of getting a banking job in Europe?

Thu, 03 Mar 2016 18:03:09 +0000

Faisal KhanAnswered Mar 3, 2016

Pretty low. There are enough forex traders in Europe, sometimes more traders than jobs. Besides, your RBI knowledge is of no use to the Europeans. They need you to understand the ECB and EU laws along with European experience to really offer you a job. Unless, you've been a stellar trader (for which you would have been found already).

Bluntly speaking, you don't offer much to them to hire you from all the way from India.

How can I connect to the ACH network so customers can pay from their bank accounts inside my product?

Thu, 03 Mar 2016 18:03:08 +0000

Faisal KhanAnswered Mar 3, 2016

Just work with an ACH provider that would enable them to use the providers API, that would stitch this. Ot many people have their Bank/Routing information with them handy, so best to use a service like Knox Payments (caution: they are going thru an upheaval at present) or Synapse Pay.

How do interbank and cross-country money transfers work?

Thu, 03 Mar 2016 18:03:06 +0000

Faisal KhanAnswered Mar 3, 2016

How do banks transfer money?

A question asked of me often is How do banks transfer money? How is money transferred from one country to another? I mean how does it work? How does my account get debited of $100 and somewhere around the world someone’s account get credited for $100.

Another parallel question is, How does $100 Million transfer? I mean, say if America is giving someone loan, how do the two countries transfer $100 Million? Or even $10 Billion? How does this work? How can the wealth of one country decrease by $10 Billion and another one’s increase by $10 Billion?

Is money physically moved? Do they transfer cash in vaults?

How does this all work?

The most common answer cited by many is SWIFT or Wire Transfer but it still doesn’t answer the question. You still walk away feeling equally baffled by the whole thing.

So, how does money really get transferred between banks?

Tl;dr:

It’s all about trust and ledger adjustments. Essentially, IOUs being exchanged.

The Solution

There are a million ways to explain the solution. Some use complex ledger examples, others, will use a mix of ledger and trust lines, etc. I decided to use an exceedingly simple example that explains the general concept well.
Granted, a lot many things are left out, or not quite accurate, but then again, the whole goal here is to make sure you grasp the concept of how banking transfer work.

The Lemonade Bunch

For any bank to function, there must be deposits and customers. So for our example, lets assume this lemonade stand business, aptly called The Lemonade Bunch.

These three hard working folks, generate a lot of income. They sell lemonade like crazy and make lots of money.

At the end of the day, they tally their sales and its US$100,000. Now they are holding on to that cash. They need to deposit this money in some bank. Wells-Fargo seems to be their bank of choice, so they walk in to a Wells-Fargo branch and deposit their money (assume for a minute, they are the only clients for Wells-Fargo)

So they go, deposit the money and then get a receipt for their deposit, which would look something like this:

The bank now has one customer, and the bank’s balance would look something like this:

The Banking System

To truly understand how the whole banking eco-system works, imagine a school. A school's hallway has access to all the classes. Each class having students and a teacher.

In our example, imagine each class being a country.

With each class representing a country, then within each class are students and a teacher. The students would be the banks, and the teacher the central bank.

This is how USA (for example) would look like:

As you can see, that young lady over there, representing Wells-Fargo. She is holding on to US$ 100,000 in deposits of The Lemonade Bunch.

So, like in regular school, at the start of each class, there is a roll call, remember that? except this roll-call is slightly different. To start out with, every student (i.e. bank) has brought with them, their ledger book. The ledger book contains all the deposit slips they have issued, and in their back-pack, let us assume, they have brought the money (currency notes & coins) that was deposited.

In case of Wells-Fargo, she would have brought in US$ 100,000 and a copy of the receipt she gave out to The Lemonade Bunch. Likewise, the teacher would ask this of everyone:

Teacher (pointing to a certain bank): How much money do you have? (and prove it)
Student (being the bank), would they say out loud, how much money they have and show their cash/coins as well.

Everyone makes notes. So if Bank of America says it has so much money, the teacher notes it down and other banks can too note it down.

This what for example how the balance sheets would look like for the US Classroom. I've deliberately not shown the Debit / Credit, etc. for non-accounting people would have a hard time grasping the concept. In plain English, it shows:

A Bank (and how much client money they are holding)
The Teacher (and how much bank money he/she is holding)

Typical example of how the ledger would look like for customers, banks and central bank.

To make sense of this screenshot, ignore the Teacher (French) and Teacher (China), we will come to them later on. The spreadsheet ledger view shows three banks and their clients:

Bank of America

Steve Construction (Client)
Arthur Photography (Client)

JP Morgan Chase

Jane's Bakery (Client)
Megan Old Books (Client)

Wells-Fargo

The Lemonade Bunch (Client)
Josh Music (Client)

The deposits of each client are marked, and it shows how each client's balances are in check with the bank.

The balance money from customers (money taken from customers) matches the books of the customers (balance in bank).

...and as you would expect, all the balances of the bank, are reflected in the ledger of the Teacher (the Central Bank):

Consolidated view of Balance information as filed with the Central Bank, in this case the Federal Reserve.

So the total balance in the classroom for USA is US$ 1,100,000 (One Million One Hundred Thousand Only). There are a couple of walk-way points from this exercise:

The total amount of money in circulation is known. (US$ 1,100,000)
The distribution of this money as deposited in various banks is known.
There is a general consensus (based on the ledger being maintained by the Central Bank) as to how much money each bank holds.
If a bank tries to create money (for example: JP Morgan Chase makes up a fake client and says it has received US$ 1 Million from that client), it would have to demonstrate to the teacher (central bank) that it has the money (classical case of Show me the money!). If JP Morgan Chase is able to show the currency notes, etc. its balances would be adjusted accordingly. However, if they cannot show the money, then the central bank will not accept their new found wealth and general consensus amongst the banks will be, not to accept JP Morgan Chase's claim that it has additional US$ 1 Million.
The consensus and double-entry system ensures to a larger extent (for our example) that unfounded creation of wealth cannot be done.

The Central Banks

So, at the end of the school (banking) day, all the teachers (central banks) then get together in a common room.

Central Bankers in a room comparing notes (wealth statements)

As you might have guessed, the Teacher, too compare notes. Here the information regarding the wealth ledgers of countries is going to be shared amongst the group.

Assume, that the de facto currency being traded in the world is the US Dollar (to make things simple), this is how the ledger positions for all the central banks would look like:

Ledger Statement of All the Central Banks after their first Meetup!

Is this wealth?

Yup! This is it. What were you expecting?

This is how the wealth of nations is recorded. In ledgers, which are consensus based amongst the banks, central bank and the central banks of the world.

To keep the example simple, as cited earlier, if anyone tries to add value into their economy, the others would have to agree to it. Because the system is based on double-ledger entries, one cannot unilaterally try to take advantage of the system.

Because each country has its own currency (just to spice up matters a bit), and If anyone tries to make money out of thin air, then can, but they can only do so in their own denominated currency. Others will agree that a particular country's money supply has increased and will adjust accordingly, based on the exchange rate against the US Dollar (which in our example is the global currency being used by all the banks).

So How Does Money Transfer Work?

So, let us assume our company The Lemonade Bunch needs to do a wire transfer of US$ 50,000 to China and $10,000 to France. How does this value really get transported? The answer again, is simple a consensus based value transfer.

In our example, you will see The Lemonade Bunch, sets aside two IOUs for US$ 50,000 and US$ 10,000 aside. The ledger statement would look something like this:

Notice how the total wealth of The Lemonade Bunch is reduced down to US$ 40,000 in their ledger. Likewise the wealth of Wells-Fargo has also been reduced down to US$ 115,000 (as IOUs are created).

These two IOUs are then moved to Wells-Fargo's IOUs, and the money is deducted from The Lemonade Bunch's account. Now the ledger position would look something like this:

Continuing with the same pattern, the next logical step is to deduct the IOUs total from Wells-Fargo's total wealth in the ledger and pass these IOUs to American Central Bank (Teacher). The ledger statement would now look like this (the two IOUs have been lumped together):

You can already see the total wealth as recorded by the US Central Bank has also been reduced from US$ 1,100,000 down to US$ 1,040,000.

Giving Money To The Counter-party

As per the previous experience, all the Teachers (Central Banks) gather in a room and exchange wealth statements. The same would happen this time around, except the ledger is slightly different (as can be seen below):

The reverse process would now start. US Central Bank would have the following conversation at the end of the initial wealth exchange:

US Central Bank: "Hey China!"
China Central Bank: "Yo! What up?"
US Central Bank: "Hey, I got a US$ 50,000 IOU for you, for "Bank of China" that needs to be credited to "Xing Framers" account with them."
China Central Bank: "Cool. Give it to me and I will hand it over to them with the instruction to credit further."

the same conversation would happen with the French Central Bank

US Central Bank: "Hey France!"
French Central Bank: "Oui?"
US Central Bank: (Grrrrr) [smiling] "Hey, I got a US$ 10,000 IOU for you, for "BNP Paribas" that needs to be credited to John-Pierre Imports account with them."
French Central Bank: "Cool. Give it to me and I will hand it over to them with the instruction to credit further."

US Central Bank does just that, and the ledger statement would look something like this:

Once both the Central Bank of France and Central Bank of China accept the IOUs, there collective wealth would increase (as well as the wealth of the bank where further credit is due). The ledger would look something like this:

Just two more steps left, before the entire money (value) transfer is completed.

Both the Central Bank of China and Central Bank of France, credit the IOUs to the Bank. The Banks (namely Bank of China and BNP Paribas) now have an IOU Credit liability for further credit into the account of the beneficiary which would be Xing Framers and John Pierre Imports respectively.

The last step is to credit the bank account balances of each company, which would essentially bring this money (value) transfer cycle to come to an end.

Once this credit to bank ledger is done, the final ledgers would look like this:

Conclusion

I hope with the above example, you will get a very good (if not heuristic) sense of how money is transferred. Though the above example has been simplified almost to an elementary level, this is pretty much all that happens when money (wealth) value transfer happens from one bank to another, be it within the country, or across borders.

The above model can be expanded to include how correspondent banking would work and how balances are maintained with each other, etc. however, that might be a blog article for some other day.

If you look closely, this somewhat mimics what a blockchain looks like? Its not public or decentralized, but it is consensus based and has a double-entry system to ensure there is no double spend or creation of wealth that others may (or may not agree to).

I initially wrote this answer as a blog post: How Do Banks Transfer Money?

What are the advantages of incorporating a company in the U.S. versus Dubai?

Wed, 02 Mar 2016 18:01:51 +0000

Faisal KhanAnswered Mar 2, 2016

It really depends on what you intent to do with your company. For example if you plan on serving the US market and deal with US customers, your best bet might be to have a US registered entity, if otherwise, you might want to explore other options (including Dubai).

There is no federal income tax on wages or salaries in UAE. The same is not true for the US. If you're a Bank and/or an Oil company, the corporate tax rate is 55% in UAE, otherwise there is no tax (compared to 40% in the US).

If you would primarily be working in the GCC or peripheral region, Dubai might just be a good place to incorporate.

Source:

Tax in Dubai
Corporate tax rates table

Can a non-U.S. entity (e.g., an LLC or similar structure) open a corporate account at major U.S. banks?

Wed, 02 Mar 2016 18:01:49 +0000

Faisal KhanAnswered Mar 2, 2016

No. You cannot open a corporate bank account for a non-US LLC in the US with a US bank.

In Canada, what’s the best API-based way to send money besides PayPal?

Wed, 02 Mar 2016 18:01:48 +0000

Faisal KhanAnswered Mar 2, 2016

Interac. Check with their partners who support API, one such name is http://www.salt.com

What is a recent change in the banking industry, and how could it affect banks’ corporate finance divisions?

Wed, 02 Mar 2016 18:01:47 +0000

Faisal KhanAnswered Mar 2, 2016

Customer acquisition via mobile channels. This now seems to be the focus of 1000s of banks worldwide. The common-denominator is the mobile phone, which just happens to be a communication device, so one-on-one access to banking and vice versa (bank to customer) is now available.

As to what this will do to corporate finance, am not really sure, one could speculate on it, but this is really a retail expansion point of view.

How do merchants identify transactions that were made via Apple Pay versus standard contactless card payments?

Tue, 01 Mar 2016 17:58:23 +0000

Faisal KhanAnswered Mar 1, 2016

They don't.

This is the brilliance of Apple and Apple Pay in EMVCO 4.3, the Token Service Provider (TSP) information which originally would have been showing Apple in EMVCO 4.3 shows up as the Card Scheme. Was Apple part of this during the 4.3 standard making and was this their trump card? Possibly!

With the TSP showing one of the card schemes, there is no way the acceptor can filter based on the TSP tag.

If they do, they essentially shut off one of the 6 partners of the EMVCO.

This is to the best of my understanding. Perhaps someone else can shed more light into this.

How can I send money to my home country from Saudi Arabia?

Tue, 01 Mar 2016 17:58:21 +0000

Faisal KhanAnswered Mar 1, 2016

Call or Visit Bank Al Rajhi or Bank Albilad. They have the market cornered on money transfers from Saudi Arabia to the rest of the world.

Al Rajhi Bank - مصرف الراجحي
Bank Albilad

What is the total annual global volume of corporate remittances via wire transfers?

Tue, 01 Mar 2016 17:58:20 +0000

Faisal KhanAnswered Mar 1, 2016

Safe to say, the number is very high. In US$ 10s Trillions if not US$ 100s Trillion.

Just on a daily basis, the FX Swap and Spot market is over US$ 2+ Trillion (and I'm being conservative here). The remittance market is about US$ 1 Trillion per year (both legal + illegal) but that represents a very small fraction of the overall FX trades done.

SWIFT does not publish its money-transfer numbers for wire transfers (or at least I have not seen them).

Why can’t I donate to Wikipedia anonymously using Bitcoin?

Tue, 01 Mar 2016 17:58:18 +0000

Faisal KhanAnswered Mar 1, 2016

As a legit 501(c) charitable organization, Wikimedia Foundation cannot accept 100% anonymous donations. Even your money order would have KYC information on it (the issuer has it).

Keeping up with various laws, the government requires that all donations have KYC requirements taken care of. There is an exemption on cash, but it has its limits and varies from state to state.

From an unbanked person’s perspective, why is it beneficial to become banked?

Tue, 01 Mar 2016 17:58:17 +0000

Faisal KhanAnswered Mar 1, 2016

More and more merchants and bill-pay locations are going electronic for payments.

If you're cash only or cash-from-check kinda of a person, then renting a car, or checking into a hotel, shopping online, or buying a flight ticket online would almost be impossible for you.

The financial instruments that the online world and in many cases the offline world now uses, discourages cash.

Should poorer countries have independent central banks?

Tue, 01 Mar 2016 17:58:15 +0000

Faisal KhanAnswered Mar 1, 2016

Sure. Why not? The while idea behind a central bank is to regulate and monitor, independently. Even some small Island nations have a central banks, and a central bank doesn't necessarily cost the poor country too much money.

Some countries prefer to work with each other when it comes to a central bank, i.e. share. Some examples are:

West African Economic and Monetary Union
Eastern Caribbean Central Bank
Central Bank of West African States
Bank of Central African States

You can see a list of central banks here: List of Reserve & Central Banks of the World

Which country is best for launching a small e-wallet business?

Fri, 12 Feb 2016 17:56:17 +0000

Faisal KhanAnswered Feb 12, 2016

The United Kingdom is a great option, here is what it will cost you to get an E-money license in UK, great for start-ups. Takes 6-8 months to get it, no capital requirements, you cannot passport to other EU countries, but once your business picks up, you can. (Courtesy neopay presentation).

Singapore is another great option. If you adhere to the following flow:

Then, you would be surprised to know:

In Singapore, the MAS (Monetary Authority of Singapore) has given an exemption to SVF (Stored Value Facility) from the Payment Systems (Oversight) Act when the stored value outstanding are under a certain threshold. Currently that bar is set at $30 Million. MAS approval is required for the operator when the SVF exceeds the $30 Million mark, and hence changing its status from SVF to WA-SVF (Widely Accepted Stored Value Facility).

If you're under the limit, you are not required to get approval.

Source:

How come PayPal is considered a stored-value facility (SVF) in Singapore yet it doesn't require the approval of the Monetary Authority of Singapore?
Stored Value Facilities
Page on mas.gov.sg (Guideline, PDF)

Why don’t PayPal or Skrill use SMS-based login verification—are there technical or regulatory obstacles?

Fri, 12 Feb 2016 17:56:15 +0000

Faisal KhanAnswered Feb 12, 2016

PayPal has it: PayPal Security Key

Which alternative payment providers are best for online payments in South America?

Fri, 12 Feb 2016 17:56:14 +0000

Faisal KhanAnswered Feb 12, 2016

Look out for Ebanx, they cover Brazil very well. Even markets like Mexico and Peru. https://ebanx.com/en

How has M-PESA evolved since it was first launched?

Fri, 12 Feb 2016 17:56:12 +0000

Faisal KhanAnswered Feb 12, 2016

Here is the evolutionary progress of M-PESA:

Some interesting facts:

Mobile phone based money transfer service offered to Safaricom Customers
M-PESA has over 18 Million customers – 80% of the adult population in Kenya is on M-PESA
Over 30,000 corporates and SMEs accept M-PESA for payments
There are over 6 million transactions daily on M-PESA
There are over 65,000 M-PESA Agents country wide compared to 1,272 bank branches and 16,333 bank agents as of December 2012.
Over 98% of all mobile money transactions in Kenya are conducted through M-PESA
Note: Kenya is still a cash heavy economy with over 90% of the transactions being cash based.

What is Stripe’s legal structure as a company?

Fri, 12 Feb 2016 17:56:10 +0000

Faisal KhanAnswered Feb 12, 2016

Can't tell you about their legal structure, but as they are a PSP in California, they are then exempt from MSB licensing requirements (in CA).

The real receiver of funds is their FBO account with their acquiring bank. They are classified as a PF (Payments Facilitator) with the Card Schemes.

Their issuing bank underwrites their merchants on their behalf.

Is messaging a key driver of mobile payments, and why?

Fri, 12 Feb 2016 17:56:09 +0000

Faisal KhanAnswered Feb 12, 2016

Messaging is indeed a huge driver for payments.

Everything we do in the digital world, is actually nothing more than the digital representation of behavior of the physical (analog) world.

When we meet someone, we usually exchange greetings, and break into a chat. The is what we do in real-life and what we do in the virtual world.

Communicate.

From such communication, we segment groups, friends, family, colleagues, associates, professional contacts, work, fun, suppliers, vendors, etc.

The next logical step in communication, is commerce. We then start interacting on an economic basis with them. With close friends and family, it might be spotting a few Dollars, etc. With others, it might be commercial payments (like paying rent, or mortgage, etc.)

Most of these payment systems in real-life are simply connected by your wallet and the association of your bank (for example, you usually pay a check for rent, or mortgage).

The online eco-system is no different. Eventually, the people you and I communicate most with, would most likely be the people you and I would like to transact with. It makes super-sense that the people I communicate with, to whom I can transfer information digitally, should also be the same people to whom I should be able to transfer value (i.e. money) digitally.

When you own the messaging platform that has payments enabled in it, it sort of becomes the de facto method of choice to communicate. Everyone nowadays has access to WhatsApp or Email or SMS, but if you had to go out of the way, to download an app, just to communicate with this one friend? Would you?

However, if that same friend is on WhatsApp, etc. communication becomes much more simpler (read: convenient).

Implement payments into the same scenario and you can see how you would be able to send money to anyone on your contact's list, seamlessly, without effort in hopefully a frictionless manner.

So, definitely, owning the communication/messaging space is a prerequisite of sorts to owning the mobile payments space.

Would a Bitcoin ATM operator business be viable in Pakistan?

Thu, 11 Feb 2016 17:53:53 +0000

Faisal KhanAnswered Feb 11, 2016

Probably not, but then who knows. The demand is low. Very few people know about bitcoins.

Of greater concern is that cash dispensing and/or deposit machines that do not yield a physical product, and are used for depository or dispensing functions are regulated in Pakistan.

You'd need a license from SBP to operate these machines. I personally think, you'd have better luck with a Bitcoin POS machine (like Coinkit's POS terminal). See: Page on coinkite.com

Another issue with a Bitcoin ATM is what will you connect it to? What cards will it accept? How is the processing capability for card acceptance achieved? No bank in Pakistan will allow you to connect on their ATM host or acquiring network if Bitcoins are involved.

What does “Bitcoin tipping” mean?

Thu, 11 Feb 2016 17:53:51 +0000

Faisal KhanAnswered Feb 11, 2016

The context in which I understand what Bitcoin Tipping is, it is the ability to pay 5 cents, 10 cents, etc. to people online. This could be for a wide variety of purposes, but typically think of it as thanking someone online for the content they have published or how they may have helped you out.

Truly for the first time, we can say thank you (in monetary terms) - globally.

Published content helps the users (readers) to solve problems, be more knowledgable about a specific issue, have a question that is answered or perhaps you found someone's blog or podcast, useful.

In the pre-tipping world, how do you tip? You cannot. If someone wrote a nice blog article on how to remove a piece of malicious spyware from your computer, certainly that was helpful. Now with Bitcoin, you can tip them. Because Bitcoins have lot of pennies associated to them (1 Dollar = 100 pennies, 1 Bitcoin = 100 Million pennies, or Satoshis), making a small donation is now very easy.

Lets look at Quora for example, every upvote is worth 10 credits. What if every upvote was worth 10 cents. Wouldn't that be cool? Sure it would be uber-cool. The problem is, with your current payment system (Cheque, Credit/Debit cards, ACH, etc.) it is not possible but with Bitcoin it is.

As the amount being tipped is so small, one would usually not even think about tossing a few pennies (virtually) into someone's Tip-jar. The original concept of online tipping came from Second Life (the online virtual game), where people used to tip Linden Dollars all the time.

With Bitcoin tipping, a whole new ecosystem of contributing money to people on the internet opens up. From content publishing websites, to individual publishers, to search engines, to podcasters, to video bloggers, etc.

When Coinbase rolled out their tipping, we covered this in our Around The Coin podcast with fellow co-hosts Brian Roemmele and Mike Townsend.

Interview: Nick Tomaino, Coinbase Launches Bitcoin Tipping to the Masses.

What influence do banks have over the creation of new ACH-style networks by startups and large corporations?

Thu, 11 Feb 2016 17:53:49 +0000

Faisal KhanAnswered Feb 11, 2016

If the ACH is being considered as a private ACH, then the banks would have to agree to use the format for message exchange. This could translate to the banks having some input as to how the messages would be exchanged and settlements to be done.

The common assumption here is that one is not trying to fix the existing ACH but rather deploy a new one.

Any entity that is deploying an ACH network, would have to abide by the message formats & protocols in existence. As long as that basic element is satisfied, the banks would be okay with it. Your only issue then would be in signing them up and on-boarding experience.

An ACH is essentially an RTGS (Real-time Gross Settlement) System.

The ACH layer is below (or junior) to the RTGS layer. RTGS systems worldwide have a standard suite of protocols via which they can settle. Most prefer the ATM host protocol ISO 8583 format. Albeit, there are instances where a more proprietary approach can also be taken.

In most instances, you're connecting to middleware of the bank, or commonly known as the channel manager switch.

A typical clearing platform looks like this:

With the clearing engine in place, what essentially needs to be worked out are the operating & settlement mechanics. The more frequently one settles, the less of a paid-up requirement is needed.

If the effort is government driven, then an RFC period would be opened up for banks to provide input and eventually the entity that is responsible for deploying the solution will then probably close the comment round and finalize the specs.

See also:

Faisal Khan's answer to How do ATMs and internet/mobile banking systems recharge or make utility payments for mobile service providers?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?
Faisal Khan's answer to How does an automated clearing house (ACH) work? How does it process payments, and how is it different from RTGS (which are used to process low-volume, high-value transactions), or other localized financial networks and switches?
https://www.dwolla.com/fisync

In simple terms, how is the value of a currency determined?

Tue, 09 Feb 2016 18:19:30 +0000

Faisal KhanAnswered Feb 9, 2016

The value of any currency, be it private or fiat, is determined by acceptance and then how strong the acceptance is, i.e. by the supply and demand.

If the currency has low acceptance, there will not be many takers (demand will be low), and if the currency has a high-acceptance, the demand will be high). Controlling supply will enable ti value assigned to this currency also go higher or lower (depending on how much you print).

There are literally 1000s of factors as to what gives a currency its value, but the gist of it remains the same. Supply/Demand.

Why is Pakistan not subject to US OFAC sanctions?

Tue, 09 Feb 2016 18:19:29 +0000

Faisal KhanAnswered Feb 9, 2016

Why would it be? Pakistan is not a sanctioned country.However, just like any other country, there are Pakistanis who are on the OFAC list.

How do banks verify checks that are deposited using a smartphone camera?

Tue, 09 Feb 2016 17:51:02 +0000

Faisal KhanAnswered Feb 9, 2016

Banks will treat this image of the cheque in the same manner as cheque truncation is treated, or the way it is treated once you drop the physical cheque into the bank branch.

The essentials from the cheque image are extracted and that information is then put through and processed via ACH for onward clearing.

The software provided by banks (for the mobile phone) is simply to ensure the correct imagery, focus, area and necessary information is included as well as binding that image into a front/back image for the cheque (i.e. one image for the front of the cheque and one for the back of the cheque), collectively the two images would represent a truncated form of a cheque.

See this answer to learn how it works: Faisal Khan's answer to What is involved in Check21's processing services?

What is the best approach to replicating ZenPayroll or Gusto in a European country like Spain?

Mon, 08 Feb 2016 18:17:53 +0000

Faisal KhanAnswered Feb 8, 2016

Replication might not be your best option, find a problem that needs addressing and then find a solution, not the other way around.

To answer your question, if you're going to consider Europe (e.g. Spain) then acquaint yourself with SEPA (Single European Payments Area) and especially SDD (SEPA Direct Debit) Scheme.

Europe is a whole different payments behavioral market than the US. SDD might be something you want to innovate on, a clear leader in this is User' company called http://www.sign2pay.com (Sign2Pay), where the SDD problem was solved by their company using a signature on the mobile device.

You could implement a similar solution for payroll processing.

How strong is the economic impact of microfinance in developing economies?

Mon, 08 Feb 2016 18:17:51 +0000

Faisal KhanAnswered Feb 8, 2016

Though the primary focus of microfinance is to extended financial assistance to the poor/needy, who otherwise would not qualify for banking, let alone loans, microfinance has turned more towards banking for the unbanked rather than loans. And there is a good reason for this: data!

By brining the small players (the everyday people) into the habit of understanding finance (read: money) and making them more fiscally responsible, it can do wonders for regurgitating the economy in the community, so that is extremely beneficial.

The best way, microfinance institutions can extend loans out within the community through their network, is by employing basic banking, collecting data, extending very small loans out, to see how the repayments are done, what the payback periods are, and to model this for all the small niches and cottage industries.

It is like teaching basic maths to society, it can do wonders for them. Microfinance loans and banking does the same (in my opinion), it gets the entrepreneurial juices running, it sets in motion economic play trade within a small community. Turns out, women are the largest recipients of loans (and best payback schedules also).

I highly recommend experiencing the microfinance angle. The grassroots level access you gain and the perspective of what it means to have access to banking, finance, loans, etc. whilst being at the bottom of the rung in the fiscal ladder can be extremely valuable and illuminating.

Short of it: Go for it.

How much overdraft is typically allowed on a checking account?

Mon, 08 Feb 2016 18:17:50 +0000

Faisal KhanAnswered Feb 8, 2016

The overdraft limit varies from bank to bank, and is also dependent on the type of account you hold within that bank.

There is no universal answer for this. Does your bank provide overdraft protection? Do they extend you credit for this? If they do, then that would be dependent on their own credit worthiness assessment of you. It all varies.

As a foreigner trying to open a bank account in Hungary, what arguments could convince a bank to approve it?

Mon, 08 Feb 2016 18:17:48 +0000

Faisal KhanAnswered Feb 8, 2016

European bankers have become very strict towards transient bank accounts (which is that you are describing). No matter how noble your intentions are, you cannot convince the bank. This is a policy decision that probably took many months before it was decided upon and put into play. Policy won't change for you (or anyone else) because you happen to be wearing a nice suit and a smile today.

If you're American, things can be even more difficult because of FACTA (See: Foreign Account Tax Compliance Act)

Since you have not defined the purpose, I suspect, you know the reason why they are denying you banking.

Can you deposit a check that is more than one year old?

Sun, 07 Feb 2016 19:07:33 +0000

Faisal KhanAnswered Feb 7, 2016

The validity of a cheque is 6-months from the date on the cheque.

Why hasn’t biometric tech like fingerprints and facial recognition been widely adopted in card payments to reduce fraud and costs?

Sun, 07 Feb 2016 19:07:31 +0000

Faisal KhanAnswered Feb 7, 2016

We will eventually get there. The cost of conversion is enormous. Daniel Lubarov gives great examples as to why it is not being implemented. I want to add further, that the physical card is seeing its duplicate (so to speak) on your mobile phone in the form of a digital wallet. With smartphones now implementing fingerprint scanner, it would be a matter of time before authentication would be done on the phone itself and the token passed for transaction.

Which banking and payments platform vendors have best embraced fintech and next-generation IT?

Sun, 07 Feb 2016 18:16:57 +0000

Faisal KhanAnswered Feb 7, 2016

One name that pops to mind is Nymbus, http://www.nymbus.com.
Another one is nCino http://www.nCino.com.

Incumbent players have been extremely slow, (and there are many reasons for that, one of which is not to jeopardize their existing code base and market share).

Martin Whybrow from IBS Intelligence delivers a small talk. It is a talk worth watching on the very same issue.

Page on youtube.com

Why do Google Wallet and PayPal request copies of passports and bank statements, and is this standard for everyone?

Sun, 07 Feb 2016 18:16:56 +0000

Faisal KhanAnswered Feb 7, 2016

A licensed institution can ask whatever information it deems necessary to satisfy its own internal KYC requirements which may meet or exceed the State & Federal level KYC requirements.

It is all part of the Customer Identification Program (or CIP).

Each organization is free to set internal parameters to keep check on the validity of the documents on-file.

Requests for documentation, or even additional documentation can be triggered from literally 100s/1000s of trigger points on who you are, where you live, what you do, how you transact, when you transact, etc.

A licensed institution like PayPal/Google will do everything necessary to be compliant and mitigate all forms of risk by asking for additional information.

Who is behind Keenu, which claims to be Pakistan’s first payment gateway?

Sun, 07 Feb 2016 18:16:54 +0000

Faisal KhanAnswered Feb 7, 2016

Wemsol: http://www.wemsol.com/

Correcting answer, confused them with someone else. Sorry, this is the Machaiyara group, the construction conglomerate. They have a pending PSP application with SBP was granted provisional approval.

If all miners agreed to reduce their Bitcoin mining capacity by a factor of 1,000, what would happen to costs and the network?

Sat, 06 Feb 2016 19:06:46 +0000

Faisal KhanAnswered Feb 6, 2016

Assuming that were to happen, the current value of Bitcoin would drop. Excess coins in the market via mining and computing hardware powerful enough to churn out quite a few of these. I'd say there would be a price drop, and lots of shortage of ASIC mining hardware, perhaps even GPU mining cards.

If a system glitch allows untraceable withdrawals or transfers and I report it but it remains unfixed, is using it illegal?

Sat, 06 Feb 2016 18:15:40 +0000

Faisal KhanAnswered Feb 6, 2016

There are always two parties in the authorization and circulation of money. If you hack or take advantage of the system such that you unilaterally give yourself money, the counter party claim is the main issue here. As there was no authorization in the issuance and acceptance, the money could very well be reversed.

Whether or not it is the system' fault, if you are conducting a transaction on which you have no authorization, it is then illegal. Period.

What is the best way to learn how to run a startup, and why is that approach effective?

Fri, 05 Feb 2016 19:05:00 +0000

Faisal KhanAnswered Feb 5, 2016

Enroll in a startup incubator.

Which is better: an international wire transfer or ACH?

Fri, 05 Feb 2016 18:04:29 +0000

Faisal KhanAnswered Feb 5, 2016

If you are doing this from the US it is the same. It's just nomenclature. International ACH is basically providers who have direct credit facility to various countries and their banking systems. If your model for transactions is based on good funds and then settled the International ACH would work if the payouts are many. If you only have a single payout, the wire transfer would be better option. Really depends on your needs and transaction volumes.

For how many years do banks keep records of deposits and withdrawals in a checking account?

Wed, 03 Feb 2016 18:58:04 +0000

Faisal KhanAnswered Feb 3, 2016

Depends on the country and the time period defined by the regulator. Your average period is a minimum of 7 years.

Why is the bank icon typically designed the way it is?

Wed, 03 Feb 2016 18:03:05 +0000

Faisal KhanAnswered Feb 3, 2016

The icon is a front-replica of the US Federal Hall, and pretty much how most banks followed this architecture style. The US Federal Hall served as the Sub-Treasury of the US Government (in addition to being the first capitol building in the US).

You can read up more about the Federal Hall (in New York City) on Wikipedia: Federal Hall.

Also see: National Memorial

Most banks around the world followed and utilized such an architecture.

This is how the building looks like today:

and another view...

How is the world’s total illicit income laundered in aggregate?

Wed, 03 Feb 2016 18:03:03 +0000

Faisal KhanAnswered Feb 3, 2016

Your question also assumes that wealth is laundered (to make it clean/white). This is not necessarily the case. There are huge grey economies or parallel economies that continue to exist and such black money continues to move and transact in such undocumented economies.

Why can’t payment gateways operate in every country?

Wed, 03 Feb 2016 18:03:02 +0000

Faisal KhanAnswered Feb 3, 2016

Economics is the main issue. Albeit, regulatory stipulations may prevent you from accessing or terminating in a certain market, the number one reason has always been money. Will you make enough money?

Sometimes the demand to pick-up/settle into other countries is simply not there or minuscule. Any investment done in establishing payment outreach to multiple countries with low or next to zero volumes, might actually be loss markers and hence, no reason in opening one's gateway to all countries.

Just the compliance handling part would be enormous. Rather just concentrate on the Top 25 markets.

How many retail banks are there in the U.S. (excluding branches)?

Wed, 03 Feb 2016 18:03:00 +0000

Faisal KhanAnswered Feb 3, 2016

Number keeps changing, but about 9,000+ retails banks (not branches).

Which consulting firms specialize in helping companies obtain U.S. money transmitter and MSB licenses?

Wed, 03 Feb 2016 18:02:59 +0000

Faisal KhanAnswered Feb 3, 2016

Here are some names:

MSB Compliance (Jay Postma)
Perkins Coie
Adam Atlas Law
Marco Santori at Pillsbury Law

Do payment gateways permit money-transmission businesses to operate on their platforms?

Tue, 02 Feb 2016 18:01:45 +0000

Faisal KhanAnswered Feb 2, 2016

Most full-stack or even half-stack payment service providers will not allow the business of traditional money services businesses, especially money transfer businesses.

As a money transmitter, your best option are banking partners who can provide such processing services for you or other commercial players like say First Data, Adyen, Heartland PS, etc. most of these will have partners like Bluefin, etc. who will work with you.

How exactly do Western Union and other instant money transfer services operate?

Tue, 02 Feb 2016 18:01:44 +0000

Faisal KhanAnswered Feb 2, 2016

Essentially this is based on the pre-funded agent model. I've answered this question previously.

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved? (with all the steps)
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

What basic banking or finance certifications are recommended for IT professionals?

Mon, 01 Feb 2016 17:58:14 +0000

Faisal KhanAnswered Feb 1, 2016

Two courses or certifications can really help your career grow:

Anti-Money Laundering Training.
Finance for Non-Finance Managers

In a core banking system, what does “multi-bank capability” mean?

Mon, 01 Feb 2016 17:58:12 +0000

Faisal KhanAnswered Feb 1, 2016

It is different from multi-entity (i.e. the ability to run multiple banks in the same software, haven't seen that happen yet).

Multi-bank capability is to have various banking functions in a single software. Investment Banking, Retail banking, Corporate banking, Branchless/Mobile Banking, Microfinance Banking, etc.

Depending on the vendor, it basically flaunts the multiple banking divisions in a singular platform.

What is the difference between a governing body and a regulatory body?

Mon, 01 Feb 2016 17:58:11 +0000

Faisal KhanAnswered Feb 1, 2016

Same thing. In various British territories (including former territories) the word governing is used instead of regulatory.

In simple terms, what is a payment and settlement system?

Mon, 01 Feb 2016 17:58:09 +0000

Faisal KhanAnswered Feb 1, 2016

A payments & settlement system is like an accountant. It keeps track of who owe whom and how much. To cite it as an example, think of the following scenario (this is one of many examples, the scenarios can change, the players can change, but the basics are still the same):

Consider the following Banks:

Bank A
Bank B
Bank C

Then, the following customers as depicted in the image above.

Here is what happens on a particular day, assuming everyone starts the day with a US$ 300 balance.

Bob gives Jim $150
Sam gives Andy $54.30
Andy pays Chuck $8
Chuck pays Sam $9
Chuck also pays Tom $9
Harry owes everyone $18.50
Paul owes Bob, Jim and Andy 85 cents each
Rob owes Harry $7
Sam is to be paid by Bob and Andy $4.33 each.

Now this may seem pretty simple, nine people transacting during the course of one day. But think about the same picture, 100 banks and 10,000 people. The accounting and keeping tabs can get pretty large and hard to keep up, quite fast.

A payment & settlement system keeps track of who owe who, and how much.

It is this uber-fast, automatic money wizard that is keeping track of all the transactions that are happening.

At the end of the day (for example) this system will say...

Bob, in total you have paid X1 received Y1 and your balance is Z1
Jim, in total you have paid X2 received Y2 and your balance is Z2
Tom, in total you have paid X3 received Y3 and your balance is Z3
and so on and so forth.

Whilst there is much more to a payments & settlement system, one key element of a payment & settlement system is that it is a trust-vehicle. All the financial institutions connected to it (i.e. Banks, in the example above) will trust what it says.

The customers trust their bank. The banks trust the payment & settlement system.

Also read this answer to understand it a bit better: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Why does U.S. banking appear relatively outdated compared with other countries?

Mon, 01 Feb 2016 17:58:08 +0000

Faisal KhanAnswered Feb 1, 2016

Here are some reasons:

8,000+ Banks,
Nearly 90,000+ branches.
12 Federal reserve Districts
50 US State Regulators
2 Federal Regulators
Credit Union Associations
No Central Payment Switch
Automated Clearing House that is dated
Vested Interests by Banks and other NBFIs when it comes to standards
Complacency on many fronts (for example on ACH, the estimated earnings on funds float are huge, no one wants to let go of it, despite the market pressure)
Various Interbank Payment Networks
Congress
Lawyers who are also Lobbyists.
Ancillary Federal Agencies (CFPB, OCC, etc.)

Put this in a blender, and you have a very sick looking juice.

How frequent is fraud in mobile check deposit systems?

Mon, 01 Feb 2016 17:58:06 +0000

Faisal KhanAnswered Feb 1, 2016

Two possibilities. The commonality of the fraud is unknown.

Bank identity theft (information about your name, address, bank name, bank account number, routing number, check number sequence)
Because the check is not franked, duplicate presentment issues.

What information do banks capture in real time during a transaction?

Mon, 01 Feb 2016 17:58:05 +0000

Faisal KhanAnswered Feb 1, 2016

From an MSB (Money Services Business) the data points captured are about 30 (not all of them are mandatory).

A list of these 30 data points can be seen here: AML & KYC: Best Practices: Transaction Data Points

Can I use Western Union to send money into my Payoneer account?

Tue, 12 Jan 2016 17:56:08 +0000

Faisal KhanAnswered Jan 12, 2016

Only if your use Payoneer's US/Europe Payment Service.

You can make payments using WesternUnion's website: Send Money to a Bank Account

The US/Europe Payment service is: Page on payoneer.com

You cannot use Western Union to pay into a Prepaid Debit card account.

How do I begin day trading?

Tue, 12 Jan 2016 17:56:06 +0000

Faisal KhanAnswered Jan 12, 2016

Where you trade a certain stock/equities or market, during its trading hours only, i.e. you will close all trades before the closing bell. You will not carry anything overnight to the next trading day.

Think of it like being on daily wage. You work only during the working hours and depending on how your day went, you might make money, lose money or even out.

What laws or tools would be needed to legally link Bitcoin wallets to real identities like PayPal accounts?

Tue, 12 Jan 2016 17:56:04 +0000

Faisal KhanAnswered Jan 12, 2016

tl;dr: Bitcoin needs to be defined in existing money transmission laws.

In the absence of legislation (or clarification), you can connect any bitcoin wallet to any existing wallet provider.

The issue stems when bitcoin is seen as money and it violates money transmission laws in the US. That is when the wallet provider (lets say PayPal) would need to have the appropriate licenses to onboard and transact interwallet / intrawallet between Bitcoin and Fiat currencies.

From a US perspective, at this point in time, it is the legal coverage of Bitcoin as money, that has to be incorporated into the State's Money Transmission Laws, that has not taken place. Until such legislation is not in play and the regulator has banned or prohibited the use of bitcoins till such time the legislation is out, then you are technically in violation of the law. NY is one such example.

Which financial institutions are progressive-leaning and widely accessible across the U.S. (and ideally internationally), either via branches or strong online access?

Tue, 12 Jan 2016 17:56:03 +0000

Faisal KhanAnswered Jan 12, 2016

USAA might be a good option: USAA Military Home, Life & Auto Insurance

They operate virtually all over the US. You can withdraw cash at 60,000+ ATM locations for no fees. Check deposits can be made via taking a picture. You can even talk to them and open bulk-accounts. They have internet banking so all your dispersed scientists, would have seamless access to their funds.

What safeguards prevent a bank from artificially creating balances or simulating deposits, similar to how Bitcoin uses proof-of-work and an auditable ledger?

Tue, 12 Jan 2016 17:56:01 +0000

Faisal KhanAnswered Jan 12, 2016

Ledger Entries.

Every debit and/or credit that a bank does, is entered into the ledger system. The ledger is a double-entry system.

So, let us take 3 scenarios:

Bank claims to have received US$ 10 Million in cash deposits. At losing time an audit would show a discrepancy with the cash-in-vault and the cash on ledger.
Bank claims a wire transfer from ABC Bank was for US$ 10 Million. At the end of the day, the consolidated reports sent to the federal regulator (usually the central bank) would show a discrepancy also. ABC Bank would not be showing any debit on their ledgers reflecting US$ 10 Million.
If a Bank tried to manipulate their own ledger system, see the answer here: Faisal Khan's answer to How is money virtualized? What stops a bank from misreporting its funds? What would a new bank need to do in order to be able to accept and hold virtual funds?

Which startups are focused on corporate or B2B payments?

Mon, 11 Jan 2016 17:53:47 +0000

Faisal KhanAnswered Jan 11, 2016

Tipalti (Mass Payouts Provider | Global Affiliate and Publisher Payments | Tipalti.com) comes to mind.

What should I do with old routers?

Mon, 11 Jan 2016 17:53:43 +0000

Faisal KhanAnswered Jan 11, 2016

If they are very old, and you have no use for them, donate them to perhaps a school, a computer institute or an IT teacher who can put them to good use in making a practical lab environment using old routers to explain the concept of networking, etc.

Which payment gateway providers offer strong protection and transparency when responding to government data requests?

Mon, 11 Jan 2016 17:53:41 +0000

Faisal KhanAnswered Jan 11, 2016

None. All payment gateways in some manner or the other are regulated by the financial regulator, either directly or indirectly. The home regulator would have the legal basis to look at transactions from a KYC / AML / CFA, etc angle.

Requests from other governments or agencies may be subjected to review and these requests could be denied based on the privacy laws of the land or till such time a court order is issued.

Is it true that central banks are privately owned?

Sun, 10 Jan 2016 17:52:53 +0000

Faisal KhanAnswered Jan 10, 2016

No, that is not true. Almost all of them are owned by the government, some operate autonomously others semi autonomously.

How can payments be processed between banks in an app, similar to Visa, using ACH or another network?

Sat, 09 Jan 2016 18:19:27 +0000

Faisal KhanAnswered Jan 9, 2016

If you have access to interbank networks (ATMs) then you could ride on those rails and do the same, but it would mean getting into agreements with various networks and banks for this.

ACH is the other recommended route as Kaz Nejatian has cited.

Would a credit receipt appear on a monthly bank statement?

Sat, 09 Jan 2016 18:19:26 +0000

Faisal KhanAnswered Jan 9, 2016

Yes.

If the debit/credit is related to your account, by law it will show up on your bank statement.

How long does a wire transfer through Wells Fargo usually take?

Sat, 09 Jan 2016 18:19:24 +0000

Faisal KhanAnswered Jan 9, 2016

Typically 2 days. Depends on your bank if they hold on to the wire for a day or two.

What are some strong examples of digital-only banks?

Sat, 09 Jan 2016 18:19:23 +0000

Faisal KhanAnswered Jan 9, 2016

Fidor Bank is on top of my list. (Germany: https://www.fidor.de/ & UK: https://www.fidorbank.uk/)

Simple: https://www.simple.com/

and then the list of challenger banks:

List of UK Challenger Banks

Can international bank transfers take longer than five business days?

Sat, 09 Jan 2016 18:19:21 +0000

Faisal KhanAnswered Jan 9, 2016

Usually no. Bank transfers are usually done between 1-to-3 days (depending if there is a weekend in between, and the correspondent banks involved).

It is a very common practice for banks to sit on a money for an extra day or two. (Earn them float, with the cost of funds being zero).

In other instances, a transfer can take long if the recipient information was not correct or if the transaction was flagged.

What types of locations typically cash Western Union money orders?

Sat, 09 Jan 2016 18:19:20 +0000

Faisal KhanAnswered Jan 9, 2016

All Western Union Agents can cash it for you.

How much does it cost to mint a 1p coin?

Sat, 09 Jan 2016 17:51:01 +0000

Faisal KhanAnswered Jan 9, 2016

2.41 cents.

Source: The United States Mint · Coins & Medals

For the British 1p coin, the figure is not revealed. See snapshot below:

Source: How much does it cost to make coins?

What is the Pakistan Remittance Initiative and what does it do?

Fri, 08 Jan 2016 19:08:36 +0000

Faisal KhanAnswered Jan 8, 2016

Pakistan Remittance Initiative or PRI for short, is a autonomous body for the promotion, policy and management of remittances in Pakistan. PRI at present is a sub-set of Overseas Pakistan Foundation and Ministry of Finance. They are stationed in SBP at the moment.

They are not a money transfer operator. Its prime responsibility is to be a financial regulator for all aspect of workers remittances into Pakistan.

It (was?) a great organization, until the new management start to dismantle it piece by piece.

Read my answer on that here: Faisal Khan's answer to How can remittances in Pakistan be increased substantially?

Besides the fixed transfer fee per transaction, what other revenue streams do MTOs and remittance agents have?

Thu, 07 Jan 2016 19:07:30 +0000

Faisal KhanAnswered Jan 7, 2016

FX gain. If the transaction involves currency conversion an MTO would most likely get a little action on the FX conversion gain.

Online Payments: Why isn’t Airbnb licensed as a money transmitter?

Thu, 07 Jan 2016 19:07:29 +0000

Faisal KhanAnswered Jan 7, 2016

In addition to the answer by Scott Feinberg one must also consider that AirBnB could be an agent of a Licensed Money Transmitter. In this case, they (AirBnB) could be a Agent of a Licensee with the explicit agreement that Braintree would handle the funds processing for them. The accounts to which the money flow (after being processed from Braintree) would be such that they would touch the account of the Licensee. This is all assuming AirBnB is not an Agent of PayPal (as Braintree is not an MTL holder - to the best of my knowledge).

So even though Braintree or any other PSP is processing payments on behalf of AirBnB, the License coverage may be from a totally separate company all together for AirBnB as an Agent. The only requirement is that the Licensee would need to see the flow of funds through them.

In the U.S., do you have to include a tax ID (SSN or EIN) on an invoice?

Thu, 07 Jan 2016 19:07:27 +0000

Faisal KhanAnswered Jan 7, 2016

In addition to Garrick Saito's answer, if you are an individual foreign contract, working from outside the US with a US company then you would need to fill out a Form W-8BEN. Page on irs.gov

Can a 14-year-old living in Pakistan get a Mastercard?

Thu, 07 Jan 2016 19:07:26 +0000

Faisal KhanAnswered Jan 7, 2016

Yes you can.

Go to UBL and open a First Minor Savings Account. You will need a guardian to go with you. Once the account is opened, you will be issued a VISA Debit Card.

With HBL Money Club Account you can be anywhere from 6 years of age to 17 and you will get a HBL VISA Debit Card

UBL First Minor Savings Account: http://www.ublfirst.com/importan...
HBL Money Club: http://www.hbl.com/individual-cu...

Does a marketplace-style business need a money-transmitter license?

Thu, 07 Jan 2016 19:07:25 +0000

Faisal KhanAnswered Jan 7, 2016

In the US, yes, especially if you will be holding on to the funds (though you may not be touching the funds, but if you hold on to them), you would definitely fall under a business that would need to have MTLs.

A marketplace falls in as an aggregator, which most of the States would classify you as an MSB and hence require you have an MTL.

Does David Marcus regret leaving PayPal now that the company is going public?

Thu, 07 Jan 2016 18:16:53 +0000

Faisal KhanAnswered Jan 7, 2016

Probably not. I'm pretty sure David Marcus knew that PayPal would be separating from Ebay.

What is of more challenge to him is what can be done with Facebook and payments and him at the helm of affairs there.

What is SEPA Direct Debit, and why is it considered challenging for e-commerce use?

Thu, 07 Jan 2016 18:16:51 +0000

Faisal KhanAnswered Jan 7, 2016

The SEPA Direct Debit problem when it comes to e-commerce is all to do with this:

Since most of Europe is on CHIP+PIN, if you want to be able to pay directly from your bank account (all 3,700+ bank accounts are linked in SEPA), then you would need a CHIP+PIN reader.

Now this poses a problem when you are say browsing a website on your iPad or iPhone. Imagine going to the checkout page, and if you decide to pay with your Direct Debit account, you would then need to connect one of these little buggers, go to your bank site and approve the transaction. Huge pain point.

This is even worse when you're mobile. Sitting in a cafe, train or bus, you'd have to dig deep into your backpack or purse, get the card reader out, get your card out, authorize the transaction, etc.

This is where a startup like Sign2Pay (see : http://www.sign2pay.com) is making inroads (but for mobile only).

They have implemented a "biometric signature" pay, where you simply turn your phone into landscape mode, sign with your finger and pay. No CHIP+PIN reader needed, etc.

What features should a payment app include if it combines chat, P2P transfers, and payments like Venmo?

Thu, 07 Jan 2016 18:16:50 +0000

Faisal KhanAnswered Jan 7, 2016

This is a very open-ended question. What markets will you be operating in to start with is an important element towards gaining traction. For a global payments app, interoperability is a huge issue. Being able to natively send money across to another person who may/may-not have your app, seems to be a big play that would be unfolding in the years to come. No one has cracked the interoperability in payments completely yet (as say they have done so with phone based text messaging).

Another important aspect is micro (or small value) payments, especially when they are cross-border. Very difficult to so small value payments even when we are talking within the same wallet app.

How did Visa and Mastercard significantly expand their margins starting around 2005?

Thu, 07 Jan 2016 18:16:48 +0000

Faisal KhanAnswered Jan 7, 2016

Issuance. VISA & MasterCard have aggressively been working in both emerging and developing markets. You'd be hard-pressed to find a bank that is not offering a VISA &/or MasterCard to its customers. More cards in play, more money for the card associations. Online acceptance has also contributed towards growth, but more so in the recent years.

Would widespread use of digital currency make the world a better place?

Wed, 06 Jan 2016 19:06:44 +0000

Faisal KhanAnswered Jan 6, 2016

Yes!

If you are referring to digital fiat money, that is already in play and it is improving lives (look at Kenya as the classical example of how moving digital money improves an entire country's eco-system).

Did email improve lives over the traditional physical postal letter? Of course it did. In ways we did not imagine.

Did a mobile phone improve our lives versus the limited radius landline? Of course it did. Again, in ways we did not fathom.

Digital money is doing the same. It is easier to push out digital bits (of assigned value, i.e. money, be it fiat or bitcoin, etc.) There is virtually no cost associated with making and pushing digital money, when compared to physical currency notes and coins.

One of the biggest impact it has made is financial inclusion. The ability to on-board more and more people with money, thus increasing the trade activity of an economy and reducing viscosity of money movement.

The effects have just started. The majority of the world still does not have access to digital money (again, be it fiat or crypto). The deep-rooted penetration and usage of the mobile phones is slowly but surely setting the rails and the ecosystem for the movement and trading with digital money.

For any naysayer, first I ask them to think beyond their neighborhood or the developed world. 3/5th of the world population lies in the developing world or emerging markets.

Go to such markets and simply ask a person who has a mobile phone what it means to be banked and be part of the financial inclusion - having the ability to trade, send / receive money seamlessly. Entire economies have grown and flourished because of such a small inclusion. Nearly 20 years ago, we could not fathom what the browser would do for us. I think we are pretty much in the same boat today, we cannot fathom at present what digital money will do for us, and more so how digital currencies (be Bitcoin or some other crypto currency that comes out of it) will shape us.

The one thing everyone does agree to, it will be for the betterment of society.

How can I convert my U.S. dollars to Bitcoin and then invest in U.S. stocks from that balance—can this be done via a broker like Thinkorswim?

Wed, 06 Jan 2016 19:06:43 +0000

Faisal KhanAnswered Jan 6, 2016

Not sure (at present) if you can use Bitcoin as a direct payment instrument for investing in US stocks. No broker/dealer, to the best of my knowledge, is accepting Bitcoin (without converting it into fiat first), and trading US Stocks.

I don't think the SEC would allow this.

How can someone obtain a Wells Fargo debit card?

Wed, 06 Jan 2016 18:15:39 +0000

Faisal KhanAnswered Jan 6, 2016

Open a Wells-Fargo checking account and one would be provided to you with the account.

What is required to safely store other people’s money?

Wed, 06 Jan 2016 18:15:37 +0000

Faisal KhanAnswered Jan 6, 2016

The legal depository for money is banks and will always be banks. As a money transmitter you're allowed to touch the money, but the money must still reside in a bank.

When I cite that as a money transmitter you can touch the money, implies, that as a financial intermediary, the money can be collected in cash (as retail locations) or be channeled through your (money transmitter's) bank account.

The law is what it takes to store other people's money.

Do developing countries gain from free trade, and why or why not?

Tue, 05 Jan 2016 19:04:59 +0000

Faisal KhanAnswered Jan 5, 2016

Usually no. The immediate onslaught of imports puts a lot of pressure on the balance of payments and creates a deficit. Not to mention, it has a huge effect on the local industry, essentially harming it or killing it completely.

How long will it take before Bitcoin could make banks and traditional money obsolete, if ever?

Tue, 05 Jan 2016 19:04:58 +0000

Faisal KhanAnswered Jan 5, 2016

Probably Never. It'd would be a miracle indeed if a protocol displaces Banks & Money. Just FYI, the first ever app written on this protocol, happens to be money, so if money is to be obsolete by that virtue, Bitcoin would be obsolete.

The payment systems are evolving, I'll give you that much, however, this (current) generation is going to witness the transition. What the final product or updated product as far as banking and money will be like in 10-20 years, we don't know, but chances are it will revolve around the way we have Banks and Money, in short, it (Bitcoin) will play a small part in the over all orchestra of Banking & Money, but it will not displace them entirely.

Who is not required to file income taxes in the United States?

Tue, 05 Jan 2016 19:04:56 +0000

Faisal KhanAnswered Jan 5, 2016

Students on F1 Visa in the US.

In what ways are currency-exchange bureaus used for money laundering?

Tue, 05 Jan 2016 19:04:55 +0000

Faisal KhanAnswered Jan 5, 2016

Not all currency exchanges / stores are used for money laundering. The key item in cash/currency based money laundering using money transfer shops or currency exchange booths is your ID. For certain amounts and for all money transfer services, a copy of your ID is retained. In money-laundering this ID is used again and again to generate fake transactions bearing your name, for transactions with the explicit purpose to launder money.

Why does it take several business days to move money electronically between two U.S. banks?

Tue, 05 Jan 2016 19:04:54 +0000

Faisal KhanAnswered Jan 5, 2016

tl;dr: the US doesn't have a real-time RTGS / Payment Switch to which all banks are connected to. Hence, there is a delay in processing payment.

I’ve used my credit card at stores like Target and Walgreens—what is the best way to ensure they remove my card number so it’s not exposed in a data breach?

Tue, 05 Jan 2016 19:04:52 +0000

Faisal KhanAnswered Jan 5, 2016

You don't have any defense. Barring a legal notice and then pursuing that all your data is removed from their system (which itself would be questionable, since they would need to have your data on file for their audit and information archival purposes), there is nothing you can do about it.

Does fractional-reserve banking primarily benefit banks, citizens, or both?

Tue, 05 Jan 2016 19:04:51 +0000

Faisal KhanAnswered Jan 5, 2016

In the classical sense it is benefiting both, the bank and the individual. However, on the flip side, it just keeps on continually creating more debt in the economic fabric, which at some date in the future will be harmful for both.

What is the fastest way to receive salary payments from a U.S. employer into Pakistan?

Tue, 05 Jan 2016 18:04:26 +0000

Faisal KhanAnswered Jan 5, 2016

I would have to say the Payoneer card. If your employer can push out an ACH payment, you can opt-in for US Payments Service with Payoneer to receive money directly on your card.

The fastest method otherwise would be for your employer to use a personal checking account and use a service like Xoom. Which is near real time, 10 minutes later, money in your account in Pakistan.

How do banks settle international payments internally?

Tue, 05 Jan 2016 18:04:24 +0000

Faisal KhanAnswered Jan 5, 2016

Banks settle payment with each other based on shared ledgers. This could be a direct relationship or assisted via the central bank or correspondent banks. Most of the transaction settlement is via correspondent banking.

To get a heuristic understanding of how money is settled amongst banks, take a look at this answer: Faisal Khan's answer to How does money transfer between banks and different countries work?

Could companies that dominate payments one day rival central banks in importance?

Mon, 04 Jan 2016 19:03:35 +0000

Faisal KhanAnswered Jan 4, 2016

Comparing Apples to Oranges.

Central banks don't do payments per se. They are regulators. They regulate the financial services industry. Keep the economic indicators in check, specifically related to interest rates, borrowing, fiscal policy, etc.

In addition to the above, they police the banking and non-banking financial system and act as master accountants to the ledgers and money supply.

Can't possibly see how a payments company could root the central bank out in its importance.

Legally speaking, is Bitcoin treated more as a currency or as a payment protocol?

Mon, 04 Jan 2016 19:03:33 +0000

Faisal KhanAnswered Jan 4, 2016

Before I give my answer, don't be confused by the name.

First and foremost, Bitcoin by itself is a protocol. It just happens to be that the first app developed on this protocol (loosely speaking) is money and that too is called Bitcoin.

Legally speaking is SMTP a mail or a protocol? Its a protocol.

In my opinion, Bitcoin (the protocol), legally speaking is just that, a protocol.

Now if you were to ask if Bitcoin (the currency) is a protocol or money, its money of course. Is it legal? Well the jury is out on that for many countries.

Why are some Square and PayPal transactions described as “offline” even though authorization occurs online?

Sun, 03 Jan 2016 18:58:02 +0000

Faisal KhanAnswered Jan 3, 2016

If I were to fathom a guess, all CP (Card Present) transactions are designated as off-line transactions. Online transactions are those that are CNP (Card Not Present).

However, we are moving into a hybrid world, where the transaction is technically CP, but being done in a CNP manner.

Does Russia have a central bank comparable to those in the U.K. and U.S.?

Sun, 03 Jan 2016 18:58:01 +0000

Faisal KhanAnswered Jan 3, 2016

Yes, its called the Central Bank of the Russian Federation (or Bank of Russia for short).

Official Website: Bank of Russia

What is the best way to move large amounts of fully declared (“white”) money between countries without being taxed twice?

Sat, 02 Jan 2016 18:57:05 +0000

Faisal KhanAnswered Jan 2, 2016

Legally if both countries slap a tax, then it becomes very hard to do so. You would have to go out of your way to find some type of a scheme in the beneficiary country where the funds will be parked.

You would seek out if the Government offers any exemption to the taxes for purposes of say FDI, Inward Remittance or surrendering the Foreign Exchange and opting for the local currency.

What does the shutdown of Mt. Gox imply for Bitcoin’s long-term prospects?

Sat, 02 Jan 2016 18:57:03 +0000

Faisal KhanAnswered Jan 2, 2016

I'm not an expert to answer that. A lot of people at the moment don't even know what's going on at Mt.Gox and about the stolen coins or what measures might be taken.

The protocol had a flaw, everyone knew about it (or at least that is what everyone is saying). I for one heard about the tractional malleability issue when everyone else heard about it - recently!

How these coins were skimmed and if there is any trace in the blockchain remains to be seen.

I think, just with everything else, you will have some planes that fly and come that crash. With every crash that is fatal, other players will pick up clues as to the mistakes that were made and carry on. Eventually, the system will sustain and in so, Bitcoin itself will sustain. Maybe not as the currency itself, but certainly as the protocol.

I shudder at the thought if coins were to be stolen from say Bitcoin Block Explorer - Blockchain.info's online wallet. What would that mean? Is the technology weak or is the security weak? Only time will tell.

The recent series of events associated with Bitcoins has caused other currencies to prop up or differentiate themselves. All and all, as sad as it is, this is part and parcel of the evolutionary process.

Much remains to be seen.

Are there genuinely legitimate ways to earn money from home?

Sat, 02 Jan 2016 18:56:59 +0000

Faisal KhanAnswered Jan 2, 2016

Some great answers here. There are many ways to make money from home. Have a look at oDesk, Elance and Fiverr and see what sort of services are being provided by people.

If you have the talent/skills set as posted on these websites, you too can make money from home.

The thing is - there is no free lunch. You have to work for it. If something sounds too good to be true, it most probably is. You need to be cognizant of what is genuine and what is most likely a scam. Many well-read people get duped by scams all the time.

Another great avenue is Mechanical Turks

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What is the legal and technical structure behind Coinbase’s exchange platform?

Sat, 02 Jan 2016 18:56:57 +0000

Faisal KhanAnswered Jan 2, 2016

Joseph Wang is correct.

Coinbase is a Bitcoin retailer. Currently, there isn't a Bitcoin exchange in the US. The only one that could be is CoinX (Home Page - CoinX Trading Platform) - User is the CEO of that and she's here on Quora.

They are in Private BETA right now from what can be seen on the website.

What might happen if we chose a specific date after which the U.S. dollar would no longer be used?

Sat, 02 Jan 2016 18:56:56 +0000

Faisal KhanAnswered Jan 2, 2016

Massive conversions out of the currency. Pennies for your Dollars! (provided you can find a Buyer).

Realistic approach. Buy physical things for your Dollars and then sell them in other currencies. Tens of Pennies for your Dollar.

Why might a company demand a bank wire instead of an ACH transfer for large payments?

Sat, 02 Jan 2016 18:01:42 +0000

Faisal KhanAnswered Jan 2, 2016

In the US context, the Bank Wire would be settled via FedWire (RTGS) same day usually within the hour, ACH will take 3 days.

Are there fintech incubators similar to the FinTech Innovation Lab?

Sat, 02 Jan 2016 18:01:40 +0000

Faisal KhanAnswered Jan 2, 2016

Quite a few of them, see my curated list.

List of FinTech Incubators & Accelerators Worldwide

Which fintech accelerator programs exist, how much seed funding do they provide, and what equity percentage do they typically take?

Sat, 02 Jan 2016 18:01:38 +0000

Faisal KhanAnswered Jan 2, 2016

I maintain a curated list (see link below). If you know of any other incubators, please add it in the comments section below.

List of FinTech Incubators & Accelerators Worldwide

Is Dwolla considered a cryptocurrency?

Fri, 01 Jan 2016 18:55:50 +0000

Faisal KhanAnswered Jan 1, 2016

Nope. Dwolla is not a currency. It is simply an improved payment method.

What is the cheapest way to send $1,000–$3,000 from the U.S. to a Mexican bank account?

Fri, 01 Jan 2016 17:58:03 +0000

Faisal KhanAnswered Jan 1, 2016

Have a look at Sigue (See: Home) they offer pretty decent rates and US-Mexico is their speciality.

For banks like Simple and Moven, who is the legal bank of record for the customer, and who stores the transaction data?

Fri, 01 Jan 2016 17:58:02 +0000

Faisal KhanAnswered Jan 1, 2016

Great insight Brett. Thanks for answering.

What strategies are most effective for helping unbanked people in the U.S. become fully banked?

Fri, 01 Jan 2016 17:58:01 +0000

Faisal KhanAnswered Jan 1, 2016

This is a question that is debated in conference rooms to conferences all around the world. Be it the US or a developing country. The goal is the same: How to bring more people on to the banked side?

In the US, the availability of a wallet like service (that is all things mobile) still has a huge prerequisite in the form of a bank account to be associated with the wallet.

Very few MFS solutions exist in the US that cater to such an unbanked market, and even if they do exist, the offering is very restricted.

You need to offer the entire value-chain of product offering to the underbanked for them to be able to switch to an in-between solution (away from cash and check-cashing, and a step before being a full-time banked customer).

In my opinion, an intermediary solution needs to exist in the form of a full-service mobile wallet, that would allow such a conversion to take place. One such wallet is PayToo (Paytoo - PayToo Mobile Wallet) [no affiliation to PayToo other than the fact I just know of them professionally],

Having unbanked customers be able to use money just like a banked customer would be the first (and correct) step. The data collected from such users can then best determine what sort of banking relationship they would need and what sort of bank and banking products would cater to their unique needs.

When and how might technology companies disrupt consumer banking?

Fri, 01 Jan 2016 17:57:59 +0000

Faisal KhanAnswered Jan 1, 2016

Kind of difficult to stress the point, technology is just an enabler. In most of the conferences on banking and payments, you will realize that the underlying factor, the common denominator that everyone is agreeing to when it comes to any form of disruption is behavior. Not technology.

Societal behavior as to how we interact, communicate, trust, exchange value, connect, redeem value for other things, etc. is what drives the change. Technology represents the mass-adoption. There are technological advances and products on the shelves of Deutsche Telekom on banking and payments, that are still deemed far ahead of our time.

MIT Media Labs is no exception or stranger when it comes to innovation. Trying to force (juxtapose) these cutting edge technologies in society is a very complex issue and understood by a handful of people in the world.

Banking is like Baskin Robins, many flavors. Many geographies. Butter Pecan may not bode well in Kenya or Russia.

To answer your question: One cannot force someone to change behavior. It is done in pockets, all around the world and then suddenly you realize, it has reached the proverbial critical mass. The expansion cannot be stopped. What triggers this boundary condition? No one can identify for sure. It is as if everyone has been told to let go of their past and reach out for the new.

Which U.S. law requires online brokerages to perform KYC and AML checks on both new and existing clients?

Fri, 01 Jan 2016 17:57:58 +0000

Faisal KhanAnswered Jan 1, 2016

Here is the list:

Bank Secrecy Act of 1970
Money Laundering Control Act of 1986
Annunzio-Wylie Anti-Money Laundering Act of 1992
Anti-Drug Abuse Act of 1988
Money Laundering Suppression Act of 1994
Money Laundering and Financial Crimes Strategy Act of 1998
USA PATRIOT Act of 2001 (United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act).

What are the best books for learning about anti–money laundering?

Fri, 01 Jan 2016 17:57:56 +0000

Faisal KhanAnswered Jan 1, 2016

Protivity's Guide to US Anti-Money Laundering Requirements is a solid 370 page read. You can download it from here: Guide to US Anti-Money Laundering Requirements - The Money Wiki

Can Bitcoin be outlawed or regulated in the U.S., and by what mechanisms?

Fri, 01 Jan 2016 17:57:55 +0000

Faisal KhanAnswered Jan 1, 2016

Can they made illegal sure? Will they be, not likely.

Most US States will issue you a money transmitter license based on your application for a license.

A few US States have a no action on Bitcoin and that is understandable. A lot many are classifying it as part and parcel of regular money transmission till such time they decide to specifically include additional laws for bitcoin by name.

The big 3: New York, California and Texas are the ones that all the other States are looking to, as far as a grid reference is concerned for amending their own money transmission laws.

Unless the whole Bitcoin community royally screws-up, chances are Bitcoin is here to stay and slowly be inducted into the main-stream financial and banking system in a legal manner.

What laws and regulations apply to Bitcoin businesses operating in the United States?

Fri, 01 Jan 2016 17:57:54 +0000

Faisal KhanAnswered Jan 1, 2016

Terrence Yang provides a pretty detailed answer. Here are some of the laws I would like to add to Terrence's answer.

Our company (CoinX) which is a licensed Bitcoin exchange in the US is subjected to the following laws:

As a regulated money services business, we are regulated by the State department of financial services (or equivalent). This means for every State in which we are licensed, the financial regulator of that State has laws for money services business, specifically money transmission applicable on us. In our company's case (for example), here are the licenses we hold and the corresponding State regulator: Money Transmitter Licenses |
On a federal level, we are bound to the USA PATRIOT Act of 2001
We also have to adhere to the Bank Secrecy Act (BSA) of 1970
Money Laundering Control Act 1986
Anti-Drug Abuse Act of 1988
Annunzio-Wylie Anti-Money Laundering Act of 1992
Money Laundering Suppression Act of 1994
Money Laundering and Financial Crimes Strategy Act of 1998
We have to do regular reporting to the federal agency known as FinCEN (Federal Crimes Enforcement Network)
Because we deal with Consumers, the CFPB (Consumer Financial Protection Bureau) laws and guidelines are applicable to us.
For money transmission, especially cross-border, Regulation E is very important.
Dodd-Frank Act, Section 1072 (which is associated with Regulated E)
FISMA (Federal Information Security Management Act) is applicable to us.

How would a country design and implement its own banking system?

Fri, 01 Jan 2016 17:57:52 +0000

Faisal KhanAnswered Jan 1, 2016

In recent years when new countries emerged, the first and foremost tasks is to setup a monetary authority: a central (or reserve) bank.

BIS (Bank of International Settlements) in Basel, Switzerland is one such place many countries go to, to help them define the framework for establishing the central bank, based on the Basel II and now Basel III framework.

Some countries in their infant stages, opt to co-share central banking functions with a neighboring central bank, till such time they are mature enough to host one of their own. Examples of such are Eurosystem in the ECB, Eastern Caribbean Central Bank that provides reserve banking to eight island nations, Central Bank of West African States which provides the same to eight countries in Africa, etc.

The framework is extremely important as it sets the ground rules as to what the various banking functions are, who does what, etc. These are supplemented by various laws and regulations so that licensee (i.e. banks who wish to establish themselves under the umbrella of the central bank) know which rules to follow.

The next step is to have association with other central banks so that ledgers (for wealth/value) can be exchanged with other countries.

Furthermore, central banks would need to have themselves or the banks they regulate connected to various payment services networks (like SWIFT), Visa/MasterCard, Interbank networks, etc.

In most cases one of the primary functions of the central bank would be settlement, this could be an RTGS system or some form of net deferred settlement. The central bank could do this themselves or designate one of the licensee bank to run the settlement system till such time the RTGS function comes back to the bank.

How would I go about establishing a new offshore bank?

Fri, 01 Jan 2016 17:57:51 +0000

Faisal KhanAnswered Jan 1, 2016

It depends which country you would choose to setup an off-shore bank. The main requirements would be to obtain a banking license from the central (or reserve) bank of that country. Setting up an off-shore bank typically means you are giving your clients some form of a tax break, so be very cognizant of the tax breaks the government would be providing for all banks who wish to setup in their region.

There are many small Island nations, etc. that you should research them. I've started maintaining an up-to-date list of all the central banks in the world, specifically look at Oceania section. Its not complete yet, but would be very soon.

Banks & Banking: Central Banks: List of Central & Reserve Banks of the World

Where can I find a complete U.S. guide to anti–money laundering compliance?

Fri, 01 Jan 2016 17:57:49 +0000

Faisal KhanAnswered Jan 1, 2016

Protivity has a really good document that explains the US aspects of anti-money laundering. It is a 370 page document (2014 edition I believe) and is definitely worth reading. Nothing short of being the AML Bible.

The document can be downloaded from here: Guide to US Anti-Money Laundering Requirements - The Money Wiki

What are some Bitcoin exchanges, how trustworthy are they, and what is the outlook for Bitcoin exchanges?

Fri, 01 Jan 2016 17:57:48 +0000

Faisal KhanAnswered Jan 1, 2016

I'm maintaining a list here. There is a difference between Exchanges and Bitcoin brokers.

List of Bitcoin Exchanges

What features and modules are typically included in banking software?

Sat, 12 Dec 2015 17:55:58 +0000

Faisal KhanAnswered Dec 12, 2015

This is not an easy question to answer. Banks literally take months to evaluate core banking software. There are literally 1,000s of feature sets.

If you have no inkling into the financial services world, the effort of your team can perhaps best be channeled by associating and contributing to the existing open-source initiatives in the banking field.

Three that comes to mind are:

Home - FinTP
Cyclos - mobile and online payment software
Open Bank Project

Work with these three initiatives to get a solid foothold into the banking world and then you can perhaps revisit your dream of rebuilding and recoding the banking software core.

Some stale initiatives like MyBanco (See: The MyBanco Open Source Project on Open Hub) can also be looked into, there hasn't been any code submissions / contributions in well over a year, but it is worth a look.

Personally, I like the Mifos initiative. You can contribute towards this project as it seems to me this is the most mature code base out there (See: Homepage - Mifos Initiative)

Has anyone invented a wireless power supply system?

Sat, 12 Dec 2015 17:55:56 +0000

Faisal KhanAnswered Dec 12, 2015

Well, close. Search for inductive charring and you have the ability to charge cellphones and other gadgets wirelessly. Power by Proxi is one of many such companies. PowerbyProxi • Wireless Power Transfer & Charging Solutions

What are best practices for implementing KYC and sanctions-screening software?

Sat, 12 Dec 2015 17:55:54 +0000

Faisal KhanAnswered Dec 12, 2015

Your best bet is to look at companies like IDology, Jumio, IDChecker, Identity Mind, etc. They provide all the necessary tools, APIs, etc. to link up with and check for multiple screening services as well as KYC validation, etc.

How can I grow and expand my currency collection?

Sat, 12 Dec 2015 17:55:51 +0000

Faisal KhanAnswered Dec 12, 2015

If you're collecting, then there are 100s of dealers all around the world, who would work with you. In the US alone, eBay has a lot of sellers who auction currency notes and coins.

You might also want to check with listings in Craig's lists, or other specialized forums, a lot many people travel but then are stuck with coins and notes from their travels that they cannot exchange. You could exchange those and expand your currency collection.

How can a failed state’s currency remain in circulation for decades, such as Somalia’s?

Sat, 12 Dec 2015 17:55:49 +0000

Faisal KhanAnswered Dec 12, 2015

Just because a country is labelled a failed state does not mean its economic activities ceases to exist.

Its currency may/may-not be accepted internationally, but it is most certainly accepted within the country and with trading partners who barter or use a complimentary currency pair to affix value.

People within the country still use their currency and if the economy accepts it as a payment instrument of choice by the popular masses, so it means it can survive.

The currency did not experience the exponential inflation that Zimbabwe or other countries in the past saw. Politically and economically the government has less of an influence, but collectively, the country agrees the currency is worth keeping and using, so it has not spiraled out of control (because of limited government influence).

How often do ATMs make errors when accepting deposits or dispensing cash?

Sat, 12 Dec 2015 17:55:48 +0000

Faisal KhanAnswered Dec 12, 2015

Receiving is subjected to physical review, unless the machine is a RCDM. The machines are highly robust. Most of the mistakes are attributed to human error.

However, depending on which provider you choose, the error rate (though not published) is assumed to be somewhere between 1-in-100,000 to 1-in-250,000 dispenses. Mostly attributed to notes insertion into the cassette.

Do you regret not buying large amounts of Bitcoin when it was $7?

Sat, 12 Dec 2015 17:55:45 +0000

Faisal KhanAnswered Dec 12, 2015

I think in hindsight anyone who wanted to (or still wants to) make money of bitcoins, the answer would unequivocally be a Yes.

What are the most innovative banking services available today?

Sat, 12 Dec 2015 17:55:44 +0000

Faisal KhanAnswered Dec 12, 2015

Making the bank branch stick. Umpqua Bank and their store concept (inspired by Apple Stores). CNN did a brief coverage of it, the video can be seen here.

Apple Store inspires 'bank of the future'

How can an e-commerce website become a third-party payment processor or aggregator, and which parties and requirements are involved?

Sat, 12 Dec 2015 17:55:42 +0000

Faisal KhanAnswered Dec 12, 2015

General Application
In order to get setup as a Payment Facilitator it is similar to applying for a regular Internet Merchant Account, except with the significant differences being in the underwriting process (which is inherently quite complex) and to have a minimum infrastructure to be in place. You need to be able to understand the clearly defined rules and responsibility by the card schemes in being an aggregator merchant acquirer (i.e. a licensed PSP or better known as a PF - Payments Facilitator). There are fees for membership associated with the card schemes like VISA and/or MasterCard that is paid directly.

Typical Timeframe for Filing & Approval
Review and approval time-frame can vary depending on the application, the supporting documents and the business plan. Usually 6-8 weeks are taken as a very minimum.

Underwriting
When banks underwrite they are thus guaranteeing payment in case of loss, theft or misuse of the card. Aggregate underwriting as required for payment facilitators is more involved, revolves around many factors and is subject to deeper scrutiny. In many cases, an acquiring bank may require the risk to be collateralized by 100% cash deposits of the processing volume. Although solvency and good credit are essential, strong financials alone are not a good enough reason to satisfy the bank that your business poses no risk to them in underwriting. You could be subject to deposits if you are not able to very strongly demonstrate your experience in the credit card industry, with special emphasis in understanding risk, fraud mitigation, further underwriting for the merchants you would be doing business with, etc.

As part of the business proposal that you submit, if you are able to demonstrate that you have partnered with a company like WePay to provide you a white-labeled payments processing platform, this will count positively towards your review. It shows that you have the core elements taken care of: risk, fraud, control, etc.

Platform Infrastructure
System that is able to manage millions of transactions, customers and Dollar value. Exacting payments between each other, maintain error-free account balances, managing risk and having fraud controls for all the sub-merchants that you as a PSP would like to acquire.

There are many challenges and hurdles you have to be aware of that you need to demonstrate:

Credit risk policies and procedures
AML/BSA policies and procedures
PCI/DSS
Audit & Continual Compliance
Commercial & Contract negotiation
Integration & Certification
Understanding Operating Regulations of Card Schemes
Passing things like MasterCard FMP Review, Amex PSP Review, etc.
Accounting & Reconciliation
Risk (Fraud Loss, Chargeback processing & collections, etc)
Money Transmitter Licensing (if in the US or even abroad).
Banking
Localization implementation.

How are the SWIFT and Visa networks linked, and does Visa use SWIFT for bulk transaction messaging?

Fri, 11 Dec 2015 17:53:40 +0000

Faisal KhanAnswered Dec 11, 2015

To the best of my knowledge the two networks are not connected. SWIFT uses various communication providers to connect with directly, including the Internet (VPN circuit). They also use in some country providers like AT&T, BT, Orange, Colt (See: Network Partners)

VISANet does not share its network or piggy back any data for SWIFT and the inverse is true as well. VISA has established nodes in each point-of-presence city, and usually has agreements with the likes of Euronet, TNSi, Tata, BT Global, Deutsche Telecom, etc. for their customers to connect to the VISANet.

Both VISA and SWIFT use their own networks for real-time and deferred settlement messaging.

How can I build a robust marketplace payments setup like Airbnb’s?

Thu, 10 Dec 2015 17:52:51 +0000

Faisal KhanAnswered Dec 10, 2015

Have you looked at the likes of Stripe and Wepay? they might support checks. If not, you can always look around for a Check21 processor who provides an API access and will allow clients to scan in their checks.

Where can I find historical USD to PKR exchange rates going back to 1947?

Tue, 08 Dec 2015 19:08:35 +0000

Faisal KhanAnswered Dec 8, 2015

Here you go... Each row is the year, starting from 1948

Source: Page on sauder.ubc.ca

What can be done to significantly increase remittance inflows into Pakistan?

Tue, 08 Dec 2015 19:08:34 +0000

Faisal KhanAnswered Dec 8, 2015

Remittances for Pakistan represent a life line. 100,000s of diaspora send money every month to Pakistan, which this year would most likely be between the $14-$15 Billion mark.

As per the last filing at State Bank of Pakistan, remittances stand as follows:

The progress being made by Pakistan has been nothing short of fantastic, as depicted in the graph below:

A bit about the background. PRI is a joint-venture between the State Bank of Pakistan and Ministry of Finance. It also has associatino with Overseas Pakistan Foundation. All of this success can literally be attributed to the hard work of four people in Pakistan Remittance Initiative:

Najmus Saqib (former Head of PRI)
Nadeem Bhurgri (Business Development Head)
Arshad Sattar (Technology/Support), and
Naushad Imdad (former Internal Control/Finance Manager)

These four people have worked tirelessly an fought many battles, political and office-nay-sayers, to keep the program on track.

Today, PRI is in a sad state of affairs. The one department that is doing something right is now being bulldozed by people who can best be described as incompetent, starting with the current head of PRI Mr. Moinuddin. A man who is hell bent that PRI should be broken away and things should be done his way.

It is easy to say and do this, once the entire infrastructure was made from nothing by the four gentlemen. PRI has been the project of envy of a lot many people, and in so, suffers the daily showers of wrath and hatred by others.

Systematically, chokeholds have been placed. Money that was due as salaries, was not paid. Money spent was not released, the immensely successful scheme for Free-Send in which Saudi Riyals 25 are offered to the MTOs/Banks has piled up.

Ever since Moinuddin came on-board the has played politics and moved Najmus Saqib out (the brains behind PRI), he has then done everything in his power to remove everyone associated with Najmus - that includes Naushad Imdad (who eventually resigned) and did not renew contracts for Arshad Sattar and Nadeem Bhurgri.

Now this man is help bent on learning on the job and screwing up things.

If Pakistan is to substantially increase remittances, here is what needs to be done:

Boot out Mr. Moinuddin from which ever hole he crept out of.
Restore the famous four team of PRI
Give them the money/finances as and when they need it (Billions are allocated, but nothing is released to them). So much so, even tea money is paid by these folks from their own pocket.
Install the golden plan of having a Remittance Hub in Pakistan, one that ties in and correlates all the remittances.
Provide better marketing budget for PRI
Allow expansion of PRI and make it truly autonomous as it was meant to be (this still has not happened and is very much required)
Expand on loyalty and rewards program for overseas Pakistanis who send remittances into Pakistan.
Introduce enhanced products like car financing, land ownership, semi-commercial payments based on the credit history and financials of the Pakistanis overseas.
Introduce PRI on all platforms and forums abroad from where Pakistan can showcase its super super product.
SBP and Ministry of Finance to support this team.

It is estimated that if the famous four team were allowed to continue, the remittances figures would most likely cross the US$ 20 Billion mark easily.

The goals are very much achievable, but when you have donkeys as Head of PRI, even sustaining the hard work done right now becomes a miracle.

What is one killer use case for Bitcoin that actually exists in 2014?

Sun, 06 Dec 2015 19:06:41 +0000

Faisal KhanAnswered Dec 6, 2015

Sending relatively small value payments across the world was not possible without paying unbelievably huge transfer fees. Try to send $20 from US to India or $35 from UK to Kenya. The transfer fees will kill you, if not make it downright impossible to do the transfer.

Bitcoin has / is changing that. Small value payments (sub $100) can now easily be sent across all around the world with ease.

How can I obtain a Mastercard if I live in a country without PayPal or direct Mastercard support?

Sun, 06 Dec 2015 19:06:40 +0000

Faisal KhanAnswered Dec 6, 2015

Opt for a service which does provide you one, see Malta based Lamda Card Service (Page on lamdagroup.com)

[No affiliation with them]

Who was Xoom’s biggest competitor in 2014?

Sat, 05 Dec 2015 19:04:50 +0000

Faisal KhanAnswered Dec 5, 2015

Western Union and native incumbent MTOs operating in fixed remittance corridors that are offering real-time funds transfer based on pre funded arrangements.

Which provider offers the best API for sending payments programmatically to international users?

Sat, 05 Dec 2015 19:04:49 +0000

Faisal KhanAnswered Dec 5, 2015

Look at providers such as Earthport, Tipalti, TheCurrencyCloud, etc. They provide APIs for payouts.

Which currency pair is considered the hardest to trade in the forex market?

Fri, 04 Dec 2015 19:03:32 +0000

Faisal KhanAnswered Dec 4, 2015

Iranian Rial / US Dollar

Which mobile payment services are currently popular, and what makes them successful?

Fri, 04 Dec 2015 19:03:31 +0000

Faisal KhanAnswered Dec 4, 2015

WeChat - hands-down one of the hottest mobile payment services. Its a wallet. 355 Million active users as of end March 2014. Its in China. They do more business that any of the other wallets in the West. Its 100% mobile. Its got tons of features. You can pay for pretty much everything with it. Its carrier and bank agnostic.

Some articles to read about it:

WeChat is going to be huge for payments (unlike WhatsApp)
WeChat Payment and Alipayment Wallet Strike
WeChat brings new weapon to mobile pay war
Enrich your wallet via WeChat in Spring Festival
Do You Know About WeChat?
Tencent: The Secretive, Chinese Tech Giant That Can Rival Facebook and Amazon

What standout or impressive features have you seen in mobile banking apps?

Fri, 04 Dec 2015 19:03:29 +0000

Faisal KhanAnswered Dec 4, 2015

A couple of points come to mind:

Agnostic. Add any bank card, debit card, credit card, bank account, loyalty card, etc.
Pay to your contacts, regardless if they are on the same payments platform or not.
The payee is the contact telephone number you have (that would be the unique identifier).

How likely is it that a newer, smarter version of ACH will be created to update or replace the current 1960s-era ACH system?

Wed, 02 Dec 2015 18:56:54 +0000

Faisal KhanAnswered Dec 2, 2015

The incentive to make a new faster ACH (ACH) just doesn't lie there. $36 Trillion processed through ACH in 2012 (I may be off by a year here). Do the math on the overnight borrowing. So much revenue gets evaporated if it takes shape.

A centralized switch to have instant payments will eventually come forth, but the larger banks (collectively) would drive that. Not only drive it, but aggressively push it.

Such a system is still a few years away (at best).

How would you feel if you didn’t receive a printed receipt when paying in person with a credit or debit card?

Wed, 02 Dec 2015 18:56:53 +0000

Faisal KhanAnswered Dec 2, 2015

I would not have an issue with not have a receipt all together for small transactions (lets say anything under $10).

$10 or over, I would like to get some form of a receipt, be it digital or printed. The issue comes when I go to a venue where I am not likely visit again anytime soon, I don't want to give an email address to get a receipt. The option of having a physical receipt vs a digital one should be presented.

How advanced or “intelligent” are ATMs in terms of what they can do and decide?

Wed, 02 Dec 2015 18:56:51 +0000

Faisal KhanAnswered Dec 2, 2015

ATMs are extremely dumb machines. They are programmed to do very specific functions. Nothing outside the functions defined. The PIN reversal is a myth and a BS story that is not true. If your PIN were 5555 - how would the ATM know that the PIN you entered was in duress? It cannot.

They can be made to be more functional only by what is programmed into them and the peripherals that they are communicating with. Nothing more and nothing less.

How exactly do remittance companies and money changers operate and make money?

Wed, 02 Dec 2015 18:56:50 +0000

Faisal KhanAnswered Dec 2, 2015

To answer your question (citing your example):

In a pre-funded model, the Sending Agent would pre-fund in their native currency, i.e. the Sending Agent would deposit say US$ 100,000 in a US Dollar Account with a Bank in the Philippines.
The Agent in Philippines through their bank or government set rate, would intimate everyday the FX Conversion rate to the Sending Agent in the US.
So at start of a business day in Philippines, the Receiving Agent would contact their bank's treasury department an obtain the day's FX rate for the US Dollar against the Philippines' Peso (PHP).
This rate is then quoted back to the Sending Agent with their margin, and additional information like top limits, bottom-limits, hold out ranges, transaction hours and settlement hours data (at the very minimum)
This rate is then used by the Sending Agent in accordance with the Dodd-Frank (WSR/CP) Act and quoted.
When someone decided to send $ 10,000 to Philippines. They will know exactly how many Pesos the beneficiary will get in Philippines.
Because the money has been collected at the Sender's side, the Beneficiary Agent will simply tap into the Pre-Funded Account and book US$ 10,000 at the FX trade they provided earlier on in the day.
This booked local currency is then transferred into the Beneficiary's end account as PHP.
The Pre-funded US Dollar account is now sitting at US$ 90,000
The Sender (or Remitter) agent is holding US$ 10,000 which is usually wired across to the pre-funded account at day's end. Assuming (though unlikely) the wire transfer for $10,000 is available the next day, the Beneficiary's Pre-Funded Account is now holding US$ 100,000
All Non-Native FX deals are done with the up-stream bank the Beneficiary Agent is working with.

The whole ecosystem is 100% balanced. Netting out of currency for transfers in many markets is now not allowed. This is specially true for transactions swaps.

Hope that clarifies.

What are effective ways to exchange between different cryptocurrencies?

Tue, 01 Dec 2015 18:55:48 +0000

Faisal KhanAnswered Dec 1, 2015

There are two ways to do it:

Do the exchange with someone. For example if you have Bitcoins and I have LiteCoins, we both can agree on a conversion rate, by looking at what some exchanges are offering and cover accordingly, or use a common denominator currency like the US Dollar and then do it using that value. Create wallets and transfer.
Use an exchange. Unless you a holding on to currency that does not have much liquidity for trade, you ought to be fine. There is applicable fees (needless to say), would be applicable.

Debit Cards: Are there any real-time tools that convert traditional bank details into SEPA IBAN and BIC format?

Tue, 01 Dec 2015 18:55:47 +0000

Faisal KhanAnswered Dec 1, 2015

For IBAN, No. As that information is separately generated by each Bank for each of their account holder. There isn't a tool or process that I am aware of that would let you do this.

Does Virgin Money accept Bitcoin as a payment method?

Tue, 01 Dec 2015 18:55:45 +0000

Faisal KhanAnswered Dec 1, 2015

As of 25th January 2014, No. They do not accept Bitcoins.

All else equal, is a cryptocurrency with faster confirmation times more or less secure against 51% attacks than one with slower confirmations?

Tue, 01 Dec 2015 18:55:44 +0000

Faisal KhanAnswered Dec 1, 2015

Ripple. (The World's Open Payment System)

51% Problem: FAQ - Ripple Wiki
Transaction Confirmation Time: FAQ - Ripple Wiki

Is Facebook likely to become a bank in the future?

Tue, 01 Dec 2015 18:55:42 +0000

Faisal KhanAnswered Dec 1, 2015

No. Facebook in reality would never become a bank. There is just too much money, traction and domain knowledge required for Facebook to become a bank. Sure, they can buy a bank out there and there, but for Facebook to truly become a bank, they would need to then be a bank in all the territories that they operate in, and what for? What would they be doing? Dealing in Money for purposes of transfers or credits to buy stuff? They can already do that very easily by just partnering up with the likes of Western Union and have an arrangement to only handle virtual currencies on their own platform and even that is questionable.

What is the largest company to have recently accepted a virtual currency (around January 2014)?

Tue, 01 Dec 2015 18:55:41 +0000

Faisal KhanAnswered Dec 1, 2015

Overstock.com - which now accepts Bitcoins.

The Grand Experiment Goes Live: Overstock.com Is Now Accepting Bitcoins | Wired Business | Wired.com

Are most payments from non-U.S. institutions to U.S. individuals made via wire transfer?

Tue, 01 Dec 2015 18:55:39 +0000

Faisal KhanAnswered Dec 1, 2015

If an Non-American institution is making money to American citizens, it would most likely be direct deposits, wire transfer or some form of a wallet or debit. If the institution is outside of the US, then most likely wire transfers.

Regardless of the method chosen, banks will always make money on transferring of money.

If I have a Scotiabank account in one country, can I access and use it from another country?

Tue, 01 Dec 2015 18:54:48 +0000

Faisal KhanAnswered Dec 1, 2015

If they have Internet Banking and will allow you to access from outside Country X, and will not block an IP from China for accessing and doing transactions, year why not!

For a new mobile money network, which model is better—Visa-like or PayPal-like architecture?

Wed, 11 Nov 2015 17:53:38 +0000

Faisal KhanAnswered Nov 11, 2015

This is a great question!

The school of thought on which avenue to pursue, is divided. Whilst attending the recent Mobile Money & Digital Payments (2014) Conference in Istanbul, this question was the topic heading for many of the presentations. (See my related post on: Take away thoughts from Mobile Money & Digital Payments Conference).

The pressing questions for many in the Mobile Financial Services (MFS) Market are as follows:

What would be the aggregator's role?
Will mobile wallets themselves retain their ecosystem?
How will interoperability with the current (banking) networks remain?

To answer your question, almost everyone that I met in the conference universally agreed that agnostic wallets are the way to go. They are bank agnostic, telco agnostic and mobile phone agnostic, i.e. go for Option # 1.

The aggregator model is inherently a very different approach. With interoperability, as a main driver, the aggregator models are more being implemented on a national switch level, the kind that say FasterPayments in the UK has or the 1Link in Pakistan, etc.

In your Option 1 and Option 2, you cite, PayPal as an aggregator, when in fact, on a broader scale, PayPal is simply a wallet provider, that has multiple product aggregation elements built in - it is by no means a true financial services aggregator. You would have more luck in success with an e-wallet, than a true regulator (which is much more difficult to deploy, because of agreements, national interest, central bank approval, regulatory hurdles, settlement bank selection, capital requirements, settlement times and technology, etc.)

An e-wallet or perhaps correctly stated, an e-money service provider that is able to implement stored value financial services has a higher business adoption rate than an aggregator.

In the event you're looking at innovation (which would be necessary) in all dimensions, I refer you to the innovation step-deck as modeled by Ericsson and now used by almost everyone in the industry as a baseline.

The general mix of your technology offering can change. That's simply the behavioral change within your consumer, but for the overall solution to be a sustainable formula, the above is what you need to consider.

The key to your product's success is needless to say frictionless manner in which payments can be made, within the ecosystem and across multiple ecosystems (hence the word interoperability). These elements are what will derive growth and adoption of your product.

What are some of the best ways to turn $50,000 into $1,000,000 within 12 months or less?

Tue, 10 Nov 2015 17:52:50 +0000

Faisal KhanAnswered Nov 10, 2015

I agree with Mark Savchuk - Lotto is your best chance, however, not just any lotto, I would recommend that Dubai Duty Free: Millennium Millionaires

5,000 Tickets - AED 1,000 Each (US$ 367 Each).

The odds are very good on this one, if you can buy more tickets. Best thing is you don't even have to travel to Dubai. You can purchase it online.

$50,000 roughly gives you a 1/500 shot at winning.

Dubai Duty Free Home Page

What is an international subsidiary?

Tue, 10 Nov 2015 17:52:48 +0000

Faisal KhanAnswered Nov 10, 2015

Various meaning to this, but essentially, any entity that it in a different geographical territory (read: country) and is owned &/or controlled by another entity. For example, a company based in London, could have another company in Florida. The Florida owned company would be a wholly-owned subsidiary of the London corporation.

In short, a subsidiary is a sub company or entity of a parent company that owns it.

Is there a payment provider in the U.S. that lets us launch our own white-label mobile wallet?

Fri, 06 Nov 2015 19:06:38 +0000

Faisal KhanAnswered Nov 6, 2015

Euronet, Luup, Monetise, etc. Quite a few. The problem is none of them will give your regulatory coverage on it. The payment rails are not an issue, they will let you ride on whatever you choose, be it ACH or traditional MC/VISA rails.

How do large banks physically and digitally secure their cash holdings?

Fri, 06 Nov 2015 19:06:37 +0000

Faisal KhanAnswered Nov 6, 2015

Needless to say the Banks have very secure and sophisticated vaults. Banks also keep in mind how much cash they would need. If they have excess cash, they send it back to the Federal Reserve Bank for them to safe-keep.

See: How Currency Gets into Circulation

How would you explain money laundering in simple layman’s terms?

Fri, 06 Nov 2015 19:06:35 +0000

Faisal KhanAnswered Nov 6, 2015

tl;dr: Moving Undocumented Money.

Money Laundering has many definitions. Not all the countries agree on a standard definition, yet they come close (which for many developed countries is still not good enough).

On the broader scope of things, laundering money is to use the existing payment and banking rails, to funnel or channel your money across. In many arenas this simply means making black money white, and in others it means, keeping the black money... black, yet being able to transport it across.

The end goals vary, but mostly it is to avoid taxation, avoid questions on the source of the income (which could be legal or illegal), to burrow through one financial system and emerge out onto another. To ingress from a particular country and egress from another. The combinations and motives vary. Like I cited, there is a disagreement on a standard definition pair. What could be illegal in one country, could very well be legal in another.

The short of it is, it is termed as undocumented transfer of money. Based on this premise, there are then models to look at money laundering on the whole and to also understand Money Laundering type: Hawala, Hundi, Fei Qian, et. al.

Each country's financial regulator has set up pretty much a monitoring unit that is some what autonomous to detect and deter money laundering. One of the governing bodies to manage this on a worldwide level is the Financial Action Task Force (See: Financial Action Task Force (FATF)), especially their recommendations (PDF Document): Page on fatf-gafi.org

Most of the payment systems are setup now, so as to flag transactions traversing through it. This is one of the most preferred ways in the detection of money laundering. Detection can vary in so many ways. Over 5 small transactions to the same person, sending chunks of money across to multiple people from the same payment instrument, in a given time period, large sums of money moving, etc. By tapping into a payment system, you then move outwards to determine how the transaction was loaded, from where the transaction was loaded from or off-loaded and start asking questions. The difficult part of money laundering is when people understand the flags and are able to by-pass them, or by-pass the system all together.

Does something like a “financial prodigy” actually exist?

Fri, 06 Nov 2015 19:06:33 +0000

Faisal KhanAnswered Nov 6, 2015

No. Not really. You do have people who have been giving the title of an Oracle (think Warren Buffet) but to the best of my understanding there is no financial prodigy, unless of-course you're on the transparent pill and are starring in the movie Limitless.

What do your friends personally think about Bitcoin?

Fri, 06 Nov 2015 19:06:29 +0000

Faisal KhanAnswered Nov 6, 2015

I would say, personally for me, I would divide this into three categories:

Friends who are cognizant of Bitcoin and how it works, etc. These are people who generally technically inclined and understand the whole concept of crypto-currencies, blockchain, mining, etc. Needless to say, they are gung ho on the whole Bitcoin ecosystem and cite a matter of time when adoption and traction becomes more than just noticeable. Very few members of this group actually do transactions using Bitcoins.
Then there is a group, who has come across and read about Bitcoin in articles online, or magazines, etc. They have no solid idea of how it works, but are mostly interested to know if they invest amount X, would they be able to get a decent return on it. They have no idea on how to buy it, where to store it, or how to trade with it. Just a general awareness of something called Bitcoin.
The 3rd category or group are people who are 100% oblivious to Bitcoins or are nay-sayers.

How do banks connect into and communicate over the SWIFT network?

Thu, 05 Nov 2015 19:04:47 +0000

Faisal KhanAnswered Nov 5, 2015

SWIFT Terminal. SWIFT provides a dedicated VPN'd circuit for Banks to connect to the SWIFT network.

Ben Milne: How does Dwolla FiSync handle settlement of payments between banks?

Thu, 05 Nov 2015 19:04:46 +0000

Faisal KhanAnswered Nov 5, 2015

Dwolla's FiSync is an RTGS solution essentially. All members settle with the settlement bank (at least once a day if not more to reduce investment exposure). Think of it no different than any other RTGS, except this one is in private hands, i.e. more efficient.

Ben Milne can elaborate more.

Is there such a thing as international banking law?

Thu, 05 Nov 2015 19:04:45 +0000

Faisal KhanAnswered Nov 5, 2015

Letter of Credit (L/C) is perhaps the only banking law that is international. Though it does take a few changes here and there, it is pretty much an international element.

The Institute of International Banking Law & Practice is a not-for-profit educational and research organization dedicated to achieving a better understanding of banking law and practice and their relationship to each other

Not a law per se, but as guidelines, the Bank of International Settlements (in Basel, Switzerland) is often referred to as the Central Bank of all Central banks. They publish a lot many guidelines, etc. (for example the Basel II/III Frameworks comes from BIS).

For further reading...

Letter of credit
IIBLP, Institute of International Banking Law & Practice
Institute of International Banking Law & Practice
Bank for International Settlements

Will fintech startups eventually seriously challenge or displace bulge-bracket banks?

Thu, 05 Nov 2015 19:04:43 +0000

Faisal KhanAnswered Nov 5, 2015

Any FinTech you look at, would probably take 10-15 years to become a decent size to be able to compete on a national or even global level with Banks.

PayPal is one such name, others are just scattered here or there. Banks, be it a small community bank, credit union, state charter, national charter or a global bank, all belong to a very powerful fraternity. The 100,000s of people who work in the banking sector are not oblivious to what is happening with Fintech startups. The people who matter in the banking circles, or circles that influence banking, know exactly what is sprouting up all around them. Banks also have a very powerful lobby. Fintech's don't give banks a run for their money per se, I cannot think of a single example where banks have cited fear or lost market share because of a fintech startup's product or service.

Banks are here to stay and they are also slowly evolving with time. Just as you don't feel the Earth's rotation, Banks are a similar example. Just because you don't see it everywhere, doesn't mean they are not doing sharpening their knives for the battle.

Who controls or owns the largest amount of bitcoins?

Thu, 05 Nov 2015 19:04:42 +0000

Faisal KhanAnswered Nov 5, 2015

Hard to say now, but to give you some form of semblance, here are the list of the richest bitcoin wallets:

Source: BitcoinRichList

Also, who owns the most Bitcoins, seems like the answer is, the FBI: Who Owns the World’s Biggest Bitcoin Wallet? The FBI | Enterprise | WIRED

On average, how much does each individual customer cost a bank to serve?

Thu, 05 Nov 2015 19:04:41 +0000

Faisal KhanAnswered Nov 5, 2015

This is a very complex question with no easy answer. Vendors/solution providers provide varying discounts in each geographic territories to be able to close business with each bank. Finding out how much a bank has actually paid for the software (like Core Banking) would not be an accurate enough mark, even if you were to somehow obtain that number. Ancillary costs must be taken into account, software maintenance, HR, implementation, regulator's audit, transitioning, network connectivity, hardware, support hard (like UPS, generators, fire suppression, etc.) networking hardware, Database (and all costs associated with the database, etc.)

The same can be applied for ATM transactions, Mobile Banking, Internet Banking, Etc.

Each country has its own set of pricing mechanisms. Some like the US, do not give a steep discount, other markets like the Scandinavian countries, rarely get discounts and they believe in paying premium, which includes premium human resources as well. Middle East varies, South Asia relies on deep discounts, South East Asia, HR is expensive if you look at countries like HK or SG, whilst PH, IN, ML are relatively economical. The network costs again depend on the carrier, the population density, the metrics at play within each economy

You will find various vendors publishing their reports, but you must understand the pricing averages reflected in such reports are for their own walled garden. Even the likes of Gartner et. al. don't really get the true pricing figures (they are pretty close, but nonetheless still estimates).

Your best bet of finding out transactional costs for certain elements as you have asked above, is to look at the transactional banking figures for the economy published by the Central Bank, they might give you some form of rough semblance of how much an ATM transaction, or the average amount processed from an ATM (though that isn't exactly what you are asking).

On average, how long does it take to move money between two different countries?

Wed, 04 Nov 2015 19:03:28 +0000

Faisal KhanAnswered Nov 4, 2015

All this can depend. It can take a few minutes, to a few days. The answer lies as to how the transfer has been setup.

Here are some pertinent answers that highlight this further:

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

If you held a U.S. money-transmitter license and wanted to use Bitcoin, what international money-transfer business models could you build?

Sun, 01 Nov 2015 18:54:47 +0000

Faisal KhanAnswered Nov 1, 2015

The possibility is still singular when you talk of international money transfers: money transfers itself.

If one is licensed as a MSB/MT in all the States in the US, the next challenge would be finding a bank to work with you for cross-border money transfers. Most banks are wary of entering this market (this is especially true of the very large and the very small banks). Limited exposure to International markets is one area and AML/KYC issues on the 2nd half of the transaction is the other (both can and are very easily solved). But its usually an obtuse or myopic view held by someone in the Bank that prevents them from truly going international. Add Bitcoin as the platform and currency to this, and the equation becomes more spicy!

The market size for remittances is over US$500+ Billion. The US still has the lion's share of the market. The issue comes in when the sending and the settlement bank are involved.

For competitive corridors the market is hovers between 2% to 3% (and I'm being generous here). Even if the transaction bank, State side works for a flat fees, the settlement bank will be working for a minimum of 0.5% of the cost of the transaction. So the question now to ask is how much would the MSB/MT holder like to make on this transaction? 0.5%? - if so, we are already at 1.0% of the cost.

Now introduce the agent network and they too would like to do business in the arena of 0.5% to 1.5%. You can see the costs are nearing the prevailing money-transfer fees.

However, all this can still be negotiated and tackled with. The main issue (in my opinion) would still be the liquidity issue on the receiving side. Who is willing to accept lots of Bitcoins and trade them over to US Dollars and pass them on to the Settlement Bank? In almost 99% of the case, the settlement banks will not touch bitcoins or trade with them (in the near foreseeable future, due to regulations), so who is doing the conversion out of Bitcoins on the receiving side?

Crack that problem, in an efficient manner and you have yourself a reliable conduit for cross-border remittances.

If a single bitcoin is very expensive, how can Bitcoin still support microtransactions?

Sun, 01 Nov 2015 18:54:45 +0000

Faisal KhanAnswered Nov 1, 2015

Because Bitcoin is highly divisible, unlike your traditional currencies or credit card systems, which can only pay you up to 2 decimal places. For example you could surely pay someone $1.23, but what if I asked you to make a payment of $0.00000079 - you simply cannot pay that amount, nor can the financial system process it.

1 Bitcoin = 100 Million Satoshis.

Another way to look at this:

1 Bitcoin = 100 Million Cents* (or pennies) (Satoshis)

The smallest payment the Bitcoin system can do is 1 Satoshi, or 0.00000001 Bitcoin.

So if a Bitcoin is worth say $900 and you want to pay someone 35 cents, that would be: 0.000389 Bitcoins or 38,900 Satoshis! (see, isn't that simpler to say).

*technically cent = 100 so it is not correct to use it above, but just wanted to illustrate it.

Why doesn’t PayPal let users change the country associated with their account?

Sun, 01 Nov 2015 18:54:44 +0000

Faisal KhanAnswered Nov 1, 2015

Just like Banks don't allow you to switch countries. You are always required to open a new account. Different Country. Different Rules to play by!

(To explain on the analogy: this is even true if you have say a Citibank in UK and now want to have a Citibank account in the US, you will have to open a new one. You can continue to use you UK account from the US, but that is not the same as switching)

How much capital would be needed to start a bank in Pakistan?

Sun, 01 Nov 2015 18:54:43 +0000

Faisal KhanAnswered Nov 1, 2015

The MCR (Minimum Capital Requirement) for opening/running a Bank in Pakistan at the moment, as outlined by State Bank of Pakistan is Rs. 23 Billion.

Source: State Bank of Pakistan

How can Ripple or other digital currencies like Bitcoin and Litecoin help the underbanked or emerging middle class?

Sun, 01 Nov 2015 18:54:41 +0000

Faisal KhanAnswered Nov 1, 2015

There is a significant difference in the definition of Emerging Middle Class. If you look at South Asia, South East Asia, Africa, some parts of Latin America, etc. (your emerging markets/countries), the "Unbanked" is a very different customer.

Based on the viewpoint of emerging markets, Crypto currencies (at the foreseeable moment) cannot play any significant role for the unbanked. The unbanked are essentially a cash economy and their first go at banking is being fulfilled via the USSD channel over the GSM network, offering them branchless banking on their mobile.

Offering a TCP/IP layered app that runs money is just not a huge enough market for the branchless or the unbanked segment (at present).

The financial services being offered to the unbanked via branchless banking networks itself is very cheap. The only interface so far as seen is via the wide-adoption of the protocol itself, a phenomenon happening in Kenya where almost a 3rd of the Kenyans have a Bitcoin Wallet (thanks to Toffene B. Kama for pointing out the article to me today: One Third of Kenyans Now Have a Bitcoin Wallet). The other application is interfacing the terminating points of the crypto-currencies that are used for cross-border remittances, to get attached to the branchless banking or mobile banking channels.

The costs savings by implementing a crypto-based currency is a winner, but right now that segment's ownership lies (read: is dominated) with the banks and they are not ready to give up on this lucrative transaction set any time soon.

Should the Bank of the United States be reinstated, and why or why not?

Mon, 12 Oct 2015 17:55:41 +0000

Faisal KhanAnswered Oct 12, 2015

Asking is the same to do away with fractional reserve banking. One immense problem with the fractional reserve banking is that is all the money that the US government has loaned from the Feds is given back, there isn't money in the money supply to pay for the interest.

Secondly, the bank would be forced not to issue more money (or debt) beyond its capitalization, which again would pose a problem.

The long and short of it is, we're in a debt trap, that is now too deep to climb out of. Every knowledgable banker and economist knows of this.

What are the demographics of Western Union users sending money from the U.S. to Asia, and is the experience smooth or painful for senders and recipients?

Mon, 12 Oct 2015 17:55:40 +0000

Faisal KhanAnswered Oct 12, 2015

The bulk of US transactions is worker's remittances (or home remittances). Money sent back home for family maintenance. No one knows for sure, as WU does not provide a break down.

Typically the average transfer hovers around the US$ 200-US$500 bracket mark.

The demographics of the users, transferring money back home is predominantly blue-collar workers. The experience is instant for them in most cases, i.e. they will go to a WU Agent, book up the transaction, get the MTCN, and relay the same to their relative via SMS/Chat. In some cases, the relative is already waiting at the WU Agent outlet in the recipient country and can confirm the transaction in about 10 minutes. Speed, needless to say, costs both the remitter and the recipient.

In some countries, if the transaction is a first time transaction, then additional paperwork is required (in the case of South Africa for example) where it can literally take 4-5 days to get the remittance the first time around, as registration has to be done as per the South African regulator's rules.

The experience for most part is good and smooth for both the Sender & Receiver.

Most importantly, the experience is uniform.

You can walk into any WU outlet in the work, and the uniformity remains. The industry now even uses their acronym MTC (Money Transfer Control Number) like we use the word Xerox or Kleenex.

As WU probably has the best over view of the remittance market (a fact that World Bank acknowledges that the best intelligence in the world on Remittance & Money Transfer patterns lies with WU), they have evolved and streamlined their processes to make it as efficient as it can be, without causing confusing ripples amongst the 500,000+ WU Agents worldwide.

Why do bankers tend to prioritize serving larger companies over smaller ones?

Sun, 11 Oct 2015 17:53:37 +0000

Faisal KhanAnswered Oct 11, 2015

Its all about deposits. The money that large companies place as deposits is worth its weight in gold for many bankers.

One large corporation may decide to have US$ 1 Million in deposit (balance) at all times. Compare this to, for example smaller companies, which might have say $100,000 as deposits, in this example, 10 Small Companies = 1 Large Company.

Money Laundering: How can I receive large deposits into my bank account while complying with source-of-funds checks and regulations?

Sun, 11 Oct 2015 17:53:35 +0000

Faisal KhanAnswered Oct 11, 2015

The answer varies, but most likely it leans towards a "No".

Your answer can depend on a lot of information that we don't have, for example:

The Country in which you Bank.
The type of Bank Account
The Country from which funds originate (if any)
The type of deposit (wire transfer, cash deposits, checks, etc.)
The frequency of deposits
The value of each deposit on average
The limitation on your account with respect to deposits (if any)
The limitation in your country with respect to large value payments/deposits.

Banks have a legal duty to comply with their internal AML/KYC/CFT control manual as well as the baseline minimums set out by the regulator. So for example if any deposit (be it cash, wire or check deposit), exceeding US$ 10,000 is made, the bank would report it regardless.

If the limits in the system are flagged, you will be asked for it. All the time. There is no pass. If your answers to the questions that the bank may pose to you are not to the satisfaction of the Risk & Compliance Officer or the MLRO, they will deny you banking facilities.

Is data security a bank’s biggest cost center, and if not, what usually is?

Sun, 11 Oct 2015 17:53:34 +0000

Faisal KhanAnswered Oct 11, 2015

Data security surely is an expense. It comes in many shapes and forms. It is a category under the overall Risk & Compliance umbrella (which I think is the biggest expense). However data security is also an expense because it hinders a lot many innovative steps a bank could take but does not due to the lack of being 100% confident about data security.

Why is the payments ecosystem so complicated?

Sat, 10 Oct 2015 17:52:47 +0000

Faisal KhanAnswered Oct 10, 2015

Great Question!

There are so many elements.

Before I delve into the answer, I do want to cite. Payments is not that complex, though it can be.

Reasonably well-versed people if boxed into a room, forced to stare at a problem on the white-board long enough, will come out with some payment solution.

There are still 1,000s of payment problems out there.

Some I am aware of, 1000s of them I am not aware of. Some cater to a small market. Some to a very large market. Pick a problem. Any one problem and in 1-2 days you can probably hack out a solution on a white-board. It is really that simple at times. To crack the payments space problem for a horizontally wide market, one needs to be proficient on many levels. As an architect of a solution (someone has to think about the problem right?) you need to be multi-talented. Herein lies the problem for many.

To give you a 100,000 feet overview as to why payments are so difficult, see some of the points below (in no particular order):

Traction: One of the biggest challenges is and will always be traction. How many people you can get to use your payment system/solution. Will you be competing with the big boys or not? Will you face resistance? Is it time for your product/service to be in the market. This is a tough one to have a definitive control over.
Geography: What specific geography are you planning to operate in? Is it saturated? Is there no competition? If so, why not? Why hasn't the vacuum been filled up by someone else? What are the numbers on the ground like? What are the adoption rates? What are the numbers being offered by adjacent products/services?
Licensing: Would you need to be licensed? If so, which one? Are the licenses open for application? What is the average time period before a license is granted? What are the capital requirements for obtaining a license? What are the surety bond requirements? What are the financial requirements? How does it affect you going from a no-license period to a licensed period? How many people would you have to hire, as per the licensing requirements? How will this affect your budget?
Regulatory Compliance: What does it entail to be compliant in a market? Does a regulator(s) have oversight on your industry? Would compliance alter the roadmap or functionality or your product/service? What will it cost to be compliant? What are the pitfalls of not being complaint? How much risk is there in your system? How will you reduce fraud? What parameters will yield a lower risk status for your? How will this affect your overall product/service delivery and usability? Do you have the adequate systems in place to make you compliant? How much will these systems cost? What about the HR and Hardware/Software required to have such a system in place to make you compliant?
Interconnects / Integrations: What networks and/or interconnect partners would you be connecting with? Would they allow you to connect? What if they don't? What sort of integration is required with your partners? How long will such an integration take? What if your party does not allow outside vendors or partners to connect to their systems? What is the alternative approach then? What if the integration costs exceed your original budget? What if integration and interconnects increase the cost of a transaction being executed on your system? What backup do you have?
Banking, Processing and Insurance Coverage: Does your product/service require banking facilities? payment processing facilities? insurance coverage (as required by the regulator?) Are you able to find all these facilities? At what cost or limits? What if you cannot find a bank to work with? What are the minimum capital requirements for obtaining a guaranteed banking facility? What if the banking / processing / insurance fees jolts your original model? What if the banks refuse to work with you - citing risk? As an example if you are a start-up in Australia or even UK wanting to enter the domain of Money Transfers - it is almost impossible for you to find a bank to work with. Somewhat similar situation exists in the US.
Technology: Who develops the technology? Are you going to be leasing or licensing technology? Would there be any royalty or licensing fees associated with it? What about development? Where will you find talent? What will this talent cost? What will a delayed launch cost you? What if a competing or near-competing product is launched - how will your technology stack adopt to such a change (if at all)? Are you allowed to do whatever it is you are doing (from a technology perspective)?
Legal Costs and Legal Ramifications: Legally, where does your product/service stand? What are the costs associated in making agreements and arrangements with your financial, network, OEM (hardware/software), processing partners? What are the legal terms under which the product/service is being provided for? What about agreements with say VISA or Pulse, or a worldwide payment connector - how would you deal with that? What if one grey clause in such an agreement would make your product a competitor and grounds for annulling the agreement. How ill you handle this? How would you, as the company be affected by a lawsuit? If you're a start-up - who pays the legal fees? Will you be able to execute an agreement with a party that is crucial to your business? What if talks break down?
The Differentiator: What makes your product/service do different? What problem is it solving? Why would people flock towards it? Why can't the big boys do it? What prevents your bank from providing the same service? What stops the card schemes to oust you and do this themselves? What about the vultures who will copy your idea? How vulnerable is your idea to a status quo element being changed? How confident are you that the value proposition you have on the table now - will still have an edge 2 years or 5 years down the road? Is it a disruptor? If so, how? and what makes it so (such that no one else is hammering away at this)?
The Flat World: Is your product / solution going to be country specific? multiple countries? global? Where will you be incorporated? Are you allowed to on-board or off-load transactions to another country? Yes? How yes? Do you have any okay from the regulator? Do you have a legal opinion on it? Do you need to be cross-licensed in other territories? Can you onboard sub-merchants? or sub-clients? Can you have affiliates? Are they legally allowed? What about agents? Can you onboard them? Does the law provide a provision for this? How does cross-border settlement occur? What are the time-motion diagrams for net settlement like? What is the FX gain/loss like? Are you allowed to repatriate profits? Are they taxable? Will it have dual-tax implications? Do you require additional permits? Will you bank or processing partner allow you to operate in different countries and/or territories? Can you setup so as not to commingle funds from business done in one country with another?
Partners: Who do you have to partner up with? What if they don't want to partner up with you? What if your potential key/core partner does not want to enter into this business? What if your competition midway manages to break the relationship you have with your partner? What does it mean - partnering up? What will it cost you? In the short term? and in the long term?
Finance / Financing / Financials (aka Money): How much money do you have? How much money in this game? How much money will you make? How much money will you need? How can you get that money? What if you don't get that money? then what? What if a competitor forces you to change your revenue model, (lowering your price) how much money will you make then? Who is going to finance this? Where will you raise money from? How soon can you do it? Midway if more funding is required what are your plans? What if you cannot get that funding? Then what?
Transaction Monitoring & Transaction Reporting: What sort of a TMS / TRS would you require? How would you handle the KYC, AML, Terrorist Financing issues and checks from other POI lists? What is your flagging and reporting mechanism? How confident are you of your monitoring? What would it mean for your company if a person on the OFAC list, gets to successfully transact? If you are operating in multiple territories what are the laws in each territory for monitoring and reporting? What kind of information can be reported in geographic area and how different is it from the reporting in another country? (US vs Europe for example)? What is the cost (equipment, training, HR, on-going) for implementing such a system? Is your product/service even providing the necessary data-points to monitor? Are you breaking any laws, by reporting what you are?

What is a good bank to open an account with in Australia?

Sat, 10 Oct 2015 17:52:44 +0000

Faisal KhanAnswered Oct 10, 2015

Westac is pretty decent. http://www.westpac.com.au

What is David Marcus’s plan for payments across Facebook and Messenger?

Fri, 09 Oct 2015 17:50:59 +0000

Faisal KhanAnswered Oct 9, 2015

Everyone has been asking around... "What's David game plan?" needless to say, very few would actually be privy to it. So, here's my take on where David Marcus plans to go with Facebook and Messenger.

David's origins must not be forgotten, i.e. Zong Payments. He understands the world of payments via mobile very well. His entry into PayPal was also remarkably successful. From what's I've read about him, he seems to be having two traits, which heuristically I will sum up below:

He's all about dividing and prioritizing markets. That is to say, he will not be like another Scott Thompson (Ex-PayPal) and expand into every conceivable market (read: country).
Secondly, he is all about leveraging more revenue per user.

SHORT-TERM GOALS (within 12 months of Launch)

Prediction # 1: Geographic Roll-out

With this in mind, whatever payment solution Messenger rolls-out, you can bet, it will be US first and then add markets like Canada, Australia, NZ, UK, and some countries in Europe (Spain, France, Germany, etc.).

If you are expecting Messenger to expand into China, India, Brazil, Japan, etc., forget it. That will most likely not happen in the initial plans.

David took the same approach in Zong and PayPal and he will probably stick to this strategy, as it a proven strategy and one that is pragmatic.

Prediction # 2: WeChat Wallet Look-a-like

There will be a Messenger Wallet.

There can be no doubt, that the payment mechanism would be a look-a-like of Tencent's WeChat wallet.

The Messenger platform as of today, is being shaped and crafted as an independent app. It was disconnected from the Facebook App (if you are on the mobile, you will notice, that any message you receive on your Facebook App, will now have to be opened in the Messenger app).

The question now arises, what sort of Wallet functionality will it have? David understands the power of micro-payments (from Zong and the gaming platforms, where 100s of Millions of transactions are done). So I think it will be a natural extension of Facebook Credits. Here is what I think will be in the wallet.

Bank and Mobile Carrier agnostic wallet.
Be able to add your cards to the wallet
Credits. You would be able to buy credits (or just US Dollars) loaded and be able to pay for games, etc. on the FB platform.
Online Shopping: You would be able to shop and pay for on any FB hosted shopping store.

Prediction # 3: Person-to-Person Payments

In the initial launch, if you are expecting Person-to-Person payments, I am going to take a big gamble and say it will not be offered in the initial launch.

P2P payments have a whole lot of regulatory, risk, compliance and transaction monitoring and management systems on the back-end. If we get to see a Messenger wallet by Summer 2015, chances are it would not be included.

Prediction # 4 (Bonus): Issuer

The Messenger app would also be issuing a VISA/MasterCard prepaid card (virtual &/or physical).

MEDIUM-TERM GOALS (within 1-2.5 Years of Launch)

Prediction # 1: Person-to-Person Payments with Advance ID

P2P payments will be enabled. This would also include upgraded identity management and verification using biometrics (and biometrics does not necessarily mean fingerprints).

Advance biometrics now include ultra-sound, that can be packed on to a very small footprint and can deliver unique ID features that are perhaps more secure than the fingerprint.

Prediction # 2: Merchant Services

Offering merchant services to all those who host and sell on Facebook Pages. This would be a big blow to companies like Shopify and/or Volusion, etc.

Prediction # 3: Expansion to Developed Markets

Expanding the offering to North America, ANZ Region, Japan, Hong Kong, UK/Ireland, Continental Europe and perhaps South Africa.

Bonus would be Brazil and India.

Prediction # 4: Accepting Bitcoins

The Messenger Wallet would be able to accept/trade Bitcoins.

Prediction # 5: American Express / Western Union Alliance

Chances are the Messenger app would also become an issuer by partnering up with American Express and be able to offer the Amex Blu/Serve Card.

You will also see some kind of a holy alliance with one of the big names in Money Transfers, either with Western Union or Money Gram.

Prediction # 6: Integration with Wallets in China

The Chinese Mobile Wallets cannot be ignored. Messenger will try to integrate with one of the leading wallets in China. This would be the first time a cross-platform wallet integration would be done.

Prediction # 7: Pay with your Phone

For devices equipped with NFC, the Messenger app will allow you to pay at any MasterPass and/or VISA's NFC enabled terminal. Just as Apple Pay will allow you to pay at any NFC enabled terminal.

Payments via QR code (as being done by WeChat) would also be possible. In fact, expect QR code based payments to pick up significantly.

LONG-TERM GOALS (within 3+ Years of Launch)

Prediction # 1: Wallet Agnostic Payments

P2P Payments with any wallet would be possible. Doesn't matter if you don't even have a wallet. Have a phone number? have an email? user some other communication messenger? That's all that the Messenger app would need to be able to send you money.

If you're using say Google Talk, via the Messenger app you would be able to send money across to the other person. The payout mechanism would be plenty.

Facebook already has all the money transmitter licenses in the US and EU (as a PI - Payment Institution). This would enable them to do cross-border money transfers with ease. In doing so, FB would already have had payment network linkages with the vast majority of payment systems in the world.

Prediction # 2: Using rails like Ripple or Stellar

There is no doubt that payment rails like Ripple (payment network) or Stellar (payment protocol) would be something that FB will incorporate. They could even fork and implement something entirely of their own. But a modern payment rails mechanism that has the characteristics of Ripple or Stellar would definitely be implemented.

Prediction #3: Pay with Facebook Messenger

Just as today we are used to logging into 3rd party services using our Facebook credentials...

We would be able to pay using our Facebook Account as well. This would be tokenized, and safe/secure, pretty much as the Apple Pay is today.

These are my main predictions. Its only a matter of time when we will see what comes out of them.

I do believe that Facebook Payments or Messenger Payments will not step into the physical retail space immediately. If they do (directly) that would be a huge surprise. I for one believe that they might partner up with someone in the retail space to accept Messenger payments. But if the phone app includes the NFC payment option (which I am sure it will), then on the retail side, FB will be quite content to be on the pay side of things, rather than the merchant side of things.

For further reading:

What David Marcus jumping ship means for Facebook and the payment's world
Facebook forays into the world of online payments?
What will be Facebook's payment strategy?

Could Apple Pay become a threat to existing payment networks?

Fri, 09 Oct 2015 17:50:56 +0000

Faisal KhanAnswered Oct 9, 2015

Difficult to fathom that happening, but then again, what may be foggy now, could be a clear-cut strategy to drive out traditional payment networks out of business.

In so far as anyone can tell, the payment innovation by Apple is riding on payment rails of existing relationships, albeit in a much more efficient (read: secure) manner.

Assuming everyone has an NFC terminal - great. Now Apple says how would you like to pay at your favorite retailer using our wallet, or our card (call it Apple Card, etc.), the question then comes into play, how do you load money onto an Apple Wallet? If you will attempt to cut-off the card schemes in one go, guess what will they do? They will retaliate the same way. The wallet (which I'm guessing will come and will be in the iTunes app), would be void of any VISA / MasterCard / American Express / Etc. logo'd card.

What will you use then? ACH? Perhaps. What about other markets that do not have ACH, but do attach their credit/debit cards to the iTunes app? How will that work.

I think Apple is going to dance with everyone (at least the big players). Sure, a few smaller players, and maybe a gross or so companies will go out of business, so be it. I think Apple will continue to work with other payment networks, till such a time, they have conclusive, and definitively figured out how to access your bank account (all over the world) to load money onto their own wallet. Once they have figured (or rather implemented) this - only then will they go after the payment networks (if they want to). Its a long envisioned game.

Why do intra-Europe transfers using IBAN sometimes take so long?

Fri, 09 Oct 2015 17:50:54 +0000

Faisal KhanAnswered Oct 9, 2015

Not as trivial as it seems. There are 1000s of banks. All have agreed to a SEPA payments format, good! Now remember all these banks individually have 10,000s of clients. They also need to update their payments system for the SEPA payments format.

The mandatory switch for banks to SEPA payments format was 1 February 2014. However, in order to have all the banks on this, along with their customers, etc. can take time and the cut-off-date is set for 31st October 2016.

The agreement right now is on the SEPA itself and the payments format. European banks have are still free to use their own payment networks on which they can ride these transactions.

Eventually, the payment networks (though SEPA ready) will be formulating a settlement process by which they can route SEPA transactions and adhere to the settlement times as outlined (a process on which work is being done - I believe, I'm not terribly up to date with it).

The the sheer size of the network, the various countries involved, the existing switches in the countries and the tying together of all these components, legislatively, legally, technically and financially, that is taking time.

Would Qiwi be treated as a money-transfer service under U.S. regulations?

Thu, 08 Oct 2015 19:08:32 +0000

Faisal KhanAnswered Oct 8, 2015

This is classified as a Money Transmitter. The owner of the kiosks would either have to get money transmitter licenses or become an agent of one.

Depending on how it is setup, each location where the kiosk is replayed can be treated as a POS location or as a Branch Agent location.

Either way, it is money transmission.

Why are ATM cards standardized to a particular physical size?

Thu, 08 Oct 2015 19:08:31 +0000

Faisal KhanAnswered Oct 8, 2015

Whilst the standard is set globally via ISO/IEC 7810 - the origination of the card size stems from the visiting card and credit cards and the wallets.

See: Faisal Khan's answer to How was the standard size of a credit card or a business card established?

What is the best approach to launching a superior system that combines elements of M-Pesa and Alipay?

Tue, 06 Oct 2015 19:06:27 +0000

Faisal KhanAnswered Oct 6, 2015

Chances are your 100+ Million populated country already has a mobile wallet in play or one is about to roll out.

Even if the above is not an issue, what will be of prime importance is whether you would be able to get a no-objection from the regulator and get licensed to roll-out such a service. Invariably every developing country I know of, has regulations that prevent unlicensed operators or service providers to operate any sort of an open-ended payment system with store-value.

Assuming the above two are non-issues for you, here are some points worthy of consideration:

Distribution Network - You would need access to a very very large distribution network. The distribution layer is what makes all the difference. On-loading/Off-loading of your fiat currency occurs primarily on this layer.
Financial Inclusion - Since you cited developing country, the question that begs to be asked is how many of the adult population is unbanked? If the unbanked figures are huge, you might need to get those figures up (assuming you are not in play with any telco). If you are in play with an MNO, then they would primarily be insisting and setting up their distro network to have more inclusion.
Wallet Acceptance - Will your wallet acceptance be agnostic or tied to a particular MNO/FI? If latter then you would have to build a very strong case for trade-acceptance of your mobile wallet brand amongst the retail level for the wallet to have any traction.
Transaction Set - Your transaction set should always start from the simplex to the complex. Bill Payments, Utility Bills, Mobile Top-ups, and Peer-to-Peer sending/receiving cash rule the transaction lists almost in any mobile wallet economy that you may look at (barring China, because China is indeed a whole different animal). You can opt for more complex transaction sets, but if you don't cover the very basic sets and are not making a killing, something is serious wrong there.
Escrow on Hold - I would hold on the escrow until such time you have ample of traction on your wallet, and are seeing a strong demand for business related transactions (which inherently on a mobile phone carry risk).
Frictionless - Your entire solution should be frictionless. Lots and lots of testing is required. It should not be assumed what works in Kenya, will easily juxtapose to your economy. It might just backfire! The more open your system, you can bet, the more transactions you will have. Keep it bank agnostic. MNO agnostic. Handset agnostic.

How can I get a co-branded prepaid Mastercard, Visa, or PayPal card for my virtual assistants that also promotes my website with my logo?

Tue, 06 Oct 2015 19:06:26 +0000

Faisal KhanAnswered Oct 6, 2015

Not sure where your virtual assistants are, but from the US this is difficult (not impossible, just difficult). Many companies provide such a service, for example Payoneer would do this for you, provided you meet their numbers (most will require you commit to 10,000+ cards).

There are quite a few providers in Europe also, the one that comes to mind is Lamda Card Services (no affiliation).

Even an issuing bank would work with you directly, if you have a good business rating and relationship with them.

Its all about the numbers.

In the U.S., is the mobile payments market being driven more by retailers or by banks?

Sat, 03 Oct 2015 18:57:59 +0000

Faisal KhanAnswered Oct 3, 2015

I don't think the banks are acting as catalysts in the mobile payments space in any manner. Even basic mobile based financial apps are being driven by a missing need in the market by companies, almost never by banks. Think Mint, Yodlee, etc.

Starbucks has a very large active walled garden within which they can promote mobile payments, so in this case, it can be said with some authority that Retailers like Starbucks are driving mobile payments.

On the flip side, companies that specialize in the development and running of payment apps on the mobile, are pushing their products to be adopted mainstream. The move is definitely being fulfilled from those who feel a gap, and then are actually rolling up their sleeves and doing something about that.

Banks require a lot of inertia to be able to venture out in the mobile payments space. The Card Schemes would probably dive in first and then just juxtapose their offering for the acquiring banks to roll out.

I personally think, looking at the landscape right now, distribution and adaptability seems to be the key drivers for those who can push mobile payments in the US. Don't be too surprised if McDonalds were to come up with one.

Are Ripple, Dogecoin, Bitcoin, and similar digital currencies all likely to succeed long term?

Thu, 01 Oct 2015 18:54:40 +0000

Faisal KhanAnswered Oct 1, 2015

As with all things Internet. I think we will see a similar example of how say Mail Clients are used or how Linux has branched out to many flavors. Survivability is a question no doubt. Some crypto currencies may survive, some will transform / mould onto something else and some will just plain fade away into oblivion.

From the crypto-currencies point of view (not just Bitcoins), this is the gestation period where birth to solutions and applications is underway. It is honestly too early to tell. I would cite a parallel example if someone were to say in the early days of Linux is Yggdrasil Linux or Walnut Creek's Slackware distribution of Linux is going to rule the world, etc.

What happened was that we didn't care (at the time) if it was the right solution or not, we just all collectively dove into it. Each sought their own pond to swim in (so to speak).

I think the Bitcoin protocol will prevail, currency (or money) apps developed on top of it - will prevail. Its just too early to tell which ones will survive and dominate in the long run.

Why do banks take time to move payments from one country to another?

Thu, 01 Oct 2015 18:54:39 +0000

Faisal KhanAnswered Oct 1, 2015

Ram Pillai is on the dot! Mostly it is time-zones and the money moving through direct banks or correspondent banks which takes times. Not to mention, most receiving banks like to keep the money a day or two before they hand it over to the client (earn float, cost of funds is near zero!).

You might want to read up on Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

How can banks assist customers in cases of fraudulent debit transactions?

Sat, 12 Sep 2015 18:19:18 +0000

Faisal KhanAnswered Sep 12, 2015

Depending on how the fraud was committed, a bank's ability to help or not is gauged by how much they feel they were involved in the incident. If your credentials were compromised and someone made a debit withdrawal, this is really not the bank's fault. They can certainly assist, once you have lodged a formal police report and have written to them in writing.

Banks don't shy away from such things, but they will try to put the blame on you most of the time (why would a bank want to implicate themselves?).

Always seek legal help and file a police report at the earliest.

In multi-country travel, how are ports of embarkation and disembarkation determined?

Sat, 12 Sep 2015 18:19:14 +0000

Faisal KhanAnswered Sep 12, 2015

Answer depends:

For immigration form purposes, the port of embarkation is the city/country from which you started your journey (so Country A) and your port of disembarkation is Country C where you ended the journey and then Country B and Country A are simply return points.

The reason the answer depends, is how much time do you spend in each country. Transiting points are not included in the Port of Embarkation/Disembarkation.

Can Bitcoin be “printed” the way central banks create more paper currency?

Sat, 12 Sep 2015 17:55:38 +0000

Faisal KhanAnswered Sep 12, 2015

From my understanding the answer would be No. Bitcoin is digital in nature, and its spending and the consensus of the spend in the ledger is digital in nature. If one were to print it out, its validation would be an issue, and would represent a double/triple/multiple spend problems.

If fiat currencies are backed by governments, what underpins Bitcoin’s value without a central authority?

Sat, 12 Sep 2015 17:55:37 +0000

Faisal KhanAnswered Sep 12, 2015

The general consensus. People are willing to price XBT (BTC) against various currencies. The smaller the group, the more wile the price can fluctuate, the larger the group, the less of an individual influence it has (barring trends-based movement).

Its like trading baseball cards, the value is set by people who trade in them. The same can be said of stamp-collectors or coin-collectors. When people are willing to trade using a specific method/medium, the price will automatically come against the currency or commodity pair.

Hence someone must have started BTC-USD rate. Other might have agreed or disagreed with it, moving the price. As more and more buyers and sellers came in the BTC-USD market, the price started reflecting the market buy and sell pricing.

You don't need anyone to back BTC, BTC itself has no value. For it to be backed against any specific currency pair, the market participants set the pricing.

With only one dollar, what realistic online business ideas could potentially grow it to $1,000 in three months?

Fri, 11 Sep 2015 18:19:12 +0000

Faisal KhanAnswered Sep 11, 2015

Garrick Saito wrote this answer a while back. Still very much applicable and doable.

Garrick Saito's answer to If you had nothing more than $1, how would you use it to make $100?

One could easily scale this model if one were creative enough.

Why does Pakistan have relatively few mobile wallets despite high mobile penetration?

Fri, 11 Sep 2015 18:19:11 +0000

Faisal KhanAnswered Sep 11, 2015

Great question!

To answer this, I suggest two reading materials as put out by Karandaaz Pakistan:

Using Mobile Money to Promote Financial Inclusion in Pakistan
Financial Inclusion Insights Survey (a must read report).

Both of these reports give a fantastic insight as to why mobile financial inclusion in Pakistan is lacking and back it up with hard data and questions / answers.

Will remittance fees ever realistically fall to zero?

Fri, 11 Sep 2015 18:19:09 +0000

Faisal KhanAnswered Sep 11, 2015

Most likely not. It might level or bottom-out to a low price or even a flat-fee for some competitive remittance corridors, but zero (in the strictest sense) is unlikely.

Why is financial inclusion still low in Pakistan?

Fri, 11 Sep 2015 18:19:05 +0000

Faisal KhanAnswered Sep 11, 2015

There are many factors that contribute to a low rate of financial inclusion in Pakistan. Our State Bank of Pakistan (central bank/financial regulator) would like us all to believe the number is closer to 23% whilst in reality it is about 10% or so.

One of the contributing factors to low financial inclusion (in my opinion) is women. A majority of the woman still do not own a mobile phone. When you remove the adult working female population from owning a mobile phone, then the next step of possible mobile financial inclusion, is not even a possibility.

Women empowerment on the use of a mobile phone not just for communicating but for transacting and doing commerce is the need of the hour.

Here is a great infographic by Karandaaz Pakistan on the same subject matter:

When tips are added to a card payment at a restaurant, how are they processed after the transaction?

Fri, 11 Sep 2015 18:19:02 +0000

Faisal KhanAnswered Sep 11, 2015

They will process the authorization they got, and add the tip to it. What you are being presented with is usually an authorization and the tip is then added to it and processed.

What regulations must be followed when starting a payments business that uses ACH?

Fri, 11 Sep 2015 18:19:00 +0000

Faisal KhanAnswered Sep 11, 2015

If you want to start a payments business, your first order of the day is to see if you would be regulated or not, i.e. do you need to be registered with FinCEN and then in turn obtain money transmitter licenses in each state or not?

Depending on the type of business you are in and how your funds-flow are structured, you could be on either side of the fence.

For ACH handling, you could go directly with a bank or work with an existing ACH provider, much will rest on your business case and your fund-flow (how you had originally envisioned it, etc.)

If you are to be regulated and require licensing, then you would need to apply for a money transmitter license in each State you want to do business in, the list of States and their financial regulators can be found here: List of Money Transmitter License Regulators

The depending if you really want to go own-your-own-licensing route or not, you may want to consider some of the options you may have (you can read a blog post I wrote, albeit for the money-transfer industry: How Do I Set Up A Remittance Money Transfer Business?)

Depending on how you have decided to go, you would either be given a compliance manual to work with our you would have to develop one. A compliance program would be the key/core ingredient of your business, so spend ample of money, resources and thought into it.

As a payments business you would have to know your legal responsibility for compliance both on a State &/or Federal level. AML/CFT training is highly recommended.

How can you tell whether a money order has already been cashed?

Fri, 11 Sep 2015 18:18:59 +0000

Faisal KhanAnswered Sep 11, 2015

In most cases you cannot (again depends on the bank & country). The money has already been taken out of your account and is now a payable liability on the bank's books. So once a money order is paid, the liability ends on the bank's books.

You most likely will not know when the money order was cashed.

What regulatory changes have limited PreCash Inc’s ability to partner with MSBs after TransferWise?

Fri, 11 Sep 2015 18:18:57 +0000

Faisal KhanAnswered Sep 11, 2015

Anna Tong very thoroughly covers this.

I will just add to it: PreCash's Authorized Delegate contracts essentially came under scrutiny where it was determined by the Texas Department of Banking that PreCash was essentially renting its licenses (something forbidden by the State Regulators).

Back in summer of 2014, PreCash's existing agent contracts were scrutinized by the Department of Banking (Texas) and the three (critical) see below were not being fulfilled:

The Agent on-boards the client on behalf of the principal licensee, i.e.Principal License Holder.
The monetary transaction flow has to be as such, so that all flow of funds have to be through the principal licensee’s bank account(s) and...
The product &/or service that the Agent is marketing or extending out, has to tie-in to the core product &/or service of the principal licensee.

It is point # 3 that is of most importance to the Principal License Holder, as this is what the regulators would be looking for, to establish that if your company (if and when it becomes an agent) is extending the core product/services of Principal License Holder.

Via Supervisory Memorandum 1038, the Department of Banking then made a case that all Authorized Delegate contracts must basically adhere to these rules. This memorandum is essentially at the core of PreCash not onboarding new agents.

The Memorandum can be read here: Page on texas.gov

In reviewing PreCash's various Authorized Delegate contracts, most of them were found to be essentially renting of the money transmitter license. As DOB Texas only has jurisdiction on their own issued license, and not on others, they gave PreCash a notice to align/correct themselves.

In February 2015 PreCash made a decision to exit out of most (all?) Authorized Delegate contracts rather than risk their license being suspended. In doing so, PreCash also made a decision of not to onboard any more new clients.

This action by DOB Texas also did not go unnoticed with the other regulators (as they communicate & share such information amongst themselves), and hence, the snowball effect started.

Many MSBs who hold money transmitter licenses have reexamined their Authorized Delegate contracts. Some of the MSBs have even served notices to their Agents and exited their relations so as not to jeopardize their licenses getting suspended.

Just FYI, TransferWise has also been given a notice to end their Authorized Delegate status, the date of which is not too far away.

Why are there no completely free international money transfer tools?

Fri, 11 Sep 2015 18:18:56 +0000

Faisal KhanAnswered Sep 11, 2015

Despite what you may have heard, money transfer is essentially a banking function, i.e. money resides in banks and is moved by banks. Banks charge for moving money.

However, there have been new providers who are working on solution with Bitcoin transfers (has limited coverage and poses liquidity problems), net-off transfers (like CurrencyFair, Transferwise), etc. which offer P2P payments in most cases where money doesn't have to travel because of equal demand on both side - though it is easier said than done).

Some insightful companies are trying the Human ATM model, where you can transfer funds via Bitcoins and have people on the other way cash them out.

All in all, it cost money to move money and hence no free tool (or service).

Where do currency exchange dealers source their foreign currency inventories?

Fri, 11 Sep 2015 18:18:54 +0000

Faisal KhanAnswered Sep 11, 2015

Money changers can get currencies from two of the following sources (needless to say this answers varies from country to country):

Designated Commercial Bank for each FCY in a particular country. For example in UK, the designated US Currency Bank could be Barclays. Thus Barclays would have an arrangement with the US Banks like Citi or JP Morgan Chase (in the US) to physically take possession of US Dollar notes and have them securely flown into the UK, where they would further be distributed/disbursed.
Central Bank - rather than using a designated currency bank, the central bank could be in-charge of all such physical procurement of foreign currencies.

What does a bank need to offer foreign-currency sub-accounts to customers?

Fri, 11 Sep 2015 18:18:53 +0000

Faisal KhanAnswered Sep 11, 2015

Barring licensing or approval which may be required from the Central Bank/Financial Regulator, what you basically need to do is to simply have a foreign currency account ledger in your CBS. All FCY accounts will be under this ledger.

Depending on who your settlement bank is for the foreign exchange (it could be an FX broker using a local FCY settlement bank, it could be the central bank itself or it could be a designated FCY bank locally), you would need to establish a correspondent relationship with them. This is how all your clearing and settlement will be done, via these banks.

From a technology point of view, you would most likely implement a FX solution in-house for FX handling for your treasury. Companies like Currenex (See: Currenex / Home) or Reuters Eikon is used (See: Forex trading strategies).

Again, if you are licensed to operate FX accounts, you will be able to accept FCY deposits.

The compliance would stem from the Correspondent bank that does FX settlement and clearing for you, along with the house rules as mandated by the central bank/financial regulator.

You do not need to have a bank in the origin country of the foreign exchange for the currencies you have mentioned, HK has plenty of banks designated for this locally.

Which regulations apply when starting a money handling or money transfer business in the US?

Fri, 11 Sep 2015 18:18:51 +0000

Faisal KhanAnswered Sep 11, 2015

To get started in the US for money transfer business, you need to register as an MSB (Money Service Business) with FinCEN (Financial Crimes Enforcement Network). This is just a registration and has some mandatory reporting, etc. associated with it.

Depending on the state you wish to operate, in your FinCEN application you will highlight that. Most application choose all the States. Do note, FinCEN MSB registration does not mean you can start doing business in all the states.

What you need to do then is to apply for a money transmitter license in each and every state your customers will be based out of. So if you're dealing with all 50 States, then you need to apply to all 50 States. A complete list of regulators for all 50 States and additional US Territories is available here: List of Money Transmitter License Regulators.

Each State has its own set of regulation that you would need to comply with, along with Federal guidelines for filing with FinCEN and any further regulations/compliance your BSA institution may ask of you.

Generally, you need to understand what reports you will have to file, and how frequently. Even more closer attention would need to paid on what reporting needs to be done during certain transactions when flags are triggered.

Here is a general audit list of points from which reporting is taken: List of Transaction Data Points for a MSB Audit

Is two-factor authentication via OTP really making internet and mobile banking safer?

Fri, 11 Sep 2015 18:18:50 +0000

Faisal KhanAnswered Sep 11, 2015

Implementing 2FA to a very large degree stems theft/hacking attempts, but it still has its social engineering drawbacks. People are gullible and get fooled easily.

Between single-sign-on and 2FA, 2FA is much much more secure. So yes, it is secure. Not foolproof, but quite secure.

What is the best way to move savings from the US to Pakistan while retaining value in US dollars?

Fri, 11 Sep 2015 18:18:48 +0000

Faisal KhanAnswered Sep 11, 2015

Just open a foreign currency account in Pakistan with the bank of your choice. Once the account has been opened up, transfer the money using wire transfer from the US to your USD Account in Pakistan.

There is no limit as to how much money you can receive. You would however be required by the bank to provide more information on the source of funds (a standard practice on opening accounts and when relatively large inward remittances comes in).

Just as an FYI, if you do not plan on retaining your money here in Pakistan in USD, then you can surrender your USD and obtain the Pakistan Rupee equivalent. The Government of Pakistan provides two benefits to this:

Your money would be 100% tax free (obtain a PRC - Proceeds Realization Certificate from the Bank). That is it. Now NO ONE can question you on how you got the money, or tax it.
This is a volunteer way to make your undeclared income official, i.e. make your money white.

How can I retrieve a 6-digit verification code for an EntroPay card charge when it doesn’t show on my statement?

Fri, 11 Sep 2015 18:18:46 +0000

Faisal KhanAnswered Sep 11, 2015

If you are unable to get it on the statement, your best bet is to call up the call-center and ask from there. Say you need the approval code for this transaction and they should be able to help you out on this.

Which international payment solutions are available for cross-border use?

Fri, 11 Sep 2015 18:18:45 +0000

Faisal KhanAnswered Sep 11, 2015

Have a look at Adyen, they will do what you are looking at, i.e. marketplace payments, on a global scale, whilst still accepting local payment methods.

International Payment Services - Adyen

Refunds will happen mostly on the quoted FX rate for the day if the processor has to buy FX and do the reversal. The loss (if any) for the reversal would be yours to absorb.

What is inward remittance, when is it used, and are certificates issued for past inward remittances?

Fri, 11 Sep 2015 18:18:43 +0000

Faisal KhanAnswered Sep 11, 2015

Remittance is a word that was conjured up and popularized by the World Bank and typically refers to migrant workers sending money back home. Various countries have different meanings for this word. In the enterprise, it means a payments, in South Asia it usually means inward (overseas) wire-transfer.

Inward remittance implies a money transfer into your account was made, i.e. your account got credited. Whether this was a domestic remittance (i.e. money that was sent within the country) or international remittance (i.e. money that was sent from another country), only you would know.

Most bank statements will be able to highlight cross-border money transfer into your account as something like Inward Remittance. Depending on which country you are in, you may/may-not qualify for a separate document as issued by the bank for that remittance. Such documents are usually called proceeds realization (certificate / document) and usually come in play when the foreign exchange has been surrendered and local currency was credited to your account.

What are the most urgent challenges banks are facing today?

Fri, 11 Sep 2015 18:18:42 +0000

Faisal KhanAnswered Sep 11, 2015

Loaded question, and would most likely have many answers. A couple of needs that prop up immediately in my mind are:

Advance KYC (many banks are still struggling with KYC issues). KYC on a global level is still undefined and hence is something that needs advance work. I wrote a blog post on this: Federated Identity Management
The lead times between discussing an idea, and the time it takes to implement it and launch it. Because of the regulatory, IT and internal complexities involved, this is a huge hurdle for banks.
Truly implementing social media signals and metadata into banking today for more 21st century decision on how users interact, communicate and transact.
Global payments (system is still fragmented)
Reinventing themselves in the midst of all the fintech startups that are propping up all over the world, slowly taking a bite of their products/services, one at a time. This is why challenger banks are called challenger. (See: List of UK Challenger Banks)

How can checks be deposited at ATMs regardless of bank branch?

Fri, 11 Sep 2015 18:18:41 +0000

Faisal KhanAnswered Sep 11, 2015

If the ATM has that functionality, sure. You can deposit a check envelope and key in the amounts, etc. It will still be subjected to manual intervention, i.e. it will be scanned again to read LAR/CAR (Legal Amount Recognition / Courtesy Amount Recognition).

Can I open a bank account with U.S. banks while visiting on a B1/B2 visa?

Fri, 11 Sep 2015 17:53:32 +0000

Faisal KhanAnswered Sep 11, 2015

Yes you can. Very easily. The bank will require your passport (with a valid Visa), they might ask for some secondary form of identification (driver's license, other credit cards, etc.) They will ask you for source of funds, and that's about it.

You will need to provide an address (cousin? family member residing in the US? give their address). Whole process takes about an hour.

Is there an AML software product called PRIME?

Thu, 10 Sep 2015 18:18:39 +0000

Faisal KhanAnswered Sep 10, 2015

A quick Google search yielded this:

FIS Prime® Compliance Suite:
FIS | Anti-Money Laundering

Who can assist with launching a prepaid card program?

Thu, 10 Sep 2015 18:18:37 +0000

Faisal KhanAnswered Sep 10, 2015

Quite an open-ended question since you have not cited your country, whether you are looking for a local payment option card or a card-association related card, open or closed loop, etc.

If you are planning to launch an open-loop card, first and foremost check with your financial regulator to learn how open-loop prepaid cards are regulated.

In most cases you would need to work with a bank that is in the card issuance business. If you cannot work with a bank directly (reasons can vary, but would usually stem that you are a startup, etc. and you cannot meet the minimum requirement numbers, etc.) you might want to look around for a company that specializes in prepaid card business and contact them to issue you the cards.

If your question is asking about marketing efforts on the launch of the card, then needless to say, ignore all what has been written above.

Do ATM withdrawals appear on bank account statements?

Thu, 10 Sep 2015 18:18:36 +0000

Faisal KhanAnswered Sep 10, 2015

Yes.

By law, every transaction that touches your account and results in a Debit or a Credit has to show up in your bank statement.

In most countries now, the withdrawal amount would be a separate entry from the ATM fees (if applicable). So both entries would show.

How can someone start an ecommerce business in the UAE, and is company registration required?

Thu, 10 Sep 2015 18:18:35 +0000

Faisal KhanAnswered Sep 10, 2015

To do business in UAE you would definitely need to be registered. UAE law says that even financial brokers or trading intermediaries need to be registered, so if you were operating say just an affiliate website and earning income in UAE, you would need to be registered as a company.

So, yes, company registration is required. Where you decide to incorporate is something you would need to discuss internally and then settle on which Emirate is best suited for your registration and within the Emirate itself, if they have regular incorporation, free-zone, etc.

What is generally the cheapest way to transfer money internationally?

Thu, 10 Sep 2015 18:18:33 +0000

Faisal KhanAnswered Sep 10, 2015

This depends from which country to which country you are sending it, and how much.

If the payment is large enough (commercial payment), you can get a good rate from your bank or many FX providers who would be willing to handle the transaction for you (provided they operate in the corridor to which you are sending money).

If the payment is a remittance/p2p payment, you might start off with comparison sites like Monito.com, etc. and see what sort of rates and fees are being offered.

Try to find out who the most popular company is for that specific corridor that offers the most exemplary service.

You might have to do a wee bit of research.

Can banks legally charge late fees in addition to interest on overdue payments?

Thu, 10 Sep 2015 18:18:32 +0000

Faisal KhanAnswered Sep 10, 2015

They can/cannot - depending on the market in which they operate and the regulator.

Banks publish something called a Schedule of Charges - these are the charges they can levy to their customers. Check with your bank and ask for this. All charges that banks charge you, have to be published.

A Schedule of Charges will let you know if they can charge a fee in addition to the interest for late payments (most do, citing it as administrative fees).

Are bank consultants allowed to advise clients by analyzing transaction patterns in their accounts?

Thu, 10 Sep 2015 18:18:30 +0000

Faisal KhanAnswered Sep 10, 2015

A consultant can really do whatever they want, however, many countries do regulate on who can dispense financial advice on a professional basis.

Investment advice is more regulated. However, what you cite above, can be done, if a consultant is in this business.

What alternatives exist to 2Checkout for Pakistani ecommerce businesses facing high cross-border fees?

Thu, 10 Sep 2015 18:18:29 +0000

Faisal KhanAnswered Sep 10, 2015

Not many. But when you factor in the have versus the have-not, even costly makes sense. Paying near 5% for 3rd party processing where you are not being underwritten, etc. is not a bad number. Try getting it from the local merchant account providers and then you will find out, the differential is marginal. The conversion part, 2CO has no say in it, it is the correspondent banks and your local bank's conversion rates that make the currency cut as is.

But it you treat this as an incoming remittance and obtain a PRC (Proceeds Realization Certificate) on it, the income is tax free, so even a 7% conversion is worth it.

Which types of financial transactions feel most personally rewarding or satisfying?

Thu, 10 Sep 2015 17:52:42 +0000

Faisal KhanAnswered Sep 10, 2015

Direct Account Credit. Love it.

Why are global banks hesitant to accept U.S. citizens or residents as clients, even when they fully comply with IRS reporting?

Thu, 10 Sep 2015 17:52:41 +0000

Faisal KhanAnswered Sep 10, 2015

It is the cost of compliance that is huge. Even if compliant then there is always the continued issue of keep in up with the regulations and reporting which is an added burden.

It is then becomes a question of is it worth it? Most banks unilaterally agree it is not worth the effort and simply deny banking facilities to US citizens.

What are the key similarities and differences between commercial banks and microfinance institutions?

Wed, 09 Sep 2015 18:18:27 +0000

Faisal KhanAnswered Sep 9, 2015

The similarities and difference vary from country to country. Commercial, Investment and Transaction banking services are not allowed to micro finance institutions.

In many cases, foreign exchange accounts and forex settlement accounts are also not handled by MFIs, rather they have a bank account for forex settlement with a larger commercial bank.

I many cases rolling out traditional acquiring services is not allowed to MFIs. In some countries, card issuance from the more recognized card schemes is also restricted.

Almost all MFI accounts have operating limits.

Does PayPal operate a single large bank account to manage all user deposits and withdrawals?

Wed, 09 Sep 2015 18:18:26 +0000

Faisal KhanAnswered Sep 9, 2015

No. PayPal has various accounts for various products, and each account holder is a sub-account (FBO) as such.

PayPal does pool all their user funds into specialized accounts, but they do not and cannot by law commingle their operation account with the user's money (that are pooled).

Take a look at this answer to learn more: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

How did PayPal handle regulatory and financial scrutiny in its early years?

Wed, 09 Sep 2015 18:18:24 +0000

Faisal KhanAnswered Sep 9, 2015

PayPal is still not licensed as a Bank or a Financial Institution (in the US and many other territories they operate in).

PayPal was classified as a closed-loop merchant processor in the initial days. Even today, all the money PayPal has is not with them, but with the designated bank(s) that they work with. PayPal is not a bank hence cannot collect to keep deposits to itself. It uses various banks that provide this functionality, and this has been true since day one.

Is it possible to link a Meezan Bank account with PayPal?

Wed, 09 Sep 2015 18:18:23 +0000

Faisal KhanAnswered Sep 9, 2015

At present, no. Pakistan is not supported, nor connected to the PayPal system/network.

How long do wire transfers sent from Dubai typically take to reach banks in Spain?

Wed, 09 Sep 2015 18:18:21 +0000

Faisal KhanAnswered Sep 9, 2015

If the transfer is being done via SWIFT, about a 1.5 days on average (in some cases even same day). It just depends on the correspondent banks being used.

If you haven't been able to trace your wire in 2-3 days, ask the sending party to provide you with a SWIFT MT103 message format and present this to your receiving bank to trace the wire. Chances are the banks are just sitting on the money.

If I want to aggregate payments for many vendors, how could I profit by running my own payment gateway without third parties?

Wed, 09 Sep 2015 18:18:20 +0000

Faisal KhanAnswered Sep 9, 2015

If you don't want to go to a 3rd party, you can become a financial intermediary for these transactions, by being a processor yourself. This varies from country to country, but in most cases you would become a principal member of VISA/MasterCard and then associate yourself with an acquiring bank to handle your acquiring & processing business.

Though I have phrased it very casually here, there is much more involved in becoming a processor. There is a good primer on all the facets of becoming a processor as published by WePay: Page on wepay.com

Do issuing banks ever outsource credit card sales in exchange for a share of recurring revenues?

Wed, 09 Sep 2015 18:18:18 +0000

Faisal KhanAnswered Sep 9, 2015

The ISO (Independent Sales Organization) program does just that. In very few cases would the issuing bank agree on affiliate income for the outsourced party for the life of the customer, typically, CC signups earn a one-time fees.

How does Western Union track money flows and ensure funds reach the right destination?

Wed, 09 Sep 2015 18:18:17 +0000

Faisal KhanAnswered Sep 9, 2015

Western Union use its own equivalent of a core banking software (to phrase it simply). Every agent is a node on the WU network and WU keeps track of payments via its ledger positions that each agent (or bank) has with WU. Because there is no credit extended, it is all good-funds till settled model. WU knows precisely where the money is who is being paid, where and when, and how much agent balances are.

How does China UnionPay operate as a payment network?

Wed, 09 Sep 2015 18:18:15 +0000

Faisal KhanAnswered Sep 9, 2015

China Union Pay (CUP) has no different of a flow for processing and settling payments than say Visa or Mastercard. Their may be certain nuances that are handled differently, but all in all, the process is the same (substitute Visa/Mastercard below with CUP):

Settlements are done by the designated CUP assigned settlement bank, which is usually on a batch-processing basis, except cash advances.

Is it possible to send or receive money using smartwatches?

Wed, 09 Sep 2015 18:18:14 +0000

Faisal KhanAnswered Sep 9, 2015

Yes. Possible as digital money. Will it prove something that would work or be practical as we progress along, don't know.

A watch is just a device, so sending money (or payments) through it, is not that big of an issue.

What would happen if Western Union started operating as a Bitcoin exchange?

Wed, 09 Sep 2015 17:50:53 +0000

Faisal KhanAnswered Sep 9, 2015

Why would they? Western Union is in the business of moving money, not of becoming an exchange. An exchange does not move money, unless you make the effort of moving money in/out from the exchange or move your bitcoins in/out from the exchange.

I doubt their business would increase by being just an exchange, they could however benefit from the transfers of Bitcoins in/out from their retail locations, however, that would be far fetched as they are not licensed to do this, nor are the laws clear about it.

WU does have a digital unit, and its struggling. WU's traditional remittances have been on a climb, but their stock has been taking a hammering for the past 5 years (down 14% over the last 5 years, whilst S&P 500 has climbed 88%)

The digital unit was to achieve US$ 500 Million in revenue, but struggled to do so $200 Million and is being investigated by the SEC.

WU has a pre-fund model, so even by adopting more powerful payment rails like Stella or Ripple, they will just decrease the requirement for liquidity (which is provided by Agents anyways), but it won't do them much good.

Internet based sale, pre-paid cards and other competitors have been aiming to hit WU where it hurts (traditional remittances), but the company still has the lion's share of remittances (of the $400 Billion moved last year, WU did 20% of that, amounting to $82 Billion in over 259 Million transactions). This yields an average transaction price of: $316.00

In the instant transaction space, WU is king and will remain so for a while because of their brand. WU's new CFO Raj Agrawal is all poised to make sure WU is not left standing because of complacency and embraces the digital alternatives, channels and rails for its money-moving business.

If WU were to have an exchange themselves, they would have it predominantly for purposes of access to liquidity, nothing more.

Source: Western Union Probed by SEC Over Digital Revenue Reports

What must an African company do to start a money-transfer business from the U.S. to their African country?

Tue, 08 Sep 2015 19:08:30 +0000

Faisal KhanAnswered Sep 8, 2015

Well for starters you would need to get a license in your own country for being a licensed money transfer operator (MTO). This may/may-not be an easy feat depending on the regulatory process, bureaucratic hurdles and just the over all way things are done in your country. Almost universally, it is never allotted in the time-frame the regulator/government would cite. Multiple the time-frame given by x2 or even x4 to get a realistic date.

If you do not want to go the MTO route yourself, you can partner up with an existing licensed MTO or a Bank. Banks generally are exempt from obtaining a separate MTO license. Once you have a relationship with either the MTO or the Bank, you are then in a position to talk to a licensed money transmitter in the US.

Depending on which country in Africa you are originating/based-in, the results can be mixed. Many money transmitters may decide to talk to you, many may not. It all depends on your approach, your business model, your know-how of the business, and your value proposition.

For the last couple of years, the US money transmitters have been very cautious as to whom they do business with. Many of them are scaling back operations from high-risk countries or from international corridors all together. This can be a damper, but don't lose hope. If you know where to look, you will find them.

The association you will have is either a Correspondent one or as an Agent of the licensed money transmitter. Depending on how your structure your entire deal, how customers would be on-boarded, how/who will do the processing, etc. the outcome can suddenly change from being extremely positive to No thanks, we cannot work with you. The reverse is also true.

The money transfer business is all about understanding the AML/KYC requirements, the regulatory compliance issues, the flow of funds and minimizing risk. Systems, procedures and human resources make it happen. If you lack in a certain area, that would pretty much kill the deal.

How can I obtain a letter of credit?

Tue, 08 Sep 2015 19:08:29 +0000

Faisal KhanAnswered Sep 8, 2015

Your bank. Specifically their international trade department.

Should coins be phased out as legal tender?

Mon, 07 Sep 2015 19:07:23 +0000

Faisal KhanAnswered Sep 7, 2015

They should be. Coins are expensive to make, transport, distribute, collect. Millions of them get lost every year. However, before one can casually make a statement of discarding them, one has to look at the industry:

How many coins in circulation?
How often are they used in case payments?
How often are they used elsewhere (think Buses, Trains, Bubble Gum machines, Vending Machines, Laundromat, etc.)

How will the ecosystem that currently uses coins, handle the transition?

I, for one would like coins to be eliminated.

Belarus has no coins. They never issued them. (Source: Belarusian ruble)
Moldova stopped minting coins, they are there in circulation, but are rarely seen. (Source: Moldovan leu)
Laos, where coins were last minted & issued in 1952 (Source: Lao kip)

Why are there still no major, large-scale Bitcoin exchanges based in the United States?

Sun, 06 Sep 2015 19:06:25 +0000

Faisal KhanAnswered Sep 6, 2015

At present there is only one licensed Bitcoin exchange in the US, and that is CoinX. That exchange is owned by User.

Though their are exchanges in the US, they do not have a money transmitter license as required by the States (the ones that require it). Most have never even filed an application for a Money Transmitter let alone receive one.

Mere FinCEN registration does not imply that you are compliant on the State level.

Am not sure when CoinX would come out of its Beta and go live, but if one were to follow up the licenses for MSB in each State, their name props up in quite a few States.

I've been researching this area for a while, and no other exchange has a license. They may have a license in a single state, but to be fully compliant you would need licenses in 50 States. Even the likes of Circle, Coinbase, Kraken do not have an MSB (to the best of my knowledge and research).

The regulatory part makes it so difficult to set an exchange up in the US, then there is the issue of finding banks to work with you. Most people have decided to simple take their exchange off-shore and operate from there, less hassle, less regulatory hurdles.

How can I obtain a banking license in Pakistan?

Sun, 06 Sep 2015 19:06:23 +0000

Faisal KhanAnswered Sep 6, 2015

At present you cannot. No more banking licenses are being issued. The only way to acquire one currently is to buy out an existing bank.

However, the body that governs the issuance of Banking licenses in Pakistan is the State Bank of Pakistan. You would need to submit an application to SBP. Depending on the type of banking license you are applying for (regular commercial banking license or microfinance bank license), you would most likely be referred to either Banking Policy & Regulation Department (BPRD) or Agriculture Credit & Microfinance Department.

When did Visa become a publicly traded company?

Sat, 05 Sep 2015 19:04:39 +0000

Faisal KhanAnswered Sep 5, 2015

18th March 2008.

As per Wikipedia:

On October 3, 2007, Visa completed its corporate restructuring with the formation of Visa Inc. The new company was the first step towards Visa's IPO.[28] The second step came on November 9, 2007, when the new Visa Inc. submitted its $10 billion IPO filing with the U.S. Securities and Exchange Commission (SEC).[29] On February 25, 2008, Visa announced it would go ahead with an IPO of half its shares.[30] The IPO took place on March 18, 2008. Visa sold 406 million shares at US$44 per share ($2 above the high end of the expected $37–42 pricing range), raising US$17.9 billion in the largest initial public offering in U.S. history.[31] On March 20, 2008, the IPO underwriters (including JP Morgan, Goldman Sachs & Co., Banc of America Securities LLC, Citi, HSBC, Merrill Lynch & Co., UBS Investment Bank and Wachovia Securities) exercised their over-allotment option, purchasing an additional 40.6 million shares, bringing Visa's total IPO share count to 446.6 million, and bringing the total proceeds to US$19.1 billion.[32] Visa now trades under the ticker symbol "V" on the New York Stock Exchange.[33]

Source: Visa Inc.

What are the names of national currencies used in different countries?

Sat, 05 Sep 2015 19:04:38 +0000

Faisal KhanAnswered Sep 5, 2015

List of all the World Countries and their currencies: List of currencies of the world, list of world currencies, currencies by countries

What business or startup ideas have clear, immediate potential in the Pakistani market, even if they are not tech-focused?

Fri, 04 Sep 2015 19:03:26 +0000

Faisal KhanAnswered Sep 4, 2015

Well designed and well run Temp/Co-working Space (believe me, there isn't anything well-designed) like those in the West, prevalent here in Pakistan for examples, see the properties listed by 42Floors (http://42floors.com/) - Select Coworking.

If 42 Floors seems too upscale, then check out this. Even in far-east in places like Chiang Mai, the co-working spaces are beautiful: http://www.punspace.com/gallery/.

They are economical, extremely well-kept/cool, foster a great atmosphere, etc. See this one as well: https://www.facebook.com/info.gurubox

The most important thing is to have some form of a screening process in Pakistan. Allowing some person with a laptop who has extremely bad body odor and don't do justice to the environment should just plainly be discouraged. As racist as this sounds, this has to be done. Else, you'd end up with the place that would be thriving for all things, other than work.

You need a well-designed space, especially cooling, internet Wifi (think commercial APs with beam flexing technology), proper UPS based power and cabling, bathrooms that would put a lot many hotel bathrooms to shame, separate for his/hers, lockers, showers, bike racks, kitchen, and a nice cafe. NFC based access, 24/7.

The goal is to promote a place people can call their office or temp office or a place where they can go and get work done. It has to foster a great like-minded environment.

With a very large population swath, you just cannot go wrong. If you're going to build it, build it right, or not at all.

How many people in Pakistan are using Bitcoin?

Fri, 04 Sep 2015 19:03:25 +0000

Faisal KhanAnswered Sep 4, 2015

Hard to put a number on it. I would assume the number is small, perhaps under a 1,000 (and I'm being generous here). I know about 10-12 people that do have a Bitcoin Wallet and have traded bitcoins, etc. but I am sure there are a lot of people out there with wallets.

It's impossible to tell really.

How can you verify whether a Western Union tracking number is valid, and what does one look like?

Thu, 03 Sep 2015 18:18:11 +0000

Faisal KhanAnswered Sep 3, 2015

Easy way to check if a tracking number is legit is to have it checked online. Enter the 10 digit number and you will know if it was a genuine number or not.

Is it especially beneficial for low-income individuals to have bank accounts, and if so, why?

Wed, 02 Sep 2015 18:56:49 +0000

Faisal KhanAnswered Sep 2, 2015

Asking people with low incomes to have a bank account in this day and age is asking people to invest in a landline.

The banking system in general is in the midst of a disruption as well as moulding into something new.

To put it into perspective, what email did to fax, or mobile phone to landline, the same is being done by mobile wallets to bank accounts*.

Present day, a mobile wallet bank account is perhaps the most perfectly designed solution for people with low income. These people can get all their banking needs via a mobile (branchless) bank, i.e. a mobile wallet.

Most of them would never qualify for loans or credit cards and most don't want to go that route, for fear of being entrapped into debt. Banks are now building their products around the mobile wallet to serve these people than the traditional bank account.

*Though technically speaking a mobile wallet is a bank account.

Why does Bitcoin’s price volatility seem to be decreasing (as observed around January 2014)?

Tue, 01 Sep 2015 18:54:37 +0000

Faisal KhanAnswered Sep 1, 2015

Its primarily due to China's central bank clamping down on Bitcoin investment and trading from within China. This was successively followed by many other countries, especially India which a lot of people saw as the next catalyst for Bitcoin trading.

Bitcoin price halves as China clampdown escalates
Bitcoin crashes 20% on China clampdown fears
RBI advisory puts brakes on bitcoin train in India - The Times of India

Because the speculative elements have been removed (for now), the extremes in volatility have been dampened somewhat, but have no doubt, they have not disappeared.

The BRIC countries (Brazil, Russia, India and China) along with the MINT Countries (Mexico, Indonesia, Nigeria and Turkey) would combine have a lot of speculative interest and movement of Bitcoin price. However, because of the not-so-easy way to Buy/Sell Bitcoins, the volatility has been reduced.

Overall this is a good thing for Bitcoin, as volatility is something that is really not needed and is a by-product of speculators in play.

Most analysts predict that there is still plenty of volatility in Bitcoin as people will find a way (especially from India and China) to funnel their money onto Bitcoin exchanges and speculate, add to this, the media frenzy that will follow.

Eventually (perhaps a year or so down the line), this should dampen down and the volatility would be reduced to a few ticks up and down, but nothing like the wild swings we saw.

Having said that, the thing with Bitcoin is - all bets are off, one really cannot predict with any accuracy how it will behave in the short of near long run as far as high/low movements are concerned.

Are self-service kiosks for payments and bill payments a viable future solution for developing countries and startups?

Wed, 12 Aug 2015 18:17:45 +0000

Faisal KhanAnswered Aug 12, 2015

Great answers and points by others, I would like to contribute the following to what has already been said.

Kiosks are a tricky play when it comes to developing countries. Most developing countries prefer that non-cash based kiosk facilities are provided (due to AML/KYC concerns). If cash kiosks are provided for, then best to use them for a KYC'd transaction only (like paying a bill, etc.), but money transfer is discouraged via kiosks.

Kiosks themselves are expensive when it comes to importing these into developing countries, as most countries have heavy customs taxes and levies on imports of machinery that would eventually be classified for financial usage. This is where local OEMs might have an edge.

In addition to this, some developed countries and developing countries regulate this business, by ensuring money transmission licensing (or its local equivalent) is present.

Depending on the nature of the transaction set, banks may not be willing to take your business for the cash you accumulate, again KYC/AML concerns come to mind.

Above all, there is intense competition from the mobile payments sector. With the ever expanding mobile wallets, today, one can literally pay bill or pay anyone using their featured phone (let alone a smart phone), so the need for a kiosk diminishes.

In addition to this, cardless and card based transactions at participating ATMs also allow bill payments in many countries. A tad bit tedious, but it works.

Ideal points for kiosks require a lot of research, understanding the population density in the area, the daily walk-by's, the likelihood of transactions that will take place and the average value of the transactions. The placements can vary from malls to factories, it all depends if there is a problem (read: need) that needs solving.

Power, connectivity, maintenance, servicing, cash management, rental, defacement threats and breakages, etc. all need to be taken into consideration. In some jurisdictions, a license may be required from the telecom operator &/or the banking operator to be able to offer such kiosk placements and services.

Research well before you dive into it.

Why might a bank close a customer’s account without providing a clear explanation?

Wed, 12 Aug 2015 18:17:44 +0000

Faisal KhanAnswered Aug 12, 2015

Banks cannot close your account without telling you. Legally, they have to let you know that your account is being closed down. Whether or not they give you a reason for doing so, depends. In some cases they do let you know, in most cases they don't.

As the reasons can vary, it is almost impossible to let you know what they could be, you could be a high-risk client for them? The bank could have been alerted or pressured by some external regulator or agency to close down your account? Your account activities are suspicious and they have not received a satisfactory answer from you and hence seek closure, etc.

Very difficult to guess this.

What are the benefits of KYC requirements for banks, and how do they help prevent money laundering?

Wed, 12 Aug 2015 18:17:42 +0000

Faisal KhanAnswered Aug 12, 2015

Cash is strictly an anonymous medium of exchange, however, this changes when cash is deposited into a bank and then this electronic money is moved.

The whole idea behind Money Laundering is to move money in any which way you can so that bad money (money earned from illegal or undeclared means) is turned into legal (or 'white') money.

There are many ways of doing this, and equally many ways of getting caught.

When AML software is used for profiling people and detecting patterns or finding linkages between transaction, identity is one of the most important aspect. Hence Knowing Your Customer is extremely crucial.

Is the Customer genuine?
Has the Customer's identity been stolen?
Does the Customer know (willingly) that their ID has been stolen and is being used for money laundering?
Is the Customer a victim in money laundering?
Is the Customer a willful player in laundering money?
Is the Customer oblivious to the transactions that are involved in laundering of money?
Do the Customer credentials match with records elsewhere?
How confident is the on-boarding FI/Bank on the KYC of the Customer?
How confident is the off-boarding FI/Bank on the KYC of the Customer that initiated the transaction?
What are the KYC of the people(s) who transacted with the suspected KYC customer?

Questions like these mentioned above, along with 100s of many more, help detect and then mitigate money laundering efforts.

You can detect and stop money laundering, but then, who is the person who is doing this is what the LEAs are most interested in.

Banks place limits on everything based on the information they have on file about a client. Sometimes basic KYC information collected is not enough, and hence more information may be required.

Criminals will always try to hack the system by testing it with various scenarios and KYC plays a central role in this. Thus, KYC is an extremely crucial element in the equation of anti-money laundering.

What does a typical ACH payment acceptance flow look like end to end?

Wed, 12 Aug 2015 17:55:35 +0000

Faisal KhanAnswered Aug 12, 2015

This what a typical time-motion diagram for ACH looks like.

For data fields etc see this answer and the links within it: How does an automated clearing house (ACH) work? How does it process payments, and how is it different from RTGS (which are used to process low-volume, high-value transactions), or other localized financial networks and switches?

Can Bitcoin indirectly strengthen the U.S. dollar’s global status?

Wed, 12 Aug 2015 17:55:33 +0000

Faisal KhanAnswered Aug 12, 2015

No. We cannot make this statement in any manner. There is no significant data to suggest so.

Is knowing someone’s bank account number alone enough to withdraw money from a US bank account?

Tue, 11 Aug 2015 18:17:40 +0000

Faisal KhanAnswered Aug 11, 2015

For an ACH pull to occur, the payment provider &/or the bank will most likely seek information from you (as the miscreant) asking you to show the authorization you have received from the account holder. Without that, they will not allow ACH, and besides you have 180 days to have the transaction reversed.

Is there a truly universal ATM card that works for cash withdrawals at all banks worldwide?

Tue, 11 Aug 2015 18:17:39 +0000

Faisal KhanAnswered Aug 11, 2015

Nope. VISA/Mastercard logo issued are the most widely accepted, but there ins't a general card that is accepted everywhere. You'd need to access an ATM that has access to the VISA/MasterCard network to work internationally.

Do central banking conspiracy theories have any factual basis, and why or why not?

Tue, 11 Aug 2015 18:17:35 +0000

Faisal KhanAnswered Aug 11, 2015

It is a conspiracy theory only if you don't understand the system and how it works. If you read up on banking along with history, you will see there is nothing hidden. Everyone knows how the whole central bank (which is a banking cartel) works. Just you and and I can't seem to do anything about it (oh and by the way, neither can the government. Actually they can, but that would put the entire world's financial system into a spin).

Can a merchant effectively operate as a payment service provider on top of PayPal?

Mon, 10 Aug 2015 17:52:40 +0000

Faisal KhanAnswered Aug 10, 2015

No. Currently PayPal does not have such a plan, where by a middle party can assign sub-merchants to accept PayPal payments as an aggregator.

What challenges do companies face when paying employees, partners, or affiliates in cash?

Mon, 10 Aug 2015 17:52:38 +0000

Faisal KhanAnswered Aug 10, 2015

I can immediately think of three challenges:

COC KYC - Cash Over Counter - Know Your Customer.
Distribution Points from where money can be picked up, the more distribution points the better. Distribution also comes with price. Paying out in cash has a cost associated with it.
Reporting. Within the US, there is very strict reporting for Cash. It increases the burden in compliance and risk management.

Bonus:

Your employees, partners or affiliates, may not want to be paid in cash.

How can someone obtain and distribute Visa or Mastercard prepaid debit cards in an African country?

Mon, 10 Aug 2015 17:52:37 +0000

Faisal KhanAnswered Aug 10, 2015

To distribute VISA/MasterCard prepaid products in a specific African country, you need to work with an issuing bank in the region. Period.

Anyone who tries to tell you that you can get VISA/MasterCard prepaid cards (physical &/or virtual) from other territories via other suppliers essentially is by passing the card scheme rules from where they are being issued, card schemes rules for the African country in questions as well as (possibly?) the financial regulator.

Are there API options for recurring payments for Israeli companies besides PayPal?

Mon, 10 Aug 2015 17:52:35 +0000

Faisal KhanAnswered Aug 10, 2015

Have you looked into Tipalti? Mass Payouts Provider | Global Affiliate and Publisher Payments | Tipalti.com

What are the possible applications and use cases of Hyperledger?

Mon, 10 Aug 2015 17:52:33 +0000

Faisal KhanAnswered Aug 10, 2015

What I like about Hyperledger is that it is almost an out-of-the-box solution that I can deploy. Though it does not have the exchange function element I had talked about, it is nonetheless a great ledger system.

For private equity firms or private investment firms this is a great tool for presenting investors with investment units to buy.

Equities market is another possible area. For example Berkshire Hathaway stock is way too expensive for anyone to buy. However fractional ownership of the stock is very much possible. A mixed basket of different equities is a great way to use Hyperledger. Think of it as a small closed-ended Mutual Fund that you operate.

Meher Roy has also been working on Hyperledger, and one of the possible usage he is studying is the ability to use it for RTGS (Real-time Gross Settlement System).

For crowd-funded investments, this makes a perfect system, and even more so for a closed-loop coin (or stored value) system.

In online payments, what does tokenization mean?

Sun, 09 Aug 2015 17:50:51 +0000

Faisal KhanAnswered Aug 9, 2015

In the simplest of words... its mapping of your credit card data to something (again data) that if it falls in to the wrong hands, it would make no sense or cannot be used again.

Let's look at your credit card data:

Card Number: 1234-4444-5555-6666
Expiration Date: 12/2018
Name on Card: JOHN DOE
CVV Code: 573

Now lets us assume, we generate a token for it.

For this, we need to go to our Token Master:

The Token Master would take our cardholder data and issue us a token.

It would be something like (and we are just making this up): 4743987559865367

All these tokens and their mapping to the card numbers are kept in this super-super secure vault, to which only the Token Master has access to.

Now this is a unique one-time only number. (We'll come to the one-time only later on).

So you go to a store, to pay, instead of passing your credit card data, you provide this token. The store takes this token and passes to the Token Master who approves it - i.e. it is genuine and not been used and in conjunction with the issuing bank will provide the payment gateway an approval for the transaction.

The Merchant does not get to see the detokenized data. If someone were somehow to get a hold of the detokenized data it would mean gibberish - this is gibberish: 4743987559865367

If someone tried to re-use the token again, when you take it to the Token Master, they will check in the safe and it will be shown as already being used and invalid, so it is useless.

By having a secure mechanism to map the cardholder data and make it a one-time use token only, the entire payments ecosystem can benefit greatly from it as it eliminates fraud.

Here is the Mobile NFS at POS Flow Diagram:

Source: Page 67 of the EMVCo Standards: EMVCo

What is 3D Secure, how does it protect transactions, can it increase checkout drop-offs, and are there alternatives?

Sun, 09 Aug 2015 17:50:49 +0000

Faisal KhanAnswered Aug 9, 2015

3D-Secure is an added security layer provided by MasterCard (SecureCode) and VISA (Verified by VISA) that essentially provide a security similar to Chip +PIN.

In simple words, it is a condom for card-not-present payments. Extra protection!

Because credit card credentials can be stolen (when paying for goods) or via compromised computer, having an added layer of security can make the difference between fraudulent and non-fraudulent transactions.

For example with SecureCode by MasterCard, when you are taken to the checkout page, you will see something like this:

It will ask you to enter the registered information when you had registered your card with MasterCard.

So what does registration imply? Registration would imply that you go to a website (typically of your issuing bank, the bank that issued you the card) and they will ask a lot of information about your card details. Your Data of Birth, your Social Security Number or ID Card Number, your Billing Address, your ATM PIN, etc. once all this is done, you will be asked to register (i.e. choose a code).

Let us assume your code is 784945. Now this is your MasterCard SecureCode.

Now, lets play out a scenario, you go out to the gas station, you fill gas in your car and hand over the card to the attendant to pay for it. Unbeknownst to you, they very quickly take a front/back picture of your card. Because it is night, they as you for your ID, which you gladly present, they look at it, and again, not knowing, they are recording every information as being shown on the ID, via a small camera in their breast pocket (of which you have no clue, or are oblivious).

Congratulations. Your card is now compromised. Now the person knows of your Name, Address, Date of Birth, Card Number, Expiry Date, CVV Code, etc.

If they now try using this card online, where there isn't any 3D Secure technology, guess what? It will most likely go through and you'll be hit with a fraudulent transaction.

On the other hand if they use this on a site that used 3D-Secure - despite having all the credentials, they do not have your SecureCode.... that is 784945 is what they need to complete the transaction. It wan't on your credit card when you paid, and certainly wasn't on your license.

Gladly, with websites using 3D-Secure, your card cannot be abused.

RB Bank does a really go job of explaining how the enrollment process at MasterCard SecureCode works: Registration Demo Step 1 of 4

Every time you shop a website that uses a processor that has implemented 3D Secure, you will see something like above.

By implementing 3D-Secure - you, the merchant can reduce liability. In this case, let us assume you sold iPhone and someone used a stolen credit card to purchase a phone, you'd sell it. A few days later you'd be hit with an cardholder unauthorized charge. Guess who will pay for this phone? You (the merchant!) will.
Flip the same scenario, with the different being, this time the merchant has implemented 3D-Secure. Guess who gets hit with the cardholder unauthorized charge? Not you! The issuing bank will now be responsible for the chargeback due to fraud. The financial liability shifts from the merchant to the issuing bank.

3D-Secure is a proven technology to combat fraud (though this itself is now debatable). However, this does not mean that the merchant can now get away with fraud themselves. If a customer denies receipt of goods, or is not happy with the goods received, 3D-Secure will not cover this, and a reversal/chargeback can be performed.

Overall, it adds the added layer of security that merchants gladly implement, because it shifts the liability from them to the issuing bank that the payment instrument is not compromised.

There have been many studies with respect to the bounce rates, etc. But if your business is a high-risk business or one where fraud is high, you might want to opt for 3D-Secure versus non #D-Secure.

Overall, it does introduce a step that no one likes, but it is a one-time registration.

What advantages does Stellar offer compared with Ripple?

Sat, 08 Aug 2015 19:08:27 +0000

Faisal KhanAnswered Aug 8, 2015

I'm not sure if they have an advantage per se. In the end, a number of great products don't see the light of the day, due to the adoption element. Could Stellar be one of them? Who knows. Only time will tell.

Each crypto-currency/alternative-currency solution has its own plus/minus points. Many financial & payment institutions especially money transfer companies are eagerly looking at signs and the chatter to see which horse is going to win.

Many are betting on Bitcoin, but it has its set of challenges.

Ripple has a head-start and is implementing its solution with businesses that matter.

Stellar too will have its own sets of challenges. Does it have an advantage over Ripple? Technically? Maybe? But what will matter is how many accounts the Stellar team can win and how these conversions will further propel the adoption of the Stellar protocol in the industry.

Right now - the race is wide open.

Either way, nothing but the best to all of them. The IP ready payment protocols, are much needed.

How common is it today for employees to receive salaries paid in Bitcoin?

Sat, 08 Aug 2015 18:17:34 +0000

Faisal KhanAnswered Aug 8, 2015

Extremely uncommon in the greater scheme of things. Mostly done for novelty purposes.

When it comes to one's own salary, employees don't want to mess with it.

Bitcoin offers no incentive to a salaried person.

What are some potential disruptions that could significantly change credit card usage?

Fri, 07 Aug 2015 19:07:22 +0000

Faisal KhanAnswered Aug 7, 2015

I don't have a ready taxonomy reference to refer to, but yeah, the social payments seems an adequate phrase to describe it.

With the advent of a more connected societies (thanks to Internet and the mobility of smartphones), we are able to communicate more easily and frequently across various platforms in a near frictionless manner.

Payments in the next 20 years would have gravitated to what I would call social payments. It would be like funding your accounts (whether you do it via debit cards, cheque, or direct bank account transfers), the payment instrument would most likely be your mobile phone and the apps that run on it, would be the channels via which payments can be made.

It is going to be inherently difficult to just eliminate credit cards. Who know how VISA and MasterCard will morph to become the payment companies for Gen Y and Gen Z.

American Express is already working towards that goal. They look at plastic today as mother-in-law, something you can do without. Amex is now working towards being 100% digital somewhere down the line.

The VISA/MasterCard rails will have competition for sure. I am 100% convinced of it. Newer, faster, more secure, more 21st Century, micro-transaction enabled, multi-currency enabled, crypto-currency enabled, virtual credit enabled payment networks.

Whether this comes from Bitcoin, or some company yet to be born, or from one of the tech giants, or just plain adoption of flat-fees networks, remains to be seen, but I can tell you one thing, people are sick and tired or paying "%" (percentage) of their transactions as fees. The payments world is slowly gravitating towards flat-fees, whether we like it or not.

Email had a chance to change payments, but since we've been stuck with the old SMTP/IMAP/POP protocol, any chance of embedding a protocol native payments in email, is pretty much out of the box. We haven't been able to change email since its inception.

Crypto-currencies certainly feel like disruptors. Whether it will be Bitcoin or Ripple or something else, remains to be seen.

The real traction will come from merchants. Mobile phones are becoming more powerful by the day and it is only a matter of time before the traditional POS machine is pushed out completely and replaced by the mobile phone.

Once merchant have a way to accept payments in the smoothest of ways, and with the connectivity they have to the Internet, they would have access to a myriad of alternatives as far as payments acceptance is concerned. Right now Bitcoin (for example) may be too cumbersome a process to introduce, but down the line I am sure the experience will get better.

These payments would be in the form of credits, transferable, value-driven credits. Credits that are interchangeable and swap-ready with the fiat currencies around the world. The argument of security, bank issuers, bank acquirers, dedicated (secure) payments networks, etc. would not hold valid, as these problems would have been solved by then.

The fine writing on the wall says nothing lasts forever whether or not it applies to credit card companies or not, remains to be seen, but I for one feel that the credit card debt trap, percentage driven transactions will be the reasons why we will have newer payment rails and with it, newer payment instruments that will dethrone credit/debit cards.

What is your opinion of the BitLicense regulations proposed by Ben Lawsky?

Fri, 07 Aug 2015 19:07:21 +0000

Faisal KhanAnswered Aug 7, 2015

There is a great breakdown by Marco Santori (who is an attorney and specializes in Bitcoin related ventures). His opinion can be read here: What New York's Proposed Regulations Mean for Bitcoin Businesses

The proposed rules are essentially no different from the Money Transmitter License application that NY's DFS has. The added components in this application are things that take into account the digital nature of crypto-currencies. Things like you need to have a penetration test done, you need a CISO (Chief Information Security Officer), etc.

The bonding and net worth requirements are not spelled out, but bonding would presumably be capped out at $2 Million (which is pretty much the common case for each State capping it to $2 Million). The net worth would / might be an issue. I think NY might require that the licensee match Dollar for Dollar for all outstanding payments the licensee has. Such a match would be reflected in their net worth.

What would be even more interesting is to see which companies would actually provide a surety bond for the Bitcoin space.

The agent / branch assignment would be worth looking into, if NY DFS will ask for additional bonding and net worth requirements for onboarding agents, or if Agents / Branches would be allowed or not.

The anonymity factor can be thrown out. All transactions would need to be unmasked.

The proposed regulations are no surprise for anyone who has dealt with Money Transmitter Licenses.

What you can be assured with is that all the time-lines mentioned for processing and reviewing the application would never be adhered to. NY's DFS doesn't have a stellar reputation when it comes to time-lines. Expect the timeframe from filing to award to be about 1 year (if not more).

Because of this application, a lot of small-cap Bitcoin businesses who were either based in NY or were wanting to get licensed in NY would be left out because of the financials (net worth, surety bonds, permissible investments, etc.) as well as the audit requirements.

If a bank claims to be building a more customer-centric culture, what should customers actually experience?

Fri, 07 Aug 2015 18:17:32 +0000

Faisal KhanAnswered Aug 7, 2015

Heather Wilde gives a great answer. I would like to add to it:

The Customer definition is extremely important. There is no one size fits all. Personas of the customers need to be defined in great details and then work with each persona.
Customer centric culture is being cognizant of the what is going right and what is going wrong. Understanding why it is going right (or wrong), what are the underlying elements that make this happen is important. Not just on a specific group level, but on the whole. Acute awareness of this yields to better employee KPI measurement.
Listening, listening and listening to the customer.
Incorporating that feedback back into your systems/processes so that you can improve upon the process and actually measure the improvement. A/B Testing is so very crucial here.
Understand where law of diminishing returns would come into play. Don't unnecessarily push too much energy and resources to improve something that is already operating at its optimal level.
Learn to prioritize the task list. What needs immediate attention and what needs secondary attention.
The Help-Desk approach, is so so missing from banks. If you want to help me, the customer, provide a mechanism of communication that lets me know that you're on it like white on rice.

What is the current state of banking regulation across African countries?

Fri, 07 Aug 2015 18:17:31 +0000

Faisal KhanAnswered Aug 7, 2015

Its mixed at best. African central bankers would like to see a more mature banking environment, however politics and vested interests dissuade this from happening.

Majority of the regulations are good for the African countries and/or their respective country. There is harmony amongst the African nations and they do have some regional central banks that collaborate (like the Bank of Central African States, Central Bank of Wester African States and West African Economic and Monetary Union)*

African Central Bank Governors are very proactive in trying to ease hurdles in the flow of money across borders, and yet at the same time trying to pacify Western Central Banks on their approach and methodology of doing so (key issues: AML, KYC and lets not forget's Africa's extreme natural resources wealth and vested interests).

Retail and Commercial banking regulations are sufficient, however, they can be improved drastically. Kenya, South Africa, Egypt, Morocco, Nigeria and Tanzania are perhaps the most active central banks trying to have a just and fair system, trying to find that sweet spot between liberal policies and regulations.

Most of the other African nations either looks around in their region and follow the model, or borrow models from other central banks (Singapore, HK, various EU banks, India, etc.)

All in all, like the road infrastructure, there are good roads and bad roads, same can be said of banking. In closing, what can be said with confidence, is that they are heading in the right direction, albeit slowly.

*You can see full list of Central & Reserve Banks here: List of all the Central Banks & Reserve Banks of the World

Will virtual currencies eventually replace physical cash?

Thu, 06 Aug 2015 19:06:21 +0000

Faisal KhanAnswered Aug 6, 2015

Eventually, in 25-100+ years from now... there would be no physical currency, everything would be digital. It would still be legally issued fiat currency in digital format by the government/body issuing it.

If you are asking if currencies like Bitcoin, etc. (crypto currencies) would ever replace the physical currencies, the short answer would be no.

Do P2P remittance firms like TransferWise require large amounts of capital to sustain their very low pricing?

Thu, 06 Aug 2015 19:06:20 +0000

Faisal KhanAnswered Aug 6, 2015

Capital simply aids in liquidity and pre-funding certain corridors, but the low pricing is not because of the capital injection, it is the very nature of the model of the system that allows it to match Send/Receive orders and net-off. In most instances, the money never really crosses the borders.

Person A wants to send AUS$ 1,000 to UK to Australia to Person C
Person B wants to send AUS$ 1000 to Australia from UK to Person D

The system matches these two people (orders) as a pair and deducts fees, for example extracts $5 from each party, then the transaction would look like this:

Person A would send (via TransferWise UK) AUS$ 995 to Person D.
Person B would send (via TransferWise AUS) AUS$ 995 to Person C

The money got routed locally within the economy.

How many Asian countries use real-time gross settlement systems similar to India’s Aadhaar-enabled payment system?

Thu, 06 Aug 2015 19:06:18 +0000

Faisal KhanAnswered Aug 6, 2015

Very few, a lot many countries however, are working on it (Pakistan, Bangladesh, Indonesia, Philippines, Chile, Argentina (?), Brazil, Kenya, Egypt, Morocco, Thailand, etc. to name a few).

If you are asking purely from an RTGS point of view, then you must know, real-time payments are available in quite a few countries (See: Real-time gross settlement). Though one must say this Wikipedia article refers only to the RTGS systems, ATM host based switches which are prevalent all over the world, are not part and parcel of this list. There are quite a few payment switches like that.

Aadhaar is bank-led and bank driven. It essentially works on a very large trusted distribution network, that ties in all the transactions together, and with POS and/or Human ATMs, micro transactions can be conducted.

Such a payment system, many believe is the next step in the evolutionary process of a micro-finance bank or a bank that is specializing in the work of branchless banking and promoting its mobile wallet.

*Argentina has put its plans for a mini-roll-out on hold at present.

Do large international companies move money globally using the same banks and tools like PayPal that individuals use?

Thu, 06 Aug 2015 18:17:29 +0000

Faisal KhanAnswered Aug 6, 2015

Tom Rundle explains it well. Depending on the company and how they value and handle payments, there are many methods. For example a large US corporation that pays out affiliate income to travel agents/agencies in over 80+ countries and in 40 currencies most likely would prefer to deal with someone who can handle payouts in all these countries (and manage the banking, licensing and compliance part) of the payouts.

Alternatively, the same company could decide to do it themselves (though very rarely does this happen).

Some deal with single and/or multiple banks for the different corridors where the payments have to be, some deal with a single bank (their bank) and a license FX, multiple-market player (OZ Forex's US Forex for example)

Some may decide to work with specialized payment providers/payment networks.

It really depends on the volume, value, number of transactions, type of transactions, payout mechanisms and customizations that are required in the payments.

Based on the above factors, companies they go shopping in finding the best fit that makes more economical sense to them, balancing the act of their involvement (i.e. time & resources).

What value does a global acquiring bank bring to merchants and payment businesses?

Thu, 06 Aug 2015 18:17:28 +0000

Faisal KhanAnswered Aug 6, 2015

Relatively faster settlements for inter-country payments. On a secondary level, the approval process for underwriting can be improved (made more speedier) because of access to your existing acquiring history in one or more particular market that they may already be serving.

Which startups are currently active in the money transfer and remittance space?

Thu, 06 Aug 2015 18:17:26 +0000

Faisal KhanAnswered Aug 6, 2015

See some startups in the Period Table of Remittances (Periodic Table of Remittances). There are literally 100s of companies, some established, some in stealth mode, some in US, most of them outside the US (due to US licensing issues), etc. No one to the best of my knowledge has compiled a comprehensive list of startups in the money transfer business on a worldwide basis.

Why do electronic payments get authorized in seconds but take 2–3 days for clearing and settlement?

Thu, 06 Aug 2015 18:17:25 +0000

Faisal KhanAnswered Aug 6, 2015

Short answer, batch processing. Authorizations can be given in real-time throughout the day, but the aggregate settlements (or net deferred settlements) are done in batches which run once every day. So it is not uncommon to do a batch process for debit one day and another batch process for credit and on-ward forward settlement the next day.

What wireless or hardware solutions exist for international money transfer agents, and are there Stripe-like platforms for payments?

Thu, 06 Aug 2015 18:17:23 +0000

Faisal KhanAnswered Aug 6, 2015

In the world of remittances transfers, wireless/wired equipment is seldom used. It might be used at the loading (Agent) locations for paying via a credit card / debit card, but that only makes the transaction more expensive. On the off-load side, they are rarely used.

Most of the transfer mechanisms are using pre-funded accounts so the balance to payout is always with the receiving MTO and they usually do COC (Cash Over Counter) or Direct Account Credit (be it to a bank account or a mobile wallet account).

Why do US banks typically charge around $30 for sending a wire and $12 for receiving one between businesses?

Thu, 06 Aug 2015 18:17:22 +0000

Faisal KhanAnswered Aug 6, 2015

If you're using the "Wire Transfer" chances are you're using the FedWire transfer mechanism, which is an RTGS (Real-Time Gross Settlement) platform, in the US, which is the only same-day payment platform to which nearly 10,000 US Banks connect to.

The other near real-time platform is the ATM platform, but payment settlement over the ATM rails is not so common and prevalent as a core-backend switch settlement mechanism as say the RTGS.

Because RTGS is not a deferred net settlement system, the money is actually being underwritten (but with very strong guarantees) and is fronted to you based on the settlement IOU (amongst the participating banks).

The cost to the bank is very low to front the money and it probably costs them less than a $1 for most transaction amounts, so this is where they can and do take advantage of what the consumer is willing to pay (based on the urgency of the payment) versus the ACH which is a 3 days mechanism.

Despite all the hoo-hah, the US does not have a flat-charge real-time settlement switch to which all the banks connect for real-time payments.

If wire-transfers are expensive to you, ask for ACH service is you can wait 2-3 days for clearing.

Is it possible to open a US bank account remotely while living outside the United States?

Thu, 06 Aug 2015 18:17:20 +0000

Faisal KhanAnswered Aug 6, 2015

A personal checking account, no. A business account, yes, but it comes with a bit of pre-requisites & conditions. A NOSTRO Account, yes, if you are a bank or a licensed FI, a merchant processing FBO account? Yes (though limitations do apply).

Which payment gateways are available in Pakistan?

Wed, 05 Aug 2015 19:04:37 +0000

Faisal KhanAnswered Aug 5, 2015

MIGS by MCB
MIGS by NIB Bank
Cybersource by HBL
Etisalat's Payment Gateway by UBL.

What are the steps involved in setting up a remittance or money transfer business?

Wed, 05 Aug 2015 18:17:19 +0000

Faisal KhanAnswered Aug 5, 2015

Note: This article was originally published on my website which can be read here: How Do I Set Up A Remittance Money Transfer Business?.

Reposting it here on Quora.

Introduction

Remittance industry is not that difficult to enter into, once you understand the basics (which would be true for any other business as well), then you can, with relative confidence, ease into the business.

It is also important to understand that money transfer is a serious business as far as the law is concerned. Attempting to be clever or trying to convince yourself and/or others that you don't need a license, etc. to operate can very easily land you into trouble (fines + prison).

Movement of money is regulated, be sure to consult with the local regulator(s) [there may be more than one] and attorneys who specialize in this field before you dive in.

Diving Into The Money Transfer Business

Most people will literally spend less than 100 hours reading and properly researching this industry and just dive in. They could not have opt for a more easier way to burn their time and money.

Sure, you're read some reports, done a few remittances yourself, maybe even interacted with the diaspora, but this would not make you a remittance transfer expert. All kidding aside, it takes deep learning and commitment to the game to make money out of it.

Because money-transfer is touted as the low hanging fruit, expect fierce competition. Survival in this business is tough.

Dip Your Toes Into the Water

Before you find out the hard way, it is always better to start small. Everyone wants to be able to do this...

However, the rider you see on that bike, most likely started with the vehicle below and worked their way up...

Yes. Training Wheels! Put them on!

Start small and carefully, else you might see a lot of money and time go down the drain. When you start small, you can make mistakes. You will also be learning a lot. I cannot emphasize this enough. The subtle nuances is what the game is all about.

Knowing where and how you can make money...

how to have tie-ups
where to go and ask for help
how to partner with vendors/suppliers
how to best leverage your working capital
how to market and focus your efforts in picking up clients
how to do A/B testing to see what works and what does not
understanding compliance
understanding competition
being acutely aware of the subtle clues for each remittance corridor you serve
understanding banking relationships and the hurdles posed in trying to gain access to banking
understanding how to calculate very accurately all the costs associated with transferring money
how to grow volumes
how to have better control over KYC issues
understanding money laundering and/or terrorist financing and how to avoid your system/setup from being used to funnel funds
how to build a team
Etc.

Remember, there is no shame in starting small. It pays in the long run to start small and grow.

It All Starts With Licensing

Because in most countries & territories, money transfer business is licensed, it is best to start understanding how licensing works and take it from there. This is my most suggest path when starting out, looking out at the licensing issue.

The chart below gives a brief of how this works (from a US point of view), though the same could apply (more or less) to other regulated countries as well.

In order of difficulty (from lowest to highest):

Affiliate
Correspondent
Correspondent / ISO
Authorized Delegate
Licensed
Banking Agent

[You can read more of this at: US Money Transmitter License]

I always recommend the affiliate route. My reasons for doing so are as follows:

there is hardly any investment from your side
you will learn the lingo/nomenclature very quickly
how money transfer works, you will get to understand nearly all facets (not all is clear in the affiliate route), but it is perhaps the best starting point
you will have hands-on experience rather than theoretical
you will find just how easy/difficult it is to amass clients (and retain them)
if things don't work out, you can walk away (without writing-off much money)
you do not have to enter long-term contracts
the walk away can be done without any further obligations, it didn't work out, no issue
you can always enroll with another money transfer operator into their affiliate program
the MTOs (Money Transfer Operators) you work with, will spend a lot of time explaining terminology and processes to you, free learning!

Once you are confident you've just about done enough of training wheels, you can then jump to the next level. It is all about understanding the business, your comfort level and your risk appetite.

You don't necessarily have to go to training wheels. If you understand the business well, or have interned or worked for a MTO, then you could go directly the Authorized Delegate (Agent) Route or even go ahead and start getting your own licenses.

Players in the Ecosystem

The next thing is to understand the different players in the money transfer business that make up the ecosystem:

The image below depicts more or less a complete model of all the players that will ever be:

Sender
The person sending the remittance

Sender's Bank
The bank that the sender will use to fund the remittance transaction. This can also be funded via cash (at an Agent location) or by using other payment instruments like Credit/Debit Cards, Mobile Credits, etc.

Beneficiary
The person who will be receiving the remittance money.

Beneficiary's Bank
The bank where the remittance money is credited. Alternative methods are a mobile wallet (which also has a bank on the bank end) or COC (Cash-Over-Counter) in which case the beneficiary will prefer to receive cash upon presentment of proper identification at an Agent location or Bank.

Money Transfer Operator (Sending Side)
The licensed entity in the sending country that is the legal owner of the transaction and is facilitating the remittance.

Money Transfer Operator Bank (Sending Side)
The financial institution(s) that the MTO in the Sending Country uses to aggregate the funds and distribute them.

Money Transfer Operator / Bank (Receiving Side)
Counter-party on the receiving country would either be a licensed MTO or a Bank.

Correspondent Bank (Sending Side)
Usually a correspondent bank would be involved for purposes of either hosting the sending Bank/MTO's Nostro account, or would be used to channel funds between the Sending MTO and the Receiving MTO/Bank.

Payment Processor
A payment processor might be used if using payment instruments like ACH, Debit/Credit Cards, other payment instruments (like PayPal, Dwolla, etc.) The Payment processor works for and is contracted by the Money Transfer Operator (Sending Side)

ID Verification (KYC)
Usually a 3rd party service is employed to authenticate and verify the IDs that are submitted as part of the on-boarding procedure by the Sending MTO.

Agent / Affiliate
An Agent or Affiliate might be used on the Sending side to on-board the transaction and could also be used on the Receiving side to off-load the remittance transaction.

Payment Network
MTOs can utilize various payment network to route the remittance transfer. For example they might use a 3rd party network like Earthport to settle transaction on to various countries where the MTO may not directly be integrated.

Diving Into The Business

Before diving into the business of money transfer, I will suggest that you do two things:

Attend a Money Transfer Conference. There are essentially only two conference worth looking at: (a) IMTC and (b) IAMTN. There are specialized conferences that also focus on Money Transfer, but these two are the dedicated ones. I would recommend IMTC.
Find a Mentor. In this field you can use all the help you can get.

Working Capital

No matter how you look at it, even from an Affiliate point of view, you would need working capital. Needless to say, if you are going the Affiliate route, your money would best be spent on landing pages, blog articles, SEO, SEM, running ad campaigns and social media marketing.

If you're going the correspondent route, then you would need to put up the pre-fund money that the Sending MTO is usually required to put up. Because you want to get into the business, you will be responsible for putting up the MTO's pre-funding money.

If you're going the Authorized Delegate route, then you can read up the following articles to better understand:

Access to US Money Transfer Market - Faisal Khan
Should you own a Money Transmitter License?
FAQs on ISO/Correspondent Relationship - Faisal Khan
Correspondent vs. Authorized Delegate

For trying to obtain your own licensing, you can check the amount of money needed from each financial regulator, by visiting their website. The complete list can be found here: List of Money Transmitter License Regulators

Access to Banking

This could be a very difficult proposition for you. Finding a bank, willing to work with an MSB engaged in the cross-border money transfer business is not easy.

Because of Operation Chokepoint there is a lot of De-Risking of MSBs going on in the banks.

You can read more about this in these 3-series article that I wrote:

The Sandstorm that is blanketing the Money Services Business
Can't find MSB Friendly Banks?
Banking De-Risking: The Domino Effect Is Now In Full Force.

Most MTOs will not provide you with access to banking (unless you're 100% purely affiliate). If you are going to come on-board as an ISO/Correspondent, Authorized Delegate, etc. you bring your own banking relationship to the equation.

Anti-Money Laundering Training

A prime reason for MTOs and Banks not to work with small businesses and individuals, is because of their very shallow knowledge about the AML/KYC space.

Everyone in the Money Transfer business has to under-go anti-money laundering training. There is no exception to this rule. This would apply even to Affiliates.

Spend time in getting yourself training. The basic training is not too difficult and be completed usually within a day. However, to really be able to comprehend of the nomenclature in this business, you would need to get advance training. All these trainings can be done online and can last anywhere from 1 week to 3 weeks or more.

Before you dive into advance training, read a lot. There are plenty of books and manuals on anti-money laundering, freely available on the web for you to read. Also, Youtube. Plenty of free material there to explain the concepts.

Compliance Officer

Other than being an Affiliate, almost every other program/association would require you to have a full-time Compliance Officer on-board in your organization.

Here you are looking for a full-certified officer, that has undergone comprehensive compliance training (AML, KYC, CIP, etc.) and is preferably certified (CAMS - Certified Anti-Money Laundering Specialist).

Don't penny pinch here. A rock-solid Compliance Officer will give your business credibility that will go a long way.

Compliance Program

A well-thought of, pragmatic and continually improving Compliance Program is the cornerstone of any well-established money-transfer company. By any estimation, between 5% to 10% of your human resources would eventually be employed running your compliance program.

Go with the best company you can afford to make your compliance program. Initially, many entrants will startups will work with a compliance speciality company to author their compliance program, which in turn the compliance officer would then implement.

Each legal corridor you operate under and the transaction/financial model under which your business would be running have their own subtle elements that can make or break a compliance program, this is where you need expertise.

Do not penny-pinch on this front.

Choosing Your Corridor

Next is determining which markets you want to work in. Depending on your arrangement, you may already have an established (licensed) Bank/MTO to work with, or perhaps you would need to find one and have them tie-up with your Principal License Holder in the Sending country.

Tie-ups can be a bit or a bore to implement (they are mostly paperwork driven and time consuming), but they would be essential to work in both the markets.

Software & Allied Services

Unless your arrangement is providing you with the software (to run your money transfer business) and the allied services like ID verification, OFAC and other Sanctions list checks, etc., you would need to make arrangements for this. This task should start in parallel at the very earliest as implementing it can take some time.

The goal is to have a system that can provide front-office and back-office functions, while also being able to provide audit logs for auditors. A list of the transaction points can be found here: List of Transaction Data Points for a MSB Audit.

Today, one has many options as far as software is concerned. You can buy it, lease it, rent it, work with the OEMs on a SaaS model, etc. Have a look at the Remittance Table for a brief list of OEMs who provide this (under the category Software): Periodic Table of Remittances.

Put a Plan Together

You should be very clear as to what your transaction set would look like. How the flow of funds will work (or are working, even if you are an affiliate). Many people dive into the business without paying too much attention to the money they would be making. Every single penny must be accounted for.

You should know very accurately how this all works out, how much money is being deducted at each step of the way (and why). You should also know who is keeping this money.

A sample flow can look like this:

Some Essential Homework

Things you would need before you start:

Think of a name for your business. This does not necessarily have to be the same name as your brandname, but you need a name for your business.
Think where you will incorporate? (and why?). Will opt for Delaware or Florida? or Cayman Islands? or Estonia? --- exactly why you are incorporating there, is something that you should know prior.
Think of a brandname (for your remittance product), even if right now you may be going the ISO/Affiliate route.
Buy a domain name (not only for your business, but also for your brandname).
Get Google Apps, so that you can have a formal email address of your company going (Gmail / Yahoo! and only go so far).
Get a dedicated number for your business.
Get ALL the social media identities (Facebook, Twitter, LinkedIn, Google+, Pinterest, Quora, Instagram, etc.)
Get a website up and running at the earliest. Please do not try to put one up yourself (unless you are really proficient in design, UI/UX, coding, etc.). Get professional help. With a great WordPress theme, you can have a kick-ass presence for under US$ 2,000 per year (someone till customize it for you, create content and host it for you). If you look for bargains, you could possibly do this for under US$ 1,000 per year.
Hire a professional firm/freelancer to write your content.
Get a professional Logo made.
Get a Mailing list going, MailChimp is the way to go about it (put up a Launching Soon landing page)

Research and Data is extremely important for you to proceed ahead. Go out into the real-world and interview potential customers. Take notes.

Learn from them the facilities they would like.
What their pain points are.
Who do they currently use?
Why would they choose you?
What is the average amount being remitted right now?
How long does it take to arrive there?
What can you do to improve the experience?
What is the exchange rate like?
What do they hate about the service?
What do they love about the service?
If you offered a service today, would they switch?
How many existing players? Is the field over-crowded?
What would make you stand out?
Which cities would you market in first?
How much would this marketing cost?

Business Plan

If you haven't written a business plan, do so. I am writing about it at the very end, because people tend to ignore a business plan. It is perhaps one of the most vital documents that will give you a sense of semblance every day to get your bearings right.

There are plenty of templates out there on the web, search for one and use it. It also would give structure to your thinking and overall approach.

With all these tools in your hands, you're good to go and good luck on your new venture.

How can someone launch a prepaid debit or credit card program with a bank without being a resident of that country?

Wed, 05 Aug 2015 18:17:17 +0000

Faisal KhanAnswered Aug 5, 2015

You do not need to be a resident of a country to launch a Pre-Paid Debit Card.

In many countries their are companies that provide such a service, but that would obviously be defeating the point (since you want to launch one directly).

You would need to have a registered business in that country, for the issuing bank to work with you. This would be the very basic requirement. If you can manage to get incorporated in the host country of issuance, the next step would be finding a bank to work with.

What exactly are ACH fees and who charges them?

Wed, 05 Aug 2015 18:17:16 +0000

Faisal KhanAnswered Aug 5, 2015

ACH Fees is usually what you as a Banking Client would pay to pay via the Automated Clearing House (ACH) in the US to transfer funds. The fees can range from as little as 6-7 cents to as high as $1 (depending on the nature of your work and the FI/Agent you work with).

Some institutions even vary the fees for Push vs Pull transactions.

What do customers typically expect from an online payment gateway?

Tue, 04 Aug 2015 19:03:24 +0000

Faisal KhanAnswered Aug 4, 2015

Frictionless, secure and fast transfer of online payments without having to chase and/or find out where's my money?

What is the most efficient way to pay Elance freelancers from Pakistan if I don’t have PayPal or a credit card?

Tue, 04 Aug 2015 19:03:23 +0000

Faisal KhanAnswered Aug 4, 2015

Get a Payoneer Debit card, and ask the client to pay on to that (assuming the client is only in the US). Payoneer provides a US ACH mechanism so that a person can push a payment onto Payoneer and it automatically comes into your debit card.

The debit card is free. Go to Fiverr.com and open an account and you will get one. Takes 2 weeks to get the card in Pakistan.

Can non-US citizens open bank accounts in the United States, and which banks are generally more foreigner-friendly?

Tue, 04 Aug 2015 18:17:14 +0000

Faisal KhanAnswered Aug 4, 2015

If you have a valid US Visa, a domestic address and at least two methods of identification (at least one of them has to be a photo ID), you can very easily open an account.

Small banks, credit unions, might give you a hard time, but generally opening a bank account is not an issue. Bank of America, Suntrust, JP Morgan Chase, Wells-Fargo, Citi, etc. will open an account for you without issues.

For funds, you will have to declare your source of funds and sometimes proof of income, but usually it is no biggie.

Is it legally necessary to be a bank to move money, or can individuals or companies transact money if they build their own system?

Tue, 04 Aug 2015 18:17:13 +0000

Faisal KhanAnswered Aug 4, 2015

If you're a financial intermediary, chances are you would need to be licensed as money service business / money transmitter / payment institution (nomenclature notwithstanding, depends on where in the world we are).

If you're a deposit taking institution with the intent to safe keep, investment (for return on deposit), 1/1 or fractional lending, etc., on top of being a financial intermediary, you would most likely be classified as a bank.

How common is coordination or cooperation between central banks across different countries?

Tue, 04 Aug 2015 18:17:11 +0000

Faisal KhanAnswered Aug 4, 2015

Difficult question to answer. If someone were to go back in time and cite at examples of collusion in the early history of banking and how things are/were done, one might be labelled as a conspiracy theorist.

The truth of the matter is, people down in the lower echelons will never know. If there is collusion it would be well disguised or innocently disguised, as policy meeting of G5, G7 or G20, IMF, WB, etc.

One never knows.

For purposes of argument, it is bound to happen. When banks are holding on to each other's currency in their ledgers, positions taken by a single entity do affect others. There has to be some form of understanding how policy making will fan out to other partners (central) banks.

Is it possible to transfer foreign currency between two local bank accounts in another country, and if so how, or why not?

Tue, 04 Aug 2015 18:17:09 +0000

Faisal KhanAnswered Aug 4, 2015

It is possible. Certain banks allow this (for example HSBC Premier Banking allows this and in certain geographic regions Deutsche Bank and Citi also provide this service).

As Jerry D Chan cited, NOSTRO accounts are used. In the event when it is not allowed, it is because financial regulator in one both markets may prohibit this, or a direct arrangement may not be allowed, even via a correspondent bank.

How can we build a proof of concept for an agent-banking solution?

Sun, 02 Aug 2015 18:56:47 +0000

Faisal KhanAnswered Aug 2, 2015

Agent banking solutions are essentially branchless banking solutions where the agent network is tapped for account opening (and if possible KYC process), funds load/off-loading and issuance of documentation or load vehicles.

To adequately prepare for a proof-of-concept, you would need to work with your transaction set and delve into that layer more deeply.

Here is a sample transaction set for agent banking model:

You would use this to amplify on the process-flow and making sure your wallet or core-banking software can cater to this.

Once your processes have been mapped out, you can then use a simulated mode to do a proof-of-concept.

What is the best way to receive money anonymously?

Sun, 12 Jul 2015 18:16:47 +0000

Faisal KhanAnswered Jul 12, 2015

Cash is king when it comes to being anonymous. Bearer certificates would be the other bet.

Then you have all sorts of options like gold coins, etc.

Bitcoin is there too, but it is pseudo-anonymous.

I’ve designed a card that could replace credit and debit cards—how can I bring it to market?

Sun, 12 Jul 2015 17:55:32 +0000

Faisal KhanAnswered Jul 12, 2015

About 14 years ago, I came across homemaker from Kuwait who was starting a very small startup by the name of InsCash (instant cash), that did something remarkable. She thought through and made a payment solution that could literally have put VISA/MasterCard et. al. out of business.

Today, she is still a homemaker, her start-up long gone, and VISA/MasterCard + cousins, are very much in business.

What I am trying to tell you via this short story is that if you read up, there are literally 100s of companies and 1000s of ideas on payment systems that are much more efficient, economical and safer than the current payment methods in play today.

The problem is acceptance and traction.

If you have stumbled upon what you believe is a truly great product, your best bet is to get a patent on it first. Brian Roemmele would probably tell you this, coming from a man who studies payment patents when he's bored!

In my opinion a patent would at least give you some form of protection of your idea. Getting a solution to market means you need anchor clients (i.e. banks and merchants). That is going to be the toughest challenge. You would most likely need help here.

You can go to an existing payment company (say even VISA/MasterCard) and try to pitch the product to them, or you could attend the various payments conferences worldwide and see which one is best suited for you to present your paper and solution. VCs are also another route.

The options are many. I do not want to discourage you, but even the best of the best solutions will get drowned in the noise of the existing payment rails and power brokers.

Why do payments like Chase QuickPay show a “pending” status?

Sun, 12 Jul 2015 17:55:30 +0000

Faisal KhanAnswered Jul 12, 2015

Most likely the recipient to whom the payment is being made, has not yet accepted the payment.

Do you need to link a credit card to Bitcoin in order to use it for payments?

Sun, 12 Jul 2015 17:55:29 +0000

Faisal KhanAnswered Jul 12, 2015

Not necessarily. If your merchant accepts Bitcoins (via a wallet transfer or other mechanisms), you're good to go.

However, if your merchant is not accepting Bitcoins, you could fund a pre-paid debit card with Bitcoins (converting from Bitcoins to Fiat) and then use the debit card to make a payment as you regularly would.

Credit cards are usually attached to platforms to fund bitcoin purchases.

Do Bitcoin exchanges sell or share user data?

Sun, 12 Jul 2015 17:55:27 +0000

Faisal KhanAnswered Jul 12, 2015

As a licensed Bitcoin exchange in the US, I can answer as to what we do in our exchange CoinXTrader: No, we do not sell user information.

We do however share users information with the regulators.

Which financial API should be used to build a free or near-free bank ACH transfer app similar to Venmo or Square Cash?

Sat, 11 Jul 2015 17:53:31 +0000

Faisal KhanAnswered Jul 11, 2015

It not really a question of what particular financial API you should use, but more or less a question of what API your Bank provides to you for purposes of ACH. If they provide an API for file submission, great, use it. If not, you might want to have a middleware put in for purposes of building the API and then connecting the app and the file submission/retrieval on both sides.

You could use the likes of Knox Payments, or Synapse Pay, etc. or even Yodlee etc. for account validation and/or ACH processing, etc. but there will be a cost to it.

Ideally, it would be an API you would build without any intermediaries.

What are the implications of providing personal information to Xoom when sending over $10,000 within six months?

Fri, 10 Jul 2015 17:52:32 +0000

Faisal KhanAnswered Jul 10, 2015

Nothing. The added information is from an AML/KYC Manual guideline that Xoom is following. They are just trying to ascertain your identity and address it with a bit more surety.

If any of your transactions get flagged or are required to be reported on a State or Federal Level they would be, but as such, the information is essentially used to deflate the concerns of identify-risk that are associate with high value transfers.

Why does the U.S. have so many banks compared to many Asian countries dominated by a few large banks?

Fri, 10 Jul 2015 17:52:30 +0000

Faisal KhanAnswered Jul 10, 2015

In the US, obtaining a bank license is not necessarily a Federal issue (as it is with other countries). In the US, the 50 States can issue their own independent licenses, even a single branch license (and the process is relatively simpler).

Compare this with other countries, getting a bank license means qualifying the minimum base set by the financial regulator (which in most cases is quite strict).

Many countries do not allow community banks to be opened, that are literally say single branch banks. The US does, and this is why they have 8,000+ banks.

In Europe, what is the best way to regulate Bitcoin under financial law—fit it into existing frameworks or create dedicated regulation?

Fri, 10 Jul 2015 17:52:29 +0000

Faisal KhanAnswered Jul 10, 2015

Ideally, we should not be regulating it. Let it mature. However, if it must be regulated then, under the existing PI (Payments Institution) license framework makes sense.

Treat it as an additional currency of a new virtual country.

What is Bitcoin, how does it function, is it legal, and who created it?

Fri, 10 Jul 2015 17:52:27 +0000

Faisal KhanAnswered Jul 10, 2015

There is a great article that was written by Nik Custodio last year, that explains Bitcoins very well: Explain Bitcoin Like I’m Five

Can't get a more simpler and well written explanation than this.

Do direct banks such as Ally Bank follow the same regulatory requirements as traditional banks?

Thu, 09 Jul 2015 18:16:46 +0000

Faisal KhanAnswered Jul 9, 2015

Yes. Ally Bank is regulated on the State level by DFI Utah and on a Federal level by the FDIC, so no exceptions on the regulations that they have to follow.

How are savings handled by Automated Savings apps like Digit insured by the FDIC?

Thu, 09 Jul 2015 18:16:44 +0000

Faisal KhanAnswered Jul 9, 2015

Digit can't touch the money, it can only move the money between your original bank account their Digit Saving Account, which is an FBO (For Benefit Of) account in your name.

In short, the bank is the custodian of money, not digit, and the owner of the money is you. Because the bank is the custodian of the money, the funds are FDIC insured.

If we build a ticketing platform like Eventbrite that rewards users for sharing sales, do we need an MSB license?

Thu, 09 Jul 2015 18:16:43 +0000

Faisal KhanAnswered Jul 9, 2015

As long as you are not holding on to the payments in your accounts, you would not be classified as an MSB. You should not be touching the money at any part of this process chain, except for the BSA regulated FI, to push your commission (intermediary charge) out to your bank account. Your processing has to be straight-through.

If you touch the money at any point in time, you'd be a money transmitter.

If I beta-launch a marketplace that holds funds in escrow or for 24–48 hours, would I need a money-transmitter license?

Thu, 09 Jul 2015 17:50:45 +0000

Faisal KhanAnswered Jul 9, 2015

If you are are touching the money and be holding on to it - you would require a Money Transmitter License. If you are using a marketplace like Stripe, Balance or WePay, then the question to ask is, if your business would constitute as a Money Transmitter?

If you are working with a licensed PF (Payments Facilitator) and are not touching the transaction money and are only taking your share, then you should be alright and will not be required to register as an MSB and obtain MT licenses.

The above statement comes with a caution, that you are cognizant of all the States rules and what your marketplace is trading in, does not fall under the umbrella that would require a money transmitter license.

Just FYI, Stripe, Balanced, WePay would not extend their MTL coverage to you (if they were to have one). They are just accredited, licensed and certified PF only.

What types of companies and business models are built around Bitcoin?

Thu, 09 Jul 2015 17:50:43 +0000

Faisal KhanAnswered Jul 9, 2015

100s if not 1000s of them. CoinDesk covers the industry segment really well. Some are deep in Bitcoin, some are hugging Bitcoin tightly and some enjoy a periphery arrangement with Bitcoin.

You can browse through the stories of companies that are covered by CoinDesk here: Bitcoin Companies - CoinDesk

With BitPay, are bitcoins collected from customers deposited into a business bank account via ACH?

Thu, 09 Jul 2015 17:50:42 +0000

Faisal KhanAnswered Jul 9, 2015

When a customer pays a BitPay merchant, the merchant has two options:

(a) To keep Bitcoins - which would imply they are cognizant of the risks involved in the fluctuating price.

or

(b) To convert the Bitcoins immediately into Cash.

In the latter, BitPay will sell your Bitcoins and then settle the amount (once a day) into a Merchant's bank account via ACH.

If global GDP is around $71.83 trillion but derivatives total about $350 trillion, why is the derivatives market so much larger than the real economy?

Wed, 08 Jul 2015 19:08:26 +0000

Faisal KhanAnswered Jul 8, 2015

Short answer, overlap.

Mobile payments have launched in Pakistan, but I rarely see merchants using them—how do these systems work and who is accepting them?

Wed, 08 Jul 2015 19:08:25 +0000

Faisal KhanAnswered Jul 8, 2015

There are three types of mobile payments in Pakistan:

Payments made using the mobile phone
Mobile Point of Sale Systems (this further has two categories: Phone POS aka Square Clone and Magstripe portable POS)
Mobile Apps that are ready for payments.

Payments made using Mobile Phones
This is already in play, with the likes of almost every telco operated branchless (or microfinance) banking operation. Think UBL Omni, think Waseela, think EasyPaisa, et. al.

So this payment option is already in play within Pakistan.

Mobile POS

Square Clones: Currently no Square clone type system is operating in Pakistan. None. Though many have tried, it is all in experimental stage.

Portable Magstripe POS: This is already in the market. Call up McDonalds delivery and they bring this machine out to you. Quite a few merchants have these machines.

Mobile Apps that are ready for Payments
This is a mixed one. If you consider e-banking apps that can be used for IBFT (Inter-Bank Funds Transfers) - then quite a few banks offer it - the most notable being SCB Breeze, Mobit (by Faysal Bank), MCB Lite, HBL, Etc.

On a true application level, no one offers an agnostic layered app for payments that represents a bank agnostic or a carrier agnostic e-wallet (perhaps in some ways MCB Lite could be considered this).

The above is the gist of it all. However, there are providers who are testing their own bank/carrier agnostic payment apps, there are famous messaging apps that are looking at Pakistan for the incorporation of their payment apps, but nothing concrete.

There are plenty of square clone reader based apps, but they have been plagued with regulatory and/or compliance issues.

The issue of launching a truly mobile app lies in addressing the following elements (in no particular order):

Bank agnostic
Carrier agnostic
Associated card scheme
Localized payment rails to accept the transaction and to be able to treat (read: mimic) it as an IBFT transaction rather than a card scheme transaction
Direct one-hop interoperability with various branchless banking networks (i.e. direct settlement)
Addressing the MDR issue
Addressing loss of revenue for issuing banks on non-card scheme based transactions, and
Acceptability, i.e. distribution.

The above factors would be the essential factors towards a wider adoption.

Given the huge compliance fines banks have paid, how can they reduce human error—perhaps with checklists—to avoid such failures?

Wed, 08 Jul 2015 19:08:23 +0000

Faisal KhanAnswered Jul 8, 2015

Implementing compliance on the whole is a pretty difficult thing to do. Compliance itself has so many rulesets (some which can be programmed) and many that simply cannot be inserted directly and rely on controls that are juxtaposed to the processes that are prevalent in a financial institution. Such forced sets usually work in batch process settings and not in real-time.

The legal and compliance softwares that exist are so inherently difficult and cumbersome to setup and operate. Then one small slip and a transaction that was supposed to be flagged/stopped, slips away.

Every now and then you will come across rules or instructions from the regulator that simply is not easy to implement. If you ever looked at say the net worth requirement or associated fees as the State of Texas or Washington would require of a Money Transmitter - the equation would make you go crazy.

Because of the multiple systems, that are in play, they don't necessarily talk to each other, like one would assume. There is so much bandage fixing, that its not even funny.

Then above all, there is the willful default. The Managers and Operations people who knowingly allow gaps to remains so they can meet quotas or have been told to turn a blind eye.

Many-a-times the Risk & Compliance departments are not told the full story (even by the senior management).

The variables are plenty.

Lists / Checklists, etc. are all good if they are followed meticulously, and any anomalies or breaches reported. With the amount of firefighting going on in banks, the truth rarely surfaces and when it does, it brings out the nasty side of the regulators.

How does an online money transfer actually work from a technical and process standpoint?

Wed, 08 Jul 2015 19:08:22 +0000

Faisal KhanAnswered Jul 8, 2015

That is a pretty broad question. However, the basic premise of all online money transfers is based on Trust and Settlements. Trusts represent agreements between the disbursing parties and Settlement is the method in which they will reconcile their accounts (balances).

Some relevant reading for you...

Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?
Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to How does the payments ecosystem work? What does the payments workflow look like, from the merchant’s card payment to the acquirer? What are the roles of each of the main firms in the space, like First Data, PayPal, Neteller, Square, Visa, etc.?

How can mobile wallets save consumers about 1% on every purchase compared to card payments while improving the shopping experience?

Tue, 07 Jul 2015 19:07:20 +0000

Faisal KhanAnswered Jul 7, 2015

In most countries this is already in play, but loading your wallet with funds (usually an ACH equivalent, riding the ATM rails), thus making the load very affordable. The wallet is then accepted by various merchants on the basis of a lower pricing (sometimes even flat-fees pricing), by-passing the V/MC networks. Needless to say, the key here is wide merchant adoption.

What steps can the RBI take to strengthen the Indian rupee?

Tue, 07 Jul 2015 18:49:54 +0000

Faisal KhanAnswered Jul 7, 2015

Reduce its current account deficit. More exports, less imports, less government debt.

What is the most efficient way to send money from the UAE to India?

Tue, 07 Jul 2015 18:49:53 +0000

Faisal KhanAnswered Jul 7, 2015

There are literally 100s of MTOs/Banks who will do this for you. UAE-India is one of the top grossing remittance corridors. All the famous exchange companies in the UAE (without naming them) excel at this. They do direct bank deposits and branch payout in the beneficiary country. All this for a price that is cheaper, better and quicker than the bank wire transfer.

How will PayPal’s acquisition of Xoom influence the remittances market?

Tue, 07 Jul 2015 18:16:41 +0000

Faisal KhanAnswered Jul 7, 2015

As always, this is my opinion. Feel free to disagree.

Let us tackle the first part of the question which is how do I see remittance market shaping over the next 3-5 years?

I won't talk much about PayPal + Xoom, I think it is a brilliant merger and one that would play out well in the years to come. Instead, I will focus more on the industry.

I would like to use two words to describe it:

Consolidation
Conformity

Consolidation

Remittances have been touted as the low hanging fruit. Ever since value-transfer has been made more portable, easy and available to all, everyone is running towards it.

I'd like to draw parallels to the web hosting business when the Internet came out. Everyone wanted to be a web-host. Most of us remember this era well. If it weren't a web-host, then it was providing paid email.

Why web-hosting or email? Because these were the low hanging fruits of the Internet. Over the years, the markets consolidated. Now, instead of 100,000s of hosts, we have 10,000s hosts. Serious ones, perhaps a 1,000 hosts. Large hosting providers, probably a few hundred. This is how things consolidated.

The remittance industry is going to be no exception. Expect to see a lot many small players going out of business because of diminishing returns and competition from the like of TransferWise, Xoom, Remitly, WorldRemit, Azimo, etc., companies that control the send side to a larger extent with their marketing budgets, subsidized onboarding and transmission of money.

I personally know quite a few people who are essentially corridor-killers (i.e. they rule a particular remittance corridor) and even they see the competition rising and know the fine writing on the wall that nothing lasts forever. They will be transitioning out of the corridor in the next 6-12 months.

I would say the market would have the following type of consolidation:

Incumbent players (Western Union, MG, Ria, et. al.)
New entrants who are quickly taking away market share (TransferWise, Xoom, Remitly, WorldRemit, Azimo, et. al.)
Corridor Specialists (for example UAE-India or Saudi Arabia-India, these corridors are rules by the local exchange companies and banks, so not going to be seeing a shift here anytime soon).
Smaller players

The number of players will reduce.

Conformity

Conformity is going to be a huge issue. Though it may sound contradictory to Consolidation, conformity has its own set of challenges.

Regulation: With more and more stricter regulation being asked for, the game is in favor of those who have economies of scale. Smaller players will charge higher in order to conform to the regulations, whilst for larger players, the cost on a per transaction basis goes quite low.

Access to Banking: Maintaining bank account is now becoming a difficult task (see two articles I wrote on this specific financial epidemic):

Can't find MSB Friendly Banks?
The Sandstorm that is blanketing the Money Services Business

Speed: The speed at which transactions can be made, is now important. Not only is speed important, what is also important is how quickly can the net settlement between the two MTOs / Banks be done.

Access to Working Capital: Many small MTOs have limited capital, hence, they rely on quick turn-around time to pre-fund their payout accounts. Any delays, etc. forces them to take a hit, or reduce the number of transactions they can process, resulting in lower income.

The larger players don't have this problem. They can easily fund their prefund accounts in various territories and have additional money on hand to handle a spike in remittance traffic.

Mobile: More and more people are relying on their mobile phones for surfing the web, social media access and communicating via various messengers. This is where players like WhatsApp, Viber, FB Messenger, Google, Apple, etc. would have a clear cut advantage. The smaller players are struggling just to keep their web presence in check with the technology out there today.

Niche startups who are pitching mobile as the on-boarding/off-boarding mechanism have a decent chance to disrupt the market, provided they can get enough traction. Traction is the key. The incumbents are fighting for traction (i.e. retention), the new players are fighting for it, with their large advertising budgets and the smaller players are desperate to hold on to what they have and try to make the best with their limited budgets for advertising and client acquisition.

Mobile Operators: Albeit late in many territories, mobile network operators (MNOs) are now seeing how they can leverage their distribution network for remittances. As a matter of fact, remittances is not the only area they are focusing on. They are focused on payments. Be it remittance payments, small value, B2B, value-remittances (where money is exchange for goods, etc.), these players are now going to showcase the strength of their distribution network and the power of local P2P payments to which they natively integrate.

Brand Power (or Attention as I call it): Expect the incumbents and new (large) players to capitalize on their brand power. Western Union, Ria, MoneyGram will not give up the fight so easily. The will innovate (who says they are not?) and will continue to dominate the remittance space int he years to come. Remember a very large swath of the population doesn't have access to smart phones or are not that mobile/internet savvy to attach their bank accounts and remit money. Many are still unbanked. This is where the brand power of Western Union, et. al. remains extremely powerful and relevant. Do not expect this to diminish over the next 3-5 years.

Seeking a user's attention which all the internet companies can do, will be a powerful motivator to switch. Being able to pay from your FB account or Google account is something that is inevitable. This is where the internet companies have a one-up on the incumbents.

Small Value Remittances / Cross-border Micro-Payments: This particular vertical will be huge. My personal estimation is that in 10-years time, Small Value Remittances / Micro-Payments (sub $100) will be a $500Billion to $1 Trillion industry (if not more). This is anyone's game, but internet companies are better positioned to capitalize on this.

Distribution vs. Software?

With regards to the question will software win? or will distribution win? I think both have a place and role. It would be naive to think Western Union will do nothing and be complacent. It will not. Neither will the other incumbents. There is nothing that stops the incumbents to offer nearly very same value offering for transfers that the new age internet remittance players are going to be offering.

Whilst no one can predict for sure, and examples like Blockbuster are always brought up, personally, I don't think Western Union and other incumbent players will be complacent and see their decline.

The incumbents might just even acquire the new age internet remittance players, thus have a firm monopoly, though I don't see that happening anytime soon due to competition laws.

I feel the number of players in the market will reduce, and the value of services being offered by each players will rise vertically.

For the next 3-5 years, the Old and the New will battle it out together.

What is the best option for a website that needs to receive low-volume but high-value ACH payments?

Sun, 05 Jul 2015 19:04:36 +0000

Faisal KhanAnswered Jul 5, 2015

Your best bet is for an ACH client push, with a written authorization and a photo-ID for such a large ticket item (if ACH is the route you would be taking).

Is there an off-the-shelf EMV (chip-and-PIN) Bluetooth card reader I can buy to build my own iOS payment solution?

Sun, 05 Jul 2015 19:04:34 +0000

Faisal KhanAnswered Jul 5, 2015

There are plenty of players in this realm. Just to cite one example: Miura Systems: http://www.miurasystems.com/

In a world of smart tech, Faster Payments (UK), ACH, and EPN (US), why can’t bank accounts show truly real-time balances based on all posted transactions?

Sun, 05 Jul 2015 19:04:33 +0000

Faisal KhanAnswered Jul 5, 2015

Lots of questions asked, so here are the answers:

In the UK, if the direct-debit is between two people, i.e. interbank funds transfer, the balances (correctly) in both the debit and credit accounts will reflect after a few minutes at best.

However, if the Debit card was charged somewhere, the amount from your account will be deducted and settled into the merchant's account as per the agreement the merchant has with its acquirers. In some cases, depending on the merchant and the acquiring network / processor they are using, the funds may be authorized, but not deducted. In some cases the authorization itself is the blocking of funds. In certain countries it is not. This is a merchant side issue and their upstream acquirer issue, not a direct-debit problem per se.

The US has a very archaic payments system, so lets not even talk about that. They have no clue as to what a real-time direct debit is, unless of course you're playing/paying with Dwolla and their Fisync service.

Rest of the world, where real-time switches are enabled, Singapore, Pakistan, Hong Kong, most countries in EU, the direct-debit charge is almost instant from your account, but held by the acquiring bank for some time (in the event of a reversal/fraud, etc.) before it is paid out to the merchant.

The consumer might appear to be at the mercy of the banks, or what you have termed it as: lottery, however that is not the case. The settlement times are very well defined. Especially for direct debit (be it weekday or weekend). The problem comes forth when you have one bank member of Faster Payments and one that is not. In very many countries, the settlement times between banks are now being performed a number of times during the day, Singapore for example does it not every 6-hours (this is bank-to-bank settlement, the person-to-person payment is almost instant).

How can I start and operate an acquiring bank?

Sun, 05 Jul 2015 19:04:32 +0000

Faisal KhanAnswered Jul 5, 2015

In the UAE for example, you would need to obtain a banking license from the Central Bank of UAE (http://www.centralbank.ae/), this license could be of a regular retail bank or an Islamic bank (with retail banking functions). Your offering has to be within the QMI set as defined by the Central Bank of UAE.

Once you have established yourself as a bank (and I'm skipping an ocean of things-to-do here in order to become a bank), you can then apply for VISA &/or MasterCard membership. From the membership, you can then present to VISA &/or MasterCard your business plan to get into the acquiring business. V/MC will then debate if they want to add another player in the acquiring business or not. If they, do, then you would have an acquiring license and would start working with them on integration, distribution, etc.

Just FYI, there wouldn't a banking license for just an acquiring bank per se. You can be a master (or super) acquirer, which essentially means you're an acquirer and a gateway (like say NI or FDI, etc.)

How does PayPal Here compare to Square?

Sun, 05 Jul 2015 18:45:47 +0000

Faisal KhanAnswered Jul 5, 2015

No one knows for sure. There are estimates and then there are estimates. For example, most of the folks who are into the cross-border peer to peer money transfer use the figures from the remittance industry and cite those as a benchmark for market size. The current remittance industry market size is about $500-$600 Billion per year. How much of this is actually P2P money transfer is highly debatable and speculative at best.

Hardly any country's financial regulator publishes numbers that would provide a breakdown of the remittance corridors by agent and that too, by the method in which the transaction was done (was it P2P? Agent Transfer? Bank to Bank?, etc.)

Will Facebook eventually introduce its own person-to-person money-transfer feature?

Sun, 05 Jul 2015 18:45:46 +0000

Faisal KhanAnswered Jul 5, 2015

Most people are divided on this question. My information and sources tell me, Facebook will introduce send-money option, only question is when? No one seems to know.

Also see my detailed response to a similar question: Faisal Khan's answer to Why are start-ups or Facebook itself not using Facebook's large user base for money-transfer services?

Are Bitcoins likely to become the future of currency?

Sun, 05 Jul 2015 18:45:44 +0000

Faisal KhanAnswered Jul 5, 2015

Most certainly not. BitCoin is not the future of currency.

The future of currency would still be the same one that we have now, though it would be more digital in nature.

What will money look like 35 years from now?

Sun, 05 Jul 2015 18:16:40 +0000

Faisal KhanAnswered Jul 5, 2015

Money even a 100 years from now, would be digitally value transfer mechanism.

As we (money & payments) get more digital in nature, the whole regime of currency notes and coins might be drastically reduced by then. I don't know if by 2050 currency notes & money would disappear all together.

By 2050, the old age notion of holding on to paper money would be an ancient thought for new generation, a distant memory for the millennials and for the few of us born in 19060s to 1970s - a nostalgic thought.

Taking queue from how mobile money is being transferred today back and forth (digital transfers not much cashing out) and how Denmark (See: Denmark moves step closer to being a cashless country) is slowly moving towards a cashless economy, the writing on the wall is clear. Currency notes and coins have their days numbered.

What is the difference between a SWIFT transfer and a wire transfer?

Sun, 05 Jul 2015 18:16:38 +0000

Faisal KhanAnswered Jul 5, 2015

Nomenclature essentially, also depends from which country this question is being asked for.

Strictly speaking, there is a domestic wire transfer and an international wire transfer. Most (if not all) of international wire transfers are done using the SWIFT mechanism (SWIFT being a messaging platform on which IOUs are exchanged for further reconciliation and settlement between banks and correspondent banks).

So SWIFT transfer is a sub-set of international wire transfers.

Can MCB Lite or UBL Wiz cards be used for purchases on AliExpress in Pakistan?

Sun, 05 Jul 2015 18:16:37 +0000

Faisal KhanAnswered Jul 5, 2015

MCB Lite works perfectly fine on AliExpress.

Which technology companies around the world are building tools to help customers switch their primary bank?

Sat, 04 Jul 2015 19:03:21 +0000

Faisal KhanAnswered Jul 4, 2015

In the UK, you can switch your bank accounts using the Switch-Free service. Whether or not, they can setup your payments for you, is doubtful.

Current Account Switch Service

What is the best way to start an online business?

Sat, 04 Jul 2015 19:03:20 +0000

Faisal KhanAnswered Jul 4, 2015

I wrote a pretty detailed answer on How to start an Online Business. Faisal Khan's answer to How do I start an online business?

It does need an update, which I plan on posting sometime soon.

What are the top five consumer problems that mobile POS systems help solve?

Sat, 04 Jul 2015 19:03:18 +0000

Faisal KhanAnswered Jul 4, 2015

Would be hard-pressed to find 5 solid reasons. Flexibility / Convenience / Mobility all wrapped as a single-problem is what in my opinion the mPOS solves.

Because it is so cheap to implement by merchants, as a Consumer it solves the problem of being able to offer card based payments where you traditionally would have paid via cash. Food delivery is one such example. Taxi's etc. are another. The list is quite evolving.

Have-vs-Have-not. As a consumer, some businesses I visit won't even qualify for a POS terminal. Think small businesses, hair-cutting salons, Flea Markets, Independent Clothes Designers, Artists, Freelancers, Temp Help, Small Cafes, Dry-Cleaners, Small Grocery Stores, Etc.

Before you all pounce on the list of businesses above and say "Hey! That's already happening here (in the US)", I am referring to emerging markets / developing countries examples.

What are the strongest arguments for and against treating Coinbase as a true exchange?

Sat, 04 Jul 2015 19:03:17 +0000

Faisal KhanAnswered Jul 4, 2015

If Coinbase were an exchange in the classical sense, it would have a market, where Bids & Offers would be made. You'd be able to buy/sell Bitcoins against various currencies as per your liking and depending on the liquidity in the market, the matching engine would then try to match (pair) your transactions.

Even Coinbase doesn't cite themselves as an exchange:

Which mobile payments startups map phone numbers to underlying Visa card numbers or IBANs?

Fri, 03 Jul 2015 18:57:58 +0000

Faisal KhanAnswered Jul 3, 2015

MCBLite in Pakistan does that. So does EasyPaisa (also in Pakistan). Most branchless MNOs who offer banking services also use the mobile number as the primary account identifier.

Can you walk through the full credit-card payment flow from the payment terminal and swipe to the issuing bank returning an authorization code?

Fri, 03 Jul 2015 18:57:56 +0000

Faisal KhanAnswered Jul 3, 2015

Even though this infographic technically explains how the Interchange fees, etc. is earned/split, it does provide a very good standard flow of the transaction.

Source: Understanding Swipe Fees and Interchange

Here is the flow otherwise:

Source: http://www.pathwaypayments.com/

Other resources:

How Payment Processing Works

What monthly income would I need to comfortably buy a $5 coffee daily in the U.S.?

Fri, 03 Jul 2015 18:43:48 +0000

Faisal KhanAnswered Jul 3, 2015

It really depends on how much people love their coffee to spend $150 on it every month (assuming 1 cup only per day).

You could be a minimum wage earner, and in that case, a cup of $5 coffee is almost 30 minutes of hard work, so one would think again.

If you're not minimum wage and are earning a modest living, it just might be part of a your daily ritual to spend $5 on coffee. Some people do, most don't.

If you're making above average money or lots of money, spending $5 becomes trivial and what you would really need to see if coffee is something you like and would like to spend money on.

It all comes down to choice. If you like it enough, you'll spend money on it and if you're addicted to it, you will find a way to earn and spend money on it.

Since many people have debit cards but not credit cards, is there or could there be a debit-based online payment option in Pakistan?

Fri, 03 Jul 2015 18:43:47 +0000

Faisal KhanAnswered Jul 3, 2015

Banks are hesitant to allow Debit cards to be used online as this is direct debit and chances of fraudulent transactions remains high.

Online transactions are essentially CNP (Card Not Present) transactions, and risks associated with CNP are high. Whilst it makes perfect sense to use Debit cards online, almost all the banks have switched this off.

Couple of reasons are:

Many banks are now slowly launching their own pre-paid cards, and existing debit cards would eat away into that market.
2FA (Two Factor Authentication) is the preferred method for Debit cards, with a confirmation code to complete the transaction, being received on your phone, the problem is most merchants do not have the appropriate shopping carts in place to allow 2FA to be incorporated into the sales cycle.
MDR (Merchant Discount Rate) is still relatively low, yet, people (buyers and merchants) discourage paying it so. They would still prefer a cash transaction.
If Merchants are making say 4% on the total sale, Pakistan being the cut-throat, price-sensitive market that we are, paying an MDR of 2.5% then becomes a huge issue.
Interest (or Riba) based transactions are still not preferred by a large populous of the society.
Taxation is another issue. Debit card based transactions essentially become part and parcel of the online sales reporting, and many merchant would prefer not to have it, and this includes Buyers as well. If you buy a Printer online for say Rs. 10,000, there is GST applicable on it. Both the Merchant and the Buyer would prefer the deal goes through at Rs. 10,000 with no reporting as opposed to Rs. 10,000+GST (where now both parties are reported).
Transfer Fees / Loading Fees are still too high for such cards.
SBP is leaning towards EMV (Chip+PIN) solutions later on this year, so your traditional plastic would now need to have an EMV chip and a PIN pad to approve the transactions (how will this be enabled online?). The entire world is moving towards EMV and Pakistan will soon follow.
So many people find it a hassle to enroll in Secure by MasterCard or Verified by Visa program, which would enable the online sales cycle to be extremely smooth and safe.

Which bank in Pakistan is the best option for opening a personal account?

Fri, 03 Jul 2015 18:43:45 +0000

Faisal KhanAnswered Jul 3, 2015

Dealing with banks on a daily business, here would be my personal recommendations for both your personal (current/savings account) as well as a business account.

Bank AL-Habib (superior customer service, albeit conservative banking style, wobbly ATM network).
Faysal Bank (rock solid ATM network, no Internet Banking, mobile banking very rudimentary, good customer support)
NIB Bank (solid ATM network, Internet Banking, can do Funds Transfer and IBFT, good customer support, and decent banking products).
JS Bank (reliable ATM network, solid Internet Banking, great customer support).

Is online credit-card shopping in Pakistan truly risky, or is the fear mainly due to perception and lack of awareness?

Fri, 03 Jul 2015 18:43:43 +0000

Faisal KhanAnswered Jul 3, 2015

There is inherently nothing "scary" about using a credit card online. There are various theories over the years that one can read as to why credit card and/or debit card transactions online, are limited. This, by the way is true across South Asia.

First and foremost, it is education. Many credit/debit card holders have no idea about the rights they have/do-not-have about CNP (Card Not Present) transactions and/or MOTO (Mail Order/Telephone Order) transactions.

This is equally stressed by the front line customer support at banks, who also have limited or periphery knowledge on slightly complex questions. For example if you were to call your credit card bank in Pakistan and ask why the AVS (Address Verification System) is not working for Pakistani cards abroad, they would be hard pressed for an answer.

Equally, you can ask them literally 100s of other questions and the answers are not easily forthcoming. What is the guaranteed cycle (days) upon which a chargeback can be filed? What is Interchange fees I would be charged if I used my credit card for cash advance? If I would like to dispute an international charge (the charge was made, but the merchant says it was not made), what is the procedure? If you want the transaction number for the charge you made good luck in getting that, most CS reps don't even have access to such basic data, If an erroneous charge occurs, its removal is 15 days minimum - Why if ask? then answers will be limited (at best), etc.

The second issue is the number of merchants in Pakistan or otherwise who are willing to accept credit cards from Pakistan. UBL's Wiz (Pre-paid Debit Card) for example, won't run on Apple (mixed results), Amazon, GoDaddy, Etsy, AWS, Rackspace, Barnes & Noble, and many other stores.

The same problem exists with Credit Cards. Most do not give an issue, but then again, fraudulent usage and/or abuse of the credit card is very common in Pakistan.

We (as the end-users) just do not have the confidence in the credit/debit card systems in Pakistan. We see too much pain and effort in trying to have issues resolved when it comes to banks.

On the risk and fraud management side, banks are so overly stringent, that for many transactions, you have to answer CBC (Call-Back-Confirmation) calls, and at times have to have your credit/debit card activated for an online transaction.

Most banks in Pakistan have a limit as to how much you can charge with a merchant in any given month. For example Standard Chartered Bank says, with a single merchant in any 15 days period, you cannot charge more than US$ 1,500 to that merchant's account.

All these risk/fraud rule-sets irks a few and for most across the board, it reduces the bank's exposure to fraud. Fair you say? Yes, say the bank. No says a person like myself who uses their card extensively online.

Then there is the issue of interest. Not online Interest as a form of additional charge the merchant must bear (which merchants love to pass on to consumers), but also the issue of Riba based transactions. With more and more people opting for Islamic banking and/or transactions without interest, credit cards are all the evil for them, cash on delivery makes sense even to a layman.

COD vs Credit Card transactions (for Pakistani market), has advantages for the merchant. The merchant gets paid there and then on COD method. With the credit card (acquiring) model, the payout can be as little as 2 days to as high as 15 days (depending on the risk of the merchant).

Online shopping can be made very secure, safe and easy to use with products like Verified by Visa or Secure by Mastercard. Even the evolution of one-time virtual cards (VCT - Virtual Card Technology) which essentially gives you disposable pre-paid numbers is also catching up fast.

Customers want absolute safety of using their credit card online. Banks was absolute safety of mitigating fraud/risk that they are underwriting, and merchants want a hassle-free system of getting paid. The balance of all three variables is not easy.

Until and unless there is mass adoption of plastic instruments for online payments, these issues will exist. The total number of merchants online in Pakistan is dismal (about 650 or so +/- 25 merchants). When we have say, 10,000+ merchants online, you will see online payments will be synonymous with say mobile top-ups and scratch cards. Its just a matter of time.

How do employers pay freelance writers located in other countries?

Fri, 03 Jul 2015 18:16:33 +0000

Faisal KhanAnswered Jul 3, 2015

Plenty of ways to go about this. Default payment method of choice is usually an international wire transfer for large amounts. For smaller amounts, choices vary.

Companies like Payoneer and Skrill have excelled at this. Especially Payoneer that provides payout services in something like 200 countries.

Payoneer & PayPal are usually the preferred methods.

Where are national bank accounts actually held?

Fri, 03 Jul 2015 18:16:31 +0000

Faisal KhanAnswered Jul 3, 2015

Understanding how money is created and held by each country, etc. is overly simple, to the extent, we don't believe it.

For the purposes of simplicity...

Think of every country as a child. So there is a person called Greece, Italy, UK, France, US, Kenya, so on and so forth.

Each person (country) has a ledger.

All of these people are sitting in a circle with their ledgers open and facing each other. Having the option to hear and see what is going on.

Now, imagine that the parents of all the European children is called the European Central Bank. The parents give out allowances to each child, and everyone records it. Everyone in the room knows how many Euros, Italy has, how many Greece has and how many France has.

Likewise, the parent of the US child (the Federal Reserve), might give US Dollars to some European, so Greece could have multiple entries in its ledger for Euros and US Dollars.

In some cases like say Philippines, the ledger would have entires for:

Philippines Pesos
US Dollars (as given by Uncle Sam)
Euros (as given by Aunty ECB)
UAE Dirhams as given by Uncle UAE.

Now if Philippines decides to modify its register which is say showing US$ 500 to unilaterally US$ 10,000 - it won't be possible. Why? Because everyone in the room saw (so to speak) what Uncle Sam gave to you. The consensus is that Philippines only has US$ 500.

Philippines cannot print more US Dollars, only the US can. Philippines can however, print as much as Philippines Pesos as it wants. That is its own prerogative.

When a child like Greece spends its money carelessly, ECB's entry for Greece diminishes. Now with no money left, other cousins/siblings come to Greece to ask for their money, and Greece has none to pay back.

All these monetary entries in the EU are essentially entries in the ledgers with the European Central Banks and each country's internal Central Bank keeps a corresponding copy of how much money it has, how much is owed, etc.

Hope that answers your question.

For Further Reading

Faisal Khan's answer to How do countries pay debts of millions? Is the money moved physically or electronically?
Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to How does money transfer between banks and different countries work?
Faisal Khan's answer to How do Bitcoin remittances work?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

For global B2C transfers, what banking details are needed to send winnings from a European gaming bank to users in 190+ countries?

Fri, 03 Jul 2015 18:16:30 +0000

Faisal KhanAnswered Jul 3, 2015

It would be a very difficult effort for you to go into 190+ countries and establish banking connect presence there.

Your best option is to use services like Skrill, Payoneer, Earthport, Tipalti, et. al.

They all can easily assist you in this. Skrill specializes in gambling payouts, so this is right up their alley.

Which payment gateways are best in the Middle East, and is a local company required for approval?

Fri, 03 Jul 2015 18:16:29 +0000

Faisal KhanAnswered Jul 3, 2015

Have a look at PayFort, they are the de facto go to guys for many startups and established businesses. Payfort | Online Payment Gateway

What is the next major fintech disruption expected in the payments industry?

Fri, 03 Jul 2015 18:16:27 +0000

Faisal KhanAnswered Jul 3, 2015

Its taken roughly 400+ years for the cracks of disruption starting to appear in the banking fabric. VISA & MasterCard would eventually be disrupted (nothing lasts forever).

With the advent of large social networks and messaging platforms like Facebook, WhatsApp/Messenger, LINE, Viber, WeChat, Apple's Facetime, it will only be a matter of time, that value transfer would be allowed on these networks, directly associated with your bank account.

The first step is to use the card schemes to connect to your e-wallet. Eventually, this too will pass. In the US for example, there is a large up-surge towards ACH linked bank accounts. The same is happening in other places. EasyPaisa in Pakistan, Boleto scrips in Brazil, Yandex Money in Russia, Dragon Pay in Philippines, Paytm in India, etc.

The eco-systems are young. They are still on-boarding and expanding their networks, and eventually you will start to see a lot of interconnects.

How can I track an international wire transfer if I am not a bank employee but have the SWIFT copy?

Fri, 03 Jul 2015 18:16:26 +0000

Faisal KhanAnswered Jul 3, 2015

International wire transfers like SWIFT do not provide a Fedex like dashboard to track payments (hardly anyone does when you come to think of it).

If you have a copy of SWIFT transfer, call up your bank and share it with the International Wire Department. They will be able to trace it immediately.

Most bank (especially in the developing world), like to hold on to these wires (no matter how small the amount is), as it provides them with free funds that they can use for overnight lending.

In Pakistan, for example remittance payments have to be made within 24 hours else there is a penalty imposed by State Bank of Pakistan of 60 paisas per Rs. 1000 per day.

Know your rights and pursue. Ask them the reason for the delay in processing. Always ask in writing.

Which APIs exist for transferring funds between accounts?

Fri, 03 Jul 2015 18:16:24 +0000

Faisal KhanAnswered Jul 3, 2015

Any decent ACH processor will provide you with APIs. There are so many of them. Push APIs which are more easily accessible to you, are now provided by almost everyone.

Pull APIs which require that you are underwritten, are tough to get a hold of, but are available also.

ACHq, National ACH, etc. just Google for these companies they have APIs to offer.

What is the best international address verification service?

Thu, 02 Jul 2015 18:56:46 +0000

Faisal KhanAnswered Jul 2, 2015

There are none essentially. Though there are companies like GDC and GB Group, their outreach is limited when it comes to the emerging markets (read: developing world). AVS for most of the developing world is simply not available.

Most recently, a lot many people have started implementing Google Maps validation APIs on to forms, etc. (sign up for BitPay and you will experience this - Start Accepting Bitcoin with BitPay)

References:

Identity Intelligence Solutions for ID Verification - Customer Registration - Marketing Services & Tracing
Online Identity Verification Software

What revenue layers exist between a U.S. institution holding an MSB license and the end customer?

Thu, 02 Jul 2015 18:56:44 +0000

Faisal KhanAnswered Jul 2, 2015

Here is a graph that would give you an idea of how money is split. This is assuming that introduction parties are not involved in the picture.

Where can I find information about Greece’s anti–money laundering laws related to money-transfer services?

Thu, 02 Jul 2015 18:56:43 +0000

Faisal KhanAnswered Jul 2, 2015

Bank of Greece is the supervisor for all efforts pertaining to the Anti-Money Laundering effort. You can read about them at: Money Laundering

In addition to this you might want to refer to the Financial Action Task Force (FAFT) website: Financial Action Task Force (FATF)

Why does Dwolla require users to provide a Social Security Number?

Thu, 02 Jul 2015 18:56:42 +0000

Faisal KhanAnswered Jul 2, 2015

The Bank Secrecy Act, it has so many updates and amendments, its probably buried somewhere inside of it: Bank Secrecy Act

How can someone start a business that provides payment processing like Stripe, WePay, or Square?

Wed, 01 Jul 2015 19:13:11 +0000

Faisal KhanAnswered Jul 1, 2015

For the US, assuming if you need a license (you don't need a license if you are an ISO/MSP) depends on on what sort of an agreement you have with your acquiring bank and/or partner. Sometimes they will allow you to piggy back on their MSB license (if required to do so). Do look at companies like BancBox (BancBox) that will help you with the MSB part as well.

The following help answer some of the questions you have asked:

What are the key steps involved with becoming a payment processing company?
How does one create a new payment gateway?
How does one start a payment gateway?
What do you need to start a payment processor like Stripe or Braintree ?
How do you to start a payment processor like Stripe/Braintree in sub-saharan Africa?

Does Xoom provide next-day credit for transfers to India?

Wed, 01 Jul 2015 19:13:09 +0000

Faisal KhanAnswered Jul 1, 2015

The would presumably use pre-funding, i.e. they would maintain a balance in an Indian bank and then do a interbank funds transfer. This is just an assumption.

Most money transfer companies do provide near real-time deposits, search or ask for money transfer companies they operate on the pre-funding mechanism.

What are common compliance-related reasons banks reject wire transfers?

Wed, 01 Jul 2015 18:16:22 +0000

Faisal KhanAnswered Jul 1, 2015

There can be many reasons for this, best to ask your bank.

Some points that come to mind:

The intermediary bank require more KYC on you.
The amount being transmitter is higher than the intermediary's limits set for first time users, and hence would require additional information from you on the source of funds and/or the reason for the transfer.
If your name is flagged in any database, you will not be notified, it would be against AML training to notify the client. So it could be that, but I doubt it.
The name off the beneficiary was flagged, this happens a lot, and they might require additional information on the beneficiary, to be sure, it is not the same person who is in their soft-flag database.
The transaction purpose is missing in the wire transfer
The correspondent bank requires additional information which was not sent by the originating bank
You have breached your wire limit (if any) set by the originating bank
The recipient bank is flagged or the branch is flagged.
The recipient bank account number is flagged.

What does a domestic wire transfer actually cost a bank to execute behind the scenes?

Fri, 12 Jun 2015 18:54:01 +0000

Faisal KhanAnswered Jun 12, 2015

The US does not have a central real-time settlement switch to which all banks are connected. The closest analog the US has is a 40-year old technology that is called the ACH (Automated Clearing House) which still is a 3-day process, using batch filing for transfers between banks.

With over 8,000+ financial branches, the reason that the US has never bothered to implement a real-time switch can easily be seen by the amount of money that banks make by keeping your money overnight (float). Billions of US dollars are earned by the banks on a yearly basis by having this inordinate delay built into the system. Considering that the US processed over US$ 33 Trillion in 2011 via ACH payments, you can calculate (using your preferred model) how much money they made with that transaction volume.

Everyone who is processing ACH payments is making money. Essentially, it is the bank that is setting the rate to move that transfer across. Sure, they can do it for tens of cents, but if they can get away with charging you $15 for it, why not.

There is no incentive for the banks to move to a real-time settlement system, until and unless they figure out a way to earn the money they are earning through ACH right now. There has been a lot of talk about a faster settlement system, but even if that comes into play, there is no guarantee that everyone will hop onto it and it is most likely that the banks involved will impose higher fees to have the funds channeled through faster.

If there is one thing for certain, in the US, speed comes at a price.

As a postscript, an excellent read on this is Dwolla's effort to implement a real-time settlement switch: ACH goes real time with FiSync. Free for banks and credit unions.

Would Cuba’s economy improve significantly if the U.S. embargo were lifted?

Fri, 12 Jun 2015 17:55:26 +0000

Faisal KhanAnswered Jun 12, 2015

Think Cuban cigars being exported to the US legally. One of the largest cigar smoking markets in the world, I think Cuba would benefit quite a lot.

If the SWIFT code is entered incorrectly, how long does it usually take for an international wire to bounce back?

Fri, 12 Jun 2015 17:55:24 +0000

Faisal KhanAnswered Jun 12, 2015

About a day or so in general. However, most of the time the bank will let the money sit there, for it is free float, till such time that the sender calls in and asks if the wire was returned.

Each bank has its own way of dealing with this. Greedy banks will sit on it, banks with stellar service, will inform you immediately and tell you what your options are.

How would you convince a government to accept Bitcoin and recognize it as a legal commodity?

Fri, 12 Jun 2015 17:55:23 +0000

Faisal KhanAnswered Jun 12, 2015

You don't convince the national government per se, what you have to do is to convince the financial regulator to allow Bitcoin to be treated either as a tradable commodity (like Gold, Silver, etc.) or to be treated as a Currency (like Euro, USD, etc.)

Because there is no control over Bitcoin, its issuance, its circulation, etc. The central bank regulators are essentially baffled. Spend all your life immersed in traditional fiat currencies and then something like Bitcoin comes along, what do you think the natural reaction would be? Bitcoin would be looked at with a lot of skepticism.

Education is the first key towards legalization of Bitcoin. The more the regulators, bankers, and the general public who have a vested interest in payments are educated, the more naturalized path there would be towards legalization.

Personally, I feel it is too early to regulate Bitcoin. Let it enjoy 3-4-5 years of unregulated space, so that it innovates itself more. Eventually, Bitcoin (or its successor) would be legal everywhere. Its just a matter of timing.

Many Wall Street figures face pending cases for fraud or money laundering but remain free—is this due to their power, and would jailing them do more harm than good?

Thu, 11 Jun 2015 18:52:55 +0000

Faisal KhanAnswered Jun 11, 2015

From an AML (Anti-Money Laundering) point of view, making a case and then prosecuting it successfully is a technical and legal challenge. If you look at FATF (Financial Action Task Force), the somewhat central authority on Anti Money Laundering there are disagreements between member states as to what is the classical definition of Money Laundering. AML in one country/jurisdiction may not be an AML offense in another country/jurisdiction. AML is such a complex subject, that we mistakenly have juxtaposed a simplistic definition over it - which is not true and hence has problems when you look at the law and from a prosecuting viewpoint.

In most cases, the lawyers hired to defend bankers, etc. find great references (read: past cases) and loopholes in the system that makes a successful conviction almost impossible.

Whilst there are forensic accounting personnel who excel in making connections to nefarious parties and showing that an AML violation occurred, it is an entirely different case in making it stick to court.

There can be 100s of AML definitions that are set into the BI system of a Bank's Core Banking Software.

As an example, if in a certain country, an AML definition says more than 3 transactions per month to a specific person overseas for over $10,000 be flagged, you could suddenly have 1000s of such flags from a bank like JP Morgan Chase or Bank of America. Now as per the definition, all these are AML violations, however, in actuality, 99.99% of these are genuine transactions and the few that are deemed suspicious, would require a lot of effort to be proved as such. Then there is the question - is it worth the time, money and effort spent in pursuing such cases.

You also have to work with other banks/regulators across-the-border and that is not always easy. Your subpoenas most of the time cannot be executed in other countries/jurisdictions.

So there are a whole set of problems. DAs in many states/cities most of the time jump the gun, only to find out later it is a Herculean task in trying to get successful convictions on all AML violations.

See: Financial Action Task Force (FATF)

What advantages does using Bitcoin provide compared with holding funds in a Swiss bank account?

Thu, 11 Jun 2015 18:52:53 +0000

Faisal KhanAnswered Jun 11, 2015

Needless to say, it all depends on your transactional information. Swiss Banking is not 100% anonymous. It is still regulated and if push-comes-to-shove (read: legal), your details can be given out by the Bank.

Bitcoin is anonymous of course, provided your shield your wallet information well. If you want to pay me, and I happen to know you, when a transaction is done into my wallet, your wallet ID will be known to me. This is one way I can keep track of you. You could cascade wallets, keeping your original wallet information secure, but if I were to look at the transaction history of wallets, I would still be able to track back.

It would be anonymous only if I did not know who you were, and then we conducted the transaction.

There is no authority that would give your wallet information details out (per se). If you have an online wallet, the wallet provider may be required to give out your email address to which the wallet is associated with, other than that, nada.

Your best bet would be to have an off-line wallet, where you store all your money and for anonymous transactions, make a few online wallets and transfer money to these wallets for purposes of transacting.

For making an online or offline wallet, your personal details are not required.

How do countries repay debts worth millions, and is the money moved electronically or physically?

Thu, 11 Jun 2015 18:15:36 +0000

Faisal KhanAnswered Jun 11, 2015

It is a little difficult to explain to a first time user, but trust me, it is no rocket science. It is just a concept, if you understand it, you will get it.

Think about money (currency) that each country produces. They create money in physical form (notes & coins) and much of it electronically.

So every country has a very accurate ledger count of how much money is in circulation electronically and in physical form. Because you, the country, are responsible for the creation of your own currency, no one else can make your money (if they do so, your ledger would not have that entry and hence you know someone else is trying to copy your currency).

So now when money is circulated from one country to another, lets take an example between US and UK, it might look like following:

US: Total Money created: US$ 1 Billion
US$ 900 Million Electronic and US$ 100 Million in Currency & Notes.

UK: Total Money created: GBP 1 Billion
GBP 800 Million Electronic and GBP 200 Million in Currency & Notes.

Now if the US loans the UK government say US$ 100 Million, this is how the ledger of the US Treasure will look like (in a crude sense):

US Government Treasury Department
Total Currency Ever Created: US$ 1 Billion.

- Currency & Notes: US$ 100 Million
- Electronic Within The US: US$ 800 Million
- Bank of England: US$ 100 Million.

UK Treasure Department
Total Currency Ever Created: GBP 1 Billion

- Currency & Notes: GBP 200 Million
- Electronic Within The UK: GBP 800 Million
- Received US Dollars from US: US$ 100 Million.

For this transaction to happen, BOTH the US and UK treasury simply agreed to handle their ledgers, by agreeing on a Debit & Credit.

Now are more and more parties (banks) get involved, the ledger becomes more and more complex. So smaller banks report to larger banks, larger banks, compare ledger with central banks, and central banks compare ledgers with each other. There is always a check and balance happening.

Now if the UK Government suddenly say it has US$ 300 Million in its ledger, you know that is incorrect, because the same ledger entry would not be reflected on the US side.

Hence, cheating of ledger entries is not possible. Sure, the UK government can simply increase their ledger entry and say, we now have GBP 5 Billion instead of GBP 1 Billion, which is fine, they can do that, but ONLY they (The UK Government) can do that. No one else can unilaterally just increase the money in circulation of another country.

So to answer your question, the money is electronically sitting in Greece's ledger. It will simply push this out to the IMF (via IMF's designated Bank or Banks) and push the US$ 1.3 Billion out to them and the Central Bank of Greece and the other banks will adjust their ledgers accordingly.

It is all about double entry and two-party (minimum) consensus.

For Further Reading:

The following answers will help you understand how money and money transfer works:

Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?
Faisal Khan's answer to What exactly happens when money is sent via Western Union versus a company like XOOM? What is the difference?
Faisal Khan's answer to How does money transfer between banks and different countries work?
Faisal Khan's answer to How do Bitcoin remittances work?
Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?
Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Are there infographic-style “periodic tables” that explain money concepts?

Wed, 10 Jun 2015 18:15:34 +0000

Faisal KhanAnswered Jun 10, 2015

This is a self-authored Periodic Table of Remittances (Money Transfer)

The high-resolution version can be seen here (along with the hyperlinks): Periodic Table of Remittances (Quora is mentioned in this table).

Why do extremely poor countries often remain extremely poor despite continuous foreign aid and support?

Wed, 10 Jun 2015 17:52:26 +0000

Faisal KhanAnswered Jun 10, 2015

There are many answers and views to this. Here are mine:

Taxation: Poor tax collection.
Poor Allocations: The Tax collected has poor allocation &/or allocation with lots of leakages.
Law (including Courts): When law of the land is not properly applied, there are a lot of leakages in the system, which affect the economy, including taxation.
Manufacturing Sector: I've used the term manufacturing loosely, but the country must be able to domestically generate a product &/or a service. If a country is not improving its output, stagnation will remain.
Import vs. Exports: If a country is importing more than it is exporting, it has a current account deficit. This means, on a net level, the country owes money in a foreign exchange to other countries, banks or external organizations.
Expensive Loans: Most governments succumb into accepting expensive loans, or loans, which dictate a lot as far a country's economic path is concerned. Such concessions, either tax the economy heavily, or its natural or human resources for 3rd party gain (opening closed markets, etc.) Such loans can dampen the otherwise prospect of a country trying to get out of poverty. The flip-side argument is that without these loans, the country would not go broke completely and life as one knows, would come to a standstill in these countries. Personally, I hold the opinion, loans should be avoided.
Diaspora Incentives: Not providing incentives to the diaspora for investing back home, without the burden of the investments being taxed.
Government Spending: Government spending on infrastructure is a great way to improve the economies. It create jobs, spurs economic growth, etc. Most poor countries hold the view that infrastructure investments can be kept aside for the time being, or not enough infrastructure investments in cities and districts where it is much needed.
Calling for Help: Many governments shun the idea of talking to foreign specialists or maverick specialists who can improve their economy. National pride over-shadows many-a-times the competency levels available within the country.
Government Control: Government retains control of loss making entities that they would be better off just shutting down or selling off. Think national power grids (distribution) and generation, national airlines, railways, highways/road authorities, water and sanitation, etc.
Military: Excessive military spending. Most countries who are stuck economically, will for ever be having an increased military budget spending without looking towards friendly diplomacy, yet spending blindly on more guns and ammo. In developing countries, most governments get to rule only if you please the military.

Online Payments: Why isn’t Adyen more widely known in Silicon Valley?

Tue, 09 Jun 2015 18:51:35 +0000

Faisal KhanAnswered Jun 9, 2015

Simply because its Dutch, and its not a US VC funded company. There are many companies that are much larger in scale when compared to the US counterparts, but are virtually unheard of in the US.

People in the payments space know of Adyen very well. Just like people in the P2P space would tell you (as an analogous example) that Alipay (product) is huge (much larger than PayPal (product)) yet available only in China and a handful of countries.

Will Facebook be able to significantly disrupt the online payments industry?

Tue, 09 Jun 2015 18:51:34 +0000

Faisal KhanAnswered Jun 9, 2015

Disrupt? Sure, really four companies have the power to disrupt payments today (in no particular order):

Google
Amazon
Facebook
Apple

With over a Billion+ users, Facebook certainly has the ecosystem to do so. Question is if it will do so on a global scale or not?

Imagine every Facebook Page created by an individual/company that promotes (or sells) products/services online, be suddenly be equipped with the ability of accepting payments online. Huge disruption there!

Add native Person-to-Person (P2P) payments on the entire Facebook fabric and you will see a disruption not seen in many years.

Question is - will they go global or not. They most certainly have the platform to do so.

Read this article by Farhad Manjoo to get a better semblance of the potential: The Great Tech War Of 2012

I want to build a payment gateway in a developing country—what software options are available?

Tue, 09 Jun 2015 18:51:32 +0000

Faisal KhanAnswered Jun 9, 2015

If honestly you're going to ask that question, then you're not informed much. I don't mean to hammer you down, but building a payment gateway is no easy feat. There is tremendous amount of domain knowledge that goes in building one, not to mention technical know-how in keeping it robust and secure.

If you're in a 3rd world country, your best option is to use SaaS Gateways like PayON.com. You'll be up and running in no time and shave off months (if not years) of your SDLC & Money.

How much do bank exchange rates deviate from mid-market rates like those shown on XE.com?

Tue, 09 Jun 2015 18:51:31 +0000

Faisal KhanAnswered Jun 9, 2015

It all depends on the market and the currency concerned. For competitive conversions, the difference is usually between: 0.1%-to-0.25% For most, the average is about 0.25%-to-0.5%

If I run an online service connecting the U.S. with Africa, do I need a separate money-transmitter license in each U.S. state?

Mon, 08 Jun 2015 19:08:21 +0000

Faisal KhanAnswered Jun 8, 2015

No. As a company based out of Africa, you do not need to have money transmitter licenses, nor would you (perhaps) qualify for such. What is required that you be registered with FinCEN (see link below). However, to legally do business in the US, you would need to work with...

A federally chartered bank (which has money transmission exemption)
A Licensed Money Transmitter (in all the States from which you will be sourcing your transactions from).

Depending on the arrangement, you enter into a Correspondent agreement or be on-boarded as an Agent with the licensed money transmitter.

Without having an association with a licensed money transmitter, you cannot do remittance transfers to/from the United States.

FIN-2012-A001

What payment gateway is recommended for a mobile e-commerce app based in Dubai?

Mon, 08 Jun 2015 19:08:19 +0000

Faisal KhanAnswered Jun 8, 2015

PayFort - Online Card Payments

What tracking occurs when sending money through Western Union or MoneyGram?

Mon, 08 Jun 2015 18:51:06 +0000

Faisal KhanAnswered Jun 8, 2015

Yes an ID is required for a Cash-Over-the-Counter (COC) transaction. You may be required for a supplementary ID as well. In either case, a copy of your ID is retained for internal KYC records. The information supplied is then checked by the mainstream WU/MG systems for AML checks and OFAC/Blacklist Checks. If you are flagged, they will let you know immediately (or in some case, in an hour or so).

International Trade: What fraud risks should buyers watch for in letter-of-credit payments for imports from China?

Mon, 08 Jun 2015 18:51:04 +0000

Faisal KhanAnswered Jun 8, 2015

For starters, since you've used a pre-shipment inspection service, that itself will reduce the chances of receiving substandard and/or different materials on your import. SGS / Cotecna are good companies.

The Chinese exporter can only give documents to their correspondent bank onto which the L/C is associated with.

The LC is done from your bank, so you have to present documentation to the bank that indeed pre-shipment has been done and goods have been shipped. It depends what time-frame you have been allowed with your L/C, but if its a 60 or 90 days L/C you should be pretty safe. Even if documents are somehow submitted to your bank on your behalf (can't see how that will happen), but you can still give standing instructions to your bank to have them reverified and/or recheck with you in person at the bank.

All in all, you should be pretty safe.

If I want to authorize a card for payment but only charge after the service is delivered, is “tokenization” the correct term for this process?

Sun, 07 Jun 2015 19:07:18 +0000

Faisal KhanAnswered Jun 7, 2015

Tokenization is something completely different. I agree with Bozo Juretic that authorization and capture is the preferred way to go.

Tokenization is the replacement of sensitive data with a unique identifier that cannot be mathematically reversed. In your environment, tokens take the place of sensitive credit card data.
Source: Payment Tokenization

How might Ripple’s payments network impact PayPal and Stripe?

Sun, 07 Jun 2015 18:49:52 +0000

Faisal KhanAnswered Jun 7, 2015

Well Ripple (since being a financial protocol in some sense) would allow any economy and/or ecosystem to use Ripple to make their own p2p (peer-to-peer) payment system.

As Ripple gains more traction, this ability, being able to build a P2P system on top and route it using Ripple, is nothing short of amazing.

PayPal's ecosystem is very large, and I doubt people would be willing to ditch their PayPal accounts in favour Ripple anytime soon. But because Ripple does take care of quite a few areas into consideration (transaction execution times, irrevocable payments, OFAC/AML/KYC capabilities, excellent routing network, multi-currency, market-market opportunities, etc.) this becomes a magnet for those wanting to develop a payment eco system that can not only function independently, but can also natively integrate to Ripple's payment system as well.

It will be sometime before Ripple creates a true dent (all based on the much needed traction), but nothing that PayPal and/or Stripe need to worry about immediately.

Which Pakistani banks provide free interbank fund transfers through online banking?

Sun, 07 Jun 2015 18:15:33 +0000

Faisal KhanAnswered Jun 7, 2015

Standard Chartered Bank (SCB) used to offer it, they still might. Check them out.

How can banks better protect customers from identity-theft fraudsters?

Sat, 06 Jun 2015 18:46:56 +0000

Faisal KhanAnswered Jun 6, 2015

Tellers are semi-trained to spot fake IDs, but don't hold your breath. In most cases, if a bank mildly suspects an ID is fake, they have their own internal standard operating procedure on how to handle the situation.

In most instances, a banking rep will very casually ask you for additional ID or secondary ID, to prove who you are. Banks reserve the right not to service you and/or your account if they deem that the identification was not up to par. In addition, when a person claims they do not have any other ID on them, they will very coyly ask questions pertaining to your account. Any slippage there, and they will most likely flag you.

What legal and regulatory challenges have payments, credit, and funding startups encountered or expect to face?

Sat, 06 Jun 2015 18:46:55 +0000

Faisal KhanAnswered Jun 6, 2015

The most common regulatory issue startups and/or payment providers, et. al. face is regulatory compliance (after licensing).

Not just taking the US as an example, but world over, payments and financial payment instruments & networks are licensed (in most cases). The issue can be complex, but if one were to read up on it, it is relatively easy to understand.

Licensing is simply a means to a start if you are going to be working in a particular field. Depending on where in the world you might be operating in, a license and/or a NOC (No Objection Certificate) may or may not be required by your local, state or federal regulator.

After having obtained the licensing, one of the most important and cumbersome task to handle, is regulatory compliance.

Such can include

Reporting: providing periodic reporting (usually, very specific formats, etc.),
Internal & External Audit Checks
KYC / AML etc. type checks.
Fraudulent transactions checks
Risk Mitigation

What are the biggest threats facing the ACH (automated clearing house) system, and why?

Fri, 05 Jun 2015 19:04:30 +0000

Faisal KhanAnswered Jun 5, 2015

Don't laugh, but payment solutions like Dwolla are a threat to the ACH system. Not the company Dwolla per se, but the type of payments a company like Dwolla processes - near instantaneous (i.e. Dwolla's Fisync).

Ripple protocol implemented by banks would be another threat.

Any payment solution that can allow the payment to be sent across in minutes and settled amongst the banks, is a threat to the ACH.

Can Visa prepaid cards be used for online purchases?

Fri, 05 Jun 2015 19:04:29 +0000

Faisal KhanAnswered Jun 5, 2015

Yes they do.

Which notable startups were founded and are run by women?

Fri, 05 Jun 2015 19:04:28 +0000

Faisal KhanAnswered Jun 5, 2015

User, Founder & CEO of CoinX (See: Coinx)

How do I compute value-added tax (VAT) for a transaction?

Fri, 05 Jun 2015 19:04:26 +0000

Faisal KhanAnswered Jun 5, 2015

First you have to find out how much the VAT is.

For example if it is 18% you simply multiple your Price by 1.18 to get the final amount with VAT.

If the price of a good is US$ 100 and the VAT is 9%, then your multiplier would be: US$ 100 x 1.09 = US$ 109.

What benefits does a Visa prepaid card offer compared with a standard gift card?

Fri, 05 Jun 2015 19:04:25 +0000

Faisal KhanAnswered Jun 5, 2015

A regular gift card, would most likely be a closed loop card, i.e. it would work only within the confines of a particular establishment, say Wal-Mart or Apple Store or Disney. A pre-paid gift card will work anywhere and everywhere, where there is a VISA merchant (which nowadays is pretty much everywhere), so the VISA prepaid card is more like an open-loop system. Wider acceptance.

What solutions or tips can help small businesses avoid high credit-card processing fees?

Fri, 05 Jun 2015 18:45:43 +0000

Faisal KhanAnswered Jun 5, 2015

Pass the charge to the customer. That's usually the way most small businesses with tight margins do. They prefer cash or cheque payments. For charge cards, they let their customers know that the additional expense (charge fees) would be paid by them.

What makes an ACH account number unique in the United States?

Fri, 05 Jun 2015 18:45:41 +0000

Faisal KhanAnswered Jun 5, 2015

ACH or ACH is a methodology on how electronically submitted cheques are cleared. There is no ACH Account Number per se. There is just your regular Bank Account Number. Bank Account numbers are unique only with the bank itself. It could very well be that two banks can share the same bank account number.

The differentiator is not singular. With each Bank Account Number, there is the Routing Number (ABA) and the name associated with the Account (these three items together make it unique - so to speak).

Legal (U.S.): After the Liberty Reserve arrests, how did their violations differ from the accusations made against HSBC?

Fri, 05 Jun 2015 18:45:40 +0000

Faisal KhanAnswered Jun 5, 2015

Liberty Reserve was/is being punished, because the US Financial Regulators wish to do so. There are other businesses equally that could be punished, but are not. Strictly speaking if you were to look at say JP Morgan Chase's part/role in the HSBC fiasco, the transactions from Saudi Arabia were routed through JP Morgan Chase's New York Bank branch, yet they were not chided in any manner.

Typically, when an MSB or a non-registered MSB does wrong, the Federal and State regulators do build a case, confront the party, and then try to rectify it, ensuring the player comes into compliance. There are 100s of documented cases as such, where from small time money exchangers to mid-and-large sized financial institutions may have done wrong and were then brought into the compliance net and slapped with a fine.

So lets be very clear about one thing: Liberty Reserve did break the law, continuously. A lot many times. There is no denying that. What I do object to is the manner in which they were closed down. It is not as if the regulators did not know about LR's activities and what they were doing. Are regulators now standing on the sidelines to see someone break a Dollar threshold before they move in? Seem like it. LR could have been brought into the compliance and legal net a long time ago. They could have been shut out many years ago. Yet, I personally think the regulators were salivating until the fish gained more in size.

LR's activities are nothing new. They have been around for years. Why did not one single regulator put a stop to them then is a question that begs to be answered?

The US regulators, which are needless to say backed and favoured by the larger financial institutions and their lobbyists, do not want to see any organisation that is not legally sanctioned with their blessing to blossom. I am pretty sure, Bitcoin is the next target. The US system will make it almost impossible to Americans to trade on the Bitcoin exchanges, making it illegal to use US issued or US based financial instruments or legal tender to buy/sell Bitcoins.

HSBC got away due to many factors (read my other Quora answer below), but they got the proverbial slap on the wrist, albeit an expensive one. The regulators waited out and amassed a large amount of wrongdoings and then confronted HSBC with it. HSBC which operates under the legal banking license had two options: pay up or fight. In the latter, it risked losing its license, and customers, so paying the fine was lesser of the two evils that confronted HSBC.

LR's prosecution and clamp-down efforts are different. Its been quite a few months, since the US regulators and AUSAs have clamped down on someone.

You can also read my answer on this issue at: Faisal Khan's answer to How can money laundering of $6 billion occur?

What is the intended purpose or benefit of establishing a women’s bank in India?

Fri, 05 Jun 2015 18:45:38 +0000

Faisal KhanAnswered Jun 5, 2015

Nothing.

Furthermore, I agree with you, the First Women's Bank Limited setup in Pakistan is essentially window-dressing to appease the women's vote or rights. Nothing more or less. Most bankers and those associated in the financial industry, don't even take First Women's Bank seriously (I don't for sure).

It serves no purpose in my view, and by creating one, you are creating the gender divide.

Why is a one-time password (OTP) required for nearly all banking activities in India?

Fri, 05 Jun 2015 18:45:37 +0000

Faisal KhanAnswered Jun 5, 2015

For security. People are just too easily fooled or otherwise cannot take care of their banking log-in credentials. Computers are easily hacked into. Phishing emails are able to successfully have you give up your credentials, etc.

The only known, cost effective method is to enable a OTP for transactions on the mobile phone (or another device).

Are Visa and Mastercard owned by the same company?

Fri, 05 Jun 2015 18:45:36 +0000

Faisal KhanAnswered Jun 5, 2015

Nope. They are competitors. They are two separate entities, with both VISA and Mastercard being American companies, (and they are also listed as VISA and Mastercard respectively outside the US as well). The reason why they are both mentioned in the same name comes from the fact that they operate in almost all the countries of the world. If a Bank is not working with VISA, then it is working with Mastercard and vice versa. Nowadays, many banks opt to work with both.

The naming of both VISA and Mastercard in the same sentence comes from the POS terminals industry salesmen, where the POS network operators had a great advantage in selling/leasing out POS machines that would capture and do transactions on both VISA and Mastercard, hence the terminology stayed from an acceptance point of view VISA/Mastercard.

What fee does ACH (the automated clearing house) typically charge per transaction?

Thu, 04 Jun 2015 19:03:15 +0000

Faisal KhanAnswered Jun 4, 2015

Wholesale, 10-12 cents, mid-volume, 20-25 cents, small-low volume, anywhere from 25-50-60-75 cents.

What changes could make developing countries more friendly to startups, and why are they currently less so?

Thu, 04 Jun 2015 19:03:13 +0000

Faisal KhanAnswered Jun 4, 2015

Incubators, Accelerators and Mentoring programs. That is what I have been told. If a country does not have properly run and managed incubators and accelerators, then chances are the recognition of the entire ecosystem of a start-up, etc. would just not be given its due credit at all.

The more the incubators that a country has, which in developing countries are sponsored by the city or the state, or private sector and continually pushes to evolve, over-time more friendly the country will get towards the whole start-up scene. This is just my opinion though.

How hard would it be to create an online-only card network like Visa or MasterCard focused just on internet payments?

Thu, 04 Jun 2015 19:03:12 +0000

Faisal KhanAnswered Jun 4, 2015

Barring the regulatory element of it all, i.e. licensing and banking, your main issues would be two (there are many other issues, but these two come to mind more strongly):

Merchant Traction. Until and unless, you don't see 1000s of merchants accepting your payment solution, you can bet your bottom dollar, that consumers will be in no rush to go and get your cards.
As you might have guessed it, card users will opt for it, once there is a problem your payment solution card solves. If they feel it is a genuine enough problem, they might just bite, depending on your marketing and branding.

Personally if you ask me, there is no owning of a network. With TCP/IP and mobile mobility, payment instruments are simply added on to the wallet.

Already quite a few players are addressing the security elements. Bitcoin, Ripple, etc. are examples of a mechanism of having secure transactions, for real-time payments, my choice would be Ripple (which would allow you to have multiple currencies as well on it).

Is the rising mobile-banking model led by mobile network operators a real threat to traditional banks?

Thu, 04 Jun 2015 19:03:10 +0000

Faisal KhanAnswered Jun 4, 2015

It is not unconventional per se. Clearly, everywhere else in the world, there is a need for banking people who are either unbanked or need mobility in their banking space. The MNOs play a vital role, however, they misread one bit.

Smartphones!

The smartphone has the ability to provide carrier and bank agnostic banking to the unbanked. A lot many MNOs misread that (in my opinion of the things to come). Whilst the USSD channel banking is still thriving, think of the 100s of millions of people in developing/emerging markets who do not have access to a smart phone, here the MNOs will rule. However, on the flip side, with the advent of 3G/4G/"X"G services being rolled out, the compulsion to switch to a smart phone as a mobile, computing, image capture (camera) and banking device is gaining strength each day.

Eventually, mobile wallets will rule. Which brings us to the basic question, is the "traditional" banking system being threatened? I wouldn't say threatened. The banking system for all practical purposes will remain. The "branch banking" is certainly being threatened and slowly but surely bankers will find out that the customer engagement on the delivery channel like mobile would eventually outpace and outclass that with the engagement model of say a bank branch.

We are in a transitionary phase which will perhaps last a decade or so, before you will see the eventual shrinkage of bank branches. Will the bank branches disappear totally? Perhaps! No one knows for sure. But right now a lot of money has been invested in traditional bank branches. As Brett King has said it so many times, again and again in his speeches, etc. Gen Y will be banking in the mobile space. Not the branches. They will perhaps go there once to open an account and that's it.

With this in mind, and the ever connected (mobile) population that is growing up and coming of age for banking, what do you think they will be more at ease with? A telecom carrier telling them that they can bank with them only? A bank telling them branches are essential, or a bank that has an agnostic mobile wallet - use any carrier and start banking?

You decide.

Which POS terminal is currently the most advanced on the market?

Thu, 04 Jun 2015 18:44:46 +0000

Faisal KhanAnswered Jun 4, 2015

Here is a Smart POS Terminal that is being specifically developed for the South Asian & African Markets with which I am associated.

3D Printed Working Model (Front / Merchant Facing Side)

3D Printed Working Model (Back / Customer Facing Side)

3D Printed Working Model (Front / Merchant Facing Side)

Here is the Injection Moulded Shell that is the final design. The "Blue" parts you see on this are interchangeable (Green, Orange, Red, Yellow, Blue and White)

Rear View

Another Rear View picture of the Finalised Shell (Covering)

There are 2 USB ports on the underside (belly) of the POS. There is a separate Key-pad unit for Chip & PIN transactions. The keypad units connects to the main POS via Bluetooth.

The POS is multi-functional. It has an embedded Android Board/OS and a separate Touch Screen.

Battery life is 4 hours to 8 hours (depending on the printer Usage). Needless to say it also runs on AC power.

The POS can do traditional card transactions, Up to 8 Carrier Mobile Top-ups without changing SIMs, It has a Smart Card Reader. The same reader/slot can also read SIM cards when issued by the carrier. It can do biometric verification with thumbprints. Driver's license scans, Customer photographs for cash payouts/payins as well as KYC if tied to a national registry.

Typically anything a regular POS or a Smart Phone can do with regards to payments, this POS can do it.

All this for a price less than a traditional POS machine sold in South Asia.

Where can I find legal consultancy specializing in money transfer businesses?

Thu, 04 Jun 2015 18:15:31 +0000

Faisal KhanAnswered Jun 4, 2015

All over the place, plenty at Perkins Coie, Adam Atlas, Marco Santori (Pillsbury Law), Judith Rinearson (Bryan Cave).

*my preference is in bold.

Does Stripe support ACH bank payments in addition to card transactions?

Wed, 03 Jun 2015 18:57:55 +0000

Faisal KhanAnswered Jun 3, 2015

As of 17th March 2014. They do not.

Does Stripe allow e-check (ACH) bank transfer payments?

How are payments drawn from a checking account authorized and approved?

Wed, 03 Jun 2015 18:57:53 +0000

Faisal KhanAnswered Jun 3, 2015

Theoretically you could, but the ACH processor that is pulling the payment, would require authorization (some form of a consent form that is signed). In some cases, an online form suffices.

This is a huge issue for a lot many processors and hence each has their own way or getting the authorization checked.

Could e-commerce operate without online payments, and if so, what alternatives would be used?

Wed, 03 Jun 2015 18:57:52 +0000

Faisal KhanAnswered Jun 3, 2015

Cash-On-Delivery or Pay by Direct Deposit (or Mobile Payments). Such a methodology has many names. Google calls it ROPO (Research Online, Pay Offline), others call it POPO (Purchase Online, Pay Offline).

Could using Bitcoin in a money exchange business lead to arrest?

Wed, 03 Jun 2015 18:15:30 +0000

Faisal KhanAnswered Jun 3, 2015

Depends in which country this is and what sort of law they can slap on you.

In any market you operate in, you have three choices:

Bitcoin is not regulated / not defined, hence you are in a gray area, but if the regulator wanted to come down hard on you, they could apply the foreign exchange / foreign currency money laws to you.
Bitcoin is regulated - in which case find out from the regulator if bitcoin for value-transfer is allowed in money exchange business.
Bitcoin is illegal - in which the answer is no.

When in doubt, ask!

How can a physical calling card business expand into the money transfer industry?

Wed, 03 Jun 2015 18:15:28 +0000

Faisal KhanAnswered Jun 3, 2015

Almost anywhere in the world, you cannot unilaterally expand your calling card business and offer money transfer services. The money transfer space is regulated, and hence either you go an obtain a license yourself or work with an existing money transmitter license holder.

Here is a typical transaction flow of how a physical retail distribution model of calling cards can be connected to the money transfer business. This is just one example, you can have multiple facets to this like:

IVR
Phone-Minutes Exchange
Carrier Billing (Minutes Exchange)

What are the realistic chances of a startup becoming the next PayPal?

Wed, 03 Jun 2015 18:15:27 +0000

Faisal KhanAnswered Jun 3, 2015

Anyone can start the next PayPal, the question you need to be asking yourself, what problem are you attempting to solve? (you don't have to answer here).

I've said this in the past, will say it again, put people in a room, give them a whiteboard, markers, Redbull and some cigarettes and after a couple of hours they will come up with a payment system. Many pundits believe that there are over a 1,000+ incubated payment systems and ideas out there in the world, all aiming to mimic the growth and success of PayPal. Nearly all of them will fail to meet the goal. The market can only have so many providers.

If you research extensively, the behavior of payments and then seek out the broken bridges, the friction points, etc. and see if there is a business case in trying to solve that problem.

Mathematically speaking, I could give you an answer citing 1 in 12,000 are your chances of success. I'm not trying to dissuade you, but more on asking you to look at the whole starting up a payments company from a different perspective.

Stop comparing, start exploring.

Who know, you might just be the person who would be responsible for creating the next generation payment system that would dethrone the incumbent players.

What does a time-and-motion flow-of-funds diagram look like for a money transfer company?

Wed, 03 Jun 2015 18:15:25 +0000

Faisal KhanAnswered Jun 3, 2015

Here is what a stepped time-motion diagram for money transfer (for an online business) would look like, this is based on a pre-funded account, and does not show any correspondent banking relations (its a large diagram)

If you would like the editable SVG, do let me know.

Can a personal bank account be converted into a business account?

Wed, 03 Jun 2015 18:15:24 +0000

Faisal KhanAnswered Jun 3, 2015

There is no conversion process per se, the two accounts are two different products. You can, however, open a business account and move money into it and close your personal bank account. This is what any bank will tell you.

Which website builder platforms accept Bitcoin as payment?

Tue, 02 Jun 2015 18:56:40 +0000

Faisal KhanAnswered Jun 2, 2015

Quite a few websites. BitPay, for example has a directory of companies that accept Bitcoins: Bitcoin Directory | BitPay. Am sure there are many more, too many to keep a count now.

When are Facebook mobile payments expected to launch in Europe?

Tue, 02 Jun 2015 18:15:20 +0000

Faisal KhanAnswered Jun 2, 2015

Expect it to be launched in Europe before Christmas 2015.

Are there banks or accounts where account balances can be viewed publicly?

Tue, 02 Jun 2015 18:15:19 +0000

Faisal KhanAnswered Jun 2, 2015

No. Banking Secrecy Laws in almost every conceivable country, ensure that access to financial data of it's (bank's) customers is restricted. That is one of the key responsibility of the financial regulator.

From a beginner’s perspective, how does arbitrage between different Bitcoin exchanges work?

Mon, 01 Jun 2015 18:54:36 +0000

Faisal KhanAnswered Jun 1, 2015

Assuming we don't consider the fees (as that varies from exchange to exchange), the process is pretty simple. However, exchanges have put in their mitigation gates (read: processes) that thwart such attempts on a larger scale.

For example if you were to buy from Bitstamp at $900 (1BTC) and transfer it to Mt.Gox and sell it there for $1000, congratulations you now made US$ 1000 and a gross profit of $100. But this $1000 would will not be able to use for say 10-15 days (or more) as that is the average time Mt. Gox takes to release your money.

In some instances, the exchanges have a limit on how many Bitcoins you can trade or maximum payout per month.

The only way to do it - is to have multiple accounts and investments for each day (as explained from the diagram below), which assumes it will be 7 days before you get your money.

The larger version of this image can be viewed here: Bitcoin Arbitrage Image.png

What is the best way to carry money when traveling to the United States?

Mon, 01 Jun 2015 18:15:17 +0000

Faisal KhanAnswered Jun 1, 2015

Cash should be under US$ 10,000. If you are carrying US$ 9,996 you are not obligated to tell the customs official, but it would be a good idea to do so. That number range raises a lot many flags.

If you must carry more than US$ 10,000 in cash, make sure you have multiple family members, with each one not carrying more than US$ 10,000. If you do carry more than US$10,000 you have to declare it. Source of funding proof/receipts would be a good idea.

In most instances a debit card will suffice well in the US for cash redemption. Sure it might be a bit expensive, but that's okay, considering the convenience and security it provides.

Travelers cheques - still very much issued, but hard to cash except certain bank branches.

Come to the US, open a bank account, and then have the money wired into your account.

Is the use of signatures for payment authentication becoming obsolete?

Mon, 01 Jun 2015 18:15:16 +0000

Faisal KhanAnswered Jun 1, 2015

Dead? No. Dying, Yes (isn't everything?)

Will it be around for the next 5-10 years: for sure.

Unbeknownst to many people, the signature was never meant to be used as a measure to authenticate a payment. It was meant to announce your identity in writing. It was meant to authenticate your identity. By signing, you say who you are.

The act of autographing a receipt is your acknowledgement of the transaction data on the receipt and that the merchant has in good faith executed the transaction which the Buyer in good faith has accepted.

In ideal circumstances, the signature on the receipt must be validated (cursory comparison) with the signature on say a government issued ID. Because you could mimic a signature on a government ID, it was assumed in good faith, you are who you say you are.

Signature for example is still the de facto standard on a cheque. It is the acknowledgment of authorization.

Is a PIN more secure than a Signature? Absolutely not!

If the signature is digitally analyzed every time a payment is made, it is far far more secure than a 4 digit PIN. The problem is, we don't have many payment systems that use the signatures and then (digitally) analyze them for authorization.

The only example I know of where this is being done is a fintech startup out of Belgium called (appropriately) Sign2Pay (See http://sign2pay.com). I've been tracking them and they seem to have unique niche to capture the European Debit Card market for payment on the mobile, using what else, but the signature!

Sign2Pay uses the signature as the PIN equivalent for the payment authorization. Its extremely fast, almost impossible to duplicate and very secure.

Here is their mobile app screen, where you simply sign and that is the authorization:

Quite a few elements are measured when the signature is being done to ensure it is indeed the correct one:

If you think a signature is easy to hack: try the system: visit http://www.sign2pay.com/try and "forge" a celebrity signature. (You will need an iPhone and go to landscape mode to sign).

Important is to feel the richness of the signature canvas... no lag or latency, this is definitely not your average DHL or UPS signature field.

Full Disclosure: I consult with Sign2Pay.

What is likely to be the next major cryptocurrency?

Tue, 12 May 2015 18:54:00 +0000

Faisal KhanAnswered May 12, 2015

Universal Acceptance.

Seriously! Right now, cryptocurrencies are out of reach for many. They are not understood well, they cannot be bought/sold as easily as the fiat currency, trading it is slightly complex, the whole concept of wallets, and Secret Keys, etc.

I think this is definitely Cryptocurrency 1.0 - we will very quickly go to 2.0 with more friendlier buying/selling processes, trading becomes natural and seamless, bank account to be linked to Bitcoin exchanges to buy/sell and vice versa.

Right now it is the currency for geeks. When my cabbie or the waiter at the coffee shop knows and trades in bitcoins, that is when we will see some serious traction.

How are very large sums held and moved within the United States?

Tue, 12 May 2015 18:04:23 +0000

Faisal KhanAnswered May 12, 2015

For any sporting (read: commercial) arrangements, there is a designated bank that is providing escrow & temporary contractual custodial services.

The money is transferred into the bank, and has legal conditions which is in the shape of a structured contract. For the bank this is simply a commercial arrangement for them to be the temporary custodian to the money.

When money is transferred it is kept by the bank, pending the clauses (for outcome) by the contract, or what to do if there is a cancellation (no fight) or fight does not end, etc. All possible scenarios are covered in the contract.

Towards the end, the unique executors assigned to the contract (i.e. the bank) will determine what to do with the money, based on the outcome. They will sign it off, get it signed off, and then settle the money to the designated account on file. This transfer (if in the US) would be done via RTGS (FedWire) and if international, via SWIFT.

Needless to say the bank takes a fees for arranging all this.

How can banking machines be designed to better capture and hold customer attention?

Tue, 12 May 2015 17:55:21 +0000

Faisal KhanAnswered May 12, 2015

Deploy one of these. Virtual Telepresence Robots, who can roll-up to customers, size them up on their requirements and walk them all the way over to the automated machines (like a Cash Deposit Machine), etc. and assist them. Call Center employees can connect to this machines and assist customer.

Imagine if one of the following walked up to you, with the CDM built-in and helped you how to use it - the first time around. How cool would that be?

Should Bitcoin transactions be fully untraceable?

Tue, 12 May 2015 17:55:20 +0000

Faisal KhanAnswered May 12, 2015

No If you want Bitcoins to become mainstream and to be used in this world, they ought not to be untraceable. This is the opinion of all the regulators who regulate our money.

Would an account-to-account transfer for online payments be classified as an e-money transaction?

Tue, 12 May 2015 17:55:18 +0000

Faisal KhanAnswered May 12, 2015

Depends, but I'd go with a No. E-Money in most places (regulators) is classified as stored-value. Are you moving stored value that was issued by you or maintained by you, if yes, then yes, if not issued or stored by you, then No. ?

Account transfer for online payments is just an 'electronic' transfer and would not be considered e-money transactions, unless and until specifically the e-money (stored-value) was being moved.

Why do money transfers take 3–5 business days—what manual or human processes are involved?

Tue, 12 May 2015 17:55:15 +0000

Faisal KhanAnswered May 12, 2015

I think everyone clearly has presented their best answers and indeed these reasons are correct.

Think of sending money as unilaterally driving between two points. For some the drive is easy, they know the route, and they get there in a jiffy. For some, it involves more stops and asking for directions (or paying toll), etc. and it takes time.

There are four types of money-transfers...

Domestic Inter-bank Transfers (within the country transfer from one bank to another)
Domestic Intra-bank Transfers (within the country and transferring from one bank branch to another)
International Inter-bank Transfers (probably the most common/famous bank transfer, whereby funds are transferred from one bank in one country to another bank in another country)
International Intra-bank Transfers (transferring of money within the same bank, but in a different country)

A more detailed explanation can be found here: Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

How do ATM CCTV systems identify customers in places where women wear burqas that cover their faces?

Tue, 12 May 2015 17:55:14 +0000

Faisal KhanAnswered May 12, 2015

The camera is special. When a veiled woman approaches, it switches to infrared and then can see through the cloth and takes facial measurements, running it instantly against millions of records in its database!

Of course I'm joking. Its a camera. Wear a Horse Head or a Veil or come the way you are. The camera will record just that. It has no special functions and/or abilities to circumvent or do any additional monitoring for a veiled woman.

Does a camera in New York's CitiBank scan you any differently?

If I’m optimistic about digital currencies, is it better to mine coins or simply buy them?

Mon, 11 May 2015 18:52:52 +0000

Faisal KhanAnswered May 11, 2015

I think User sums it up well. If you are specifically referring to Bitcoins, I'd say sure, go ahead. Bitcoins are being talked about a lot in the media, yet many many people have yet to wet their feet with it.

The potential upside (as being witnessed) is huge. Just imagine if 100 Million or so people started using Bitcoins for P2P payments instead of say PayPal. I was reading through a lot many forums where freelancers are very keenly looking at Bitcoins as a method of payment, the advantage? (almost instantaneous payment, irrevocable, and no cross-border limitations). That itself is a huge market which PayPal dominates and even still PayPal covers about 30-40 countries where there is free-flow of currency, in most geographical locations, PayPal has restrictions, so Bitcoin has a definite advantage.

Add cross-border remittances to the Bitcoin ecosystem, and the numbers are mind boggling. Remittances are a $550 Billion/year industry, so even a small but noticeable market share percentage, will have a huge impact on the Bitcoin value.

Once you see such traction, the value of Bitcoin is bound to surge. Right now the highs (and accompanying lows) are very volatile due to the speculative nature of investment that has come into Bitcoins. Give it a few more months and this will settle down.

Is it still worth getting into Bitcoins at their current level? My opinion is, yes. For the long term investment, say 18-24 months, the return on a Bitcoin investment is bound to be better than anything else out there.

What are some notable companies building products or services around Bitcoin?

Mon, 11 May 2015 18:52:51 +0000

Faisal KhanAnswered May 11, 2015

Bitpay for sure, the company that makes accepting Bitcoins on your website as easy as 1-2-3. See: Accept Bitcoin | BitPay

Can a money-transfer startup partner with a bank, and how does that typically work?

Sun, 10 May 2015 18:04:22 +0000

Faisal KhanAnswered May 10, 2015

There are many ways to get started in the Money Transfer business, and it all depends where in the world you are.

From a US perspective, I always cite the following approach for someone dipping their toes into the world of money transfer:

Start by becoming an ISO and see if your bank offers one for money transmission. If not, ask around and see if a licensed MTO is willing to sign you up as an ISO.

I’m launching a business but I can’t handle payouts, fraud, chargebacks, AML compliance, PCI compliance, and buyer/seller disputes—are there payment platforms that take on these burdens?

Sun, 10 May 2015 17:52:24 +0000

Faisal KhanAnswered May 10, 2015

Sure, this is what a good Payment Service Provider does. Checkout WePay, Braintree, Balanced and Stripe. They all provide this service and manage all these elements for you.

Why do people choose to fund projects on Kickstarter?

Sun, 10 May 2015 17:52:22 +0000

Faisal KhanAnswered May 10, 2015

This man.... he was my inspiration:

Are today’s mobile POS solutions sustainable long term, and what do they imply for banks?

Sat, 09 May 2015 18:04:20 +0000

Faisal KhanAnswered May 9, 2015

I think the way we are currently paying with our cards, in the near future this would be deemed as an antiquated method and gesture.

The physical card is going away and hence all methods of swipe.

Tapping or biometric authorization in proximity would most likely be the norm in paying. Those selling mPOS already know of this.

It is a very unique time in history. Traditionally technology taken off the market in the US snakes it way across South Asia and Africa to be deployed. It didn't happen with all the POS terminals in the US that are being taken down. This indeed shows it to be a turning point.

If you think about it, the mobile POS is already out there and millions of people own it in the form of a smart phone with a camera. We currently have the technology and the apps to snap a photograph and deposit a cheque and likewise add a card on the phone. The apps manage the rest. Compare this with the cost of a mPOS, it just doesn't add up. The mPOS had its brief period with the Square dongle, but that time is ending soon.

Very soon, the POS machines would be as ancient as this:

What are the latest U.S. and global statistics for consumer-to-consumer wire transfers?

Sat, 09 May 2015 18:04:19 +0000

Faisal KhanAnswered May 9, 2015

No one knows. The World Bank Group on Remittances has been pleading with regulators for years to get more visibility (read: breakdown) into the transactions from either the sending or the receiving countries. Both sides have refused.

Right now, we cannot even get the figure for the break down of the wire transfers by vertical (business, personal, credit-exchange, settlement wires, etc.) let alone even more granular data like C2C or B2B.

Don't expect this to change anytime soon.

The only breakdown you will get is the bilateral data World Bank publishes.

Would an ISIS-issued currency be accepted globally?

Sat, 09 May 2015 18:04:17 +0000

Faisal KhanAnswered May 9, 2015

For a currency to be accepted worldwide, its monetary and banking system has to be accepted worldwide. If the latter holds true, then it (Isis) would most likely start with amassing foreign currency in their ledger, and trade using that. No one has any use for an Isis issued note, so it would be worthless in the initial few years, till such time a demand for their currency (via trade) came into being.

Is Payoneer licensed as a money transmitter in every U.S. state?

Sat, 09 May 2015 17:50:40 +0000

Faisal KhanAnswered May 9, 2015

No. Not all the States. They do posses money transmitter licenses in most States but not all. For example Hawaii they don't have it for, same goes for California.

Could Pakistan follow Bangladesh’s approach and declare Bitcoin trading illegal?

Sat, 09 May 2015 17:50:38 +0000

Faisal KhanAnswered May 9, 2015

Yes. They could.

State Bank of Pakistan has not yet given an opinion on cryptocurrencies yet. State Bank has been asked of this in writing (an opinion) but has refused to give an answer to it yet.

EPD (Exchange Policy Department), PSD (Payment Systems Department) and PRI (Pakistan Remittance Initiative) collectively hold a very negative view on Bitcoins.

So it would be no surprise if Pakistan follows suit (foolishly if I may say so) and bank the trading/dealing and exchange of Bitcoins.

Why don’t banks and card processors let users restrict account access by IP location or country for extra security?

Fri, 08 May 2015 19:08:18 +0000

Faisal KhanAnswered May 8, 2015

They cannot, because the current format for authorization does not include IP information. The processor can check based on IP/location but that is for the merchant's own fraud mitigation, they cannot pass this information as part of the authorization at present.

Do U.S. companies use web-based electronic checks, and which payment gateways support them?

Thu, 07 May 2015 18:49:50 +0000

Faisal KhanAnswered May 7, 2015

Almost any processor that advertises ACH is doing this. Bancbox and Forte Payments are two names that instantly come to mind.

Why do only certain websites require an extra 3-D Secure authentication step during online payments?

Thu, 07 May 2015 18:49:49 +0000

Faisal KhanAnswered May 7, 2015

3-D Secure is an added security feature that you can opt for (if offered by) your Payment Service provider. You can opt to have it turned on or not, this depends on your type of exposure you will allow yourself to be subjected to, the financial regulations in your country and also the underwriting terms & conditions by the acquiring bank and/or PSP.

In short, its not that you have to use it, but it greatly reduces fraud and the onus of the fraud goes to the acquiring bank rather than the merchant.

Who are the top five global payments companies?

Thu, 07 May 2015 18:49:47 +0000

Faisal KhanAnswered May 7, 2015

Source: The Nilson Special Report

Which banks and account types currently offer the highest interest rates?

Thu, 07 May 2015 18:49:46 +0000

Faisal KhanAnswered May 7, 2015

Most banks offer mutual funds, and depending on the type of mutual fund you invest with, the returns can be as high as 100% (this needless to say, goes with risk - hand in hand). So if you are looking at higher interest rates than your typical (safe) CD, Mutual Funds might be a good place to look into. Some banks will offer the investment in a mutual fund, seem like a time deposit.

Banking: How often do foreign workers in the U.S. lose a large share of their earnings due to banking and transfer fees?

Thu, 07 May 2015 18:04:16 +0000

Faisal KhanAnswered May 7, 2015

Depends on the income. If you're earning US$ 300-500, then the income fees can be a noticeable portion of your income and would stand out, but then again, if you're earning US$ 300-US$500 - you'd be having a pretty darn tough time living in the US.

The average size of the transfer varies, from US$ 300 to US$ 2,500, so the fees is small, but not large enough for (as you cite) "end up losing up a significant portion of their income due to bank/transfer fees?"

As an example, the toughest remittance corridors from the US$ would charge around 10% so if you're earning $2,500 per month, the transfer fees would be US$ 250.

The only exception to this rule would be sending money to one country for further settlement into another country (send money to South Africa for further transfer to say Ghana). Here the transfer fees would rise significantly.

What would be a strong research-paper topic related to money or financial problems?

Wed, 06 May 2015 19:06:17 +0000

Faisal KhanAnswered May 6, 2015

There can be so many, some that I could suggest would be:

Flow of money in a given ecosystem, for example you could graphically model a city (like London), and then shows how money is placed (in banks, cards, etc.) and how money enters London, and then how it circulates within London, etc., essentially how it is spend. You will have to model a lot many businesses to make it work.
Factors and catalysts needed to jumpstart crypto-currency in rugged economies, aka least developed nations and how can such crypto-currencies alongside their weak fiat currencies have a running payments economy, rather than a stagnant / stringent system.
Models for reducing volatility associated with Bitcoin retailing, how can more robust models be made to minimize risk during transaction times which can include 1-2 hours before movement from bitcoin into fiat can be done.
How will existing payment rails change with the emergence of new cyrpto-currency payment rails, and will these rails eventually form a monopoly and increase pricing to the levels of Visa/MasterCard, et. al. as they have in play today?
Addressing the global KYC problem. How money movement can be made safer by adopting global KYC standards.

What would you consider the ideal payment method at a retail checkout that could replace cash?

Tue, 05 May 2015 19:04:24 +0000

Faisal KhanAnswered May 5, 2015

Contactless or Chip+PIN.

If a bank quietly added one cent to every customer’s account balance, what would happen?

Tue, 05 May 2015 19:04:22 +0000

Faisal KhanAnswered May 5, 2015

The database records are not open for manipulation. The core banking software ensures that. Even if you were to somehow do this, the log and ledger alerts will flag such a transaction (and/or increase).

In order to increase money into each account, there has to be a ledger based income, which would then disburse the amount into other accounts, failing to do so, the audit will be seeing a bunch of flags.

How difficult is it to obtain a money transmitter license?

Tue, 05 May 2015 19:04:21 +0000

Faisal KhanAnswered May 5, 2015

In addition to what other have cited, I'd like to add it is just a difficult process, one that requires money, patience and then some added patience.

It takes anywhere from 1 to almost 2 years to amass them all. Some States at times weren't even accepting applications (like NY till recently, etc.) so you have to be cognizant of that.

Depending on your business area, it could be from something easy to outright difficult (with respect to the application filing). Then there are audited financials, compliance, minimum net worth, etc.

Some States like the NY, CA and TX are difficult to get. Especially NY and CA. The commissioners can be unnecessary hurdles. They really do expect you to play to their authoritative tone. With application fees, attorney fees, and the minimum bonds, you'd be looking at US$ 2 Million as a starting point in getting your licenses (and this would also take about 1-2 years).

Brian Roemmele, Mike Townsend and I recently did a podcast on the very same subject, you can listen to it here: Everything About Money Transmitter Licensing

What exactly is a chargeback in payments?

Tue, 05 May 2015 19:04:20 +0000

Faisal KhanAnswered May 5, 2015

Its when the credit-card users informs his/her issuing bank to reverse a charge (or challenge a charge) because either the product/services were not delivered or damaged, or they did not order it.

What are some successful mobile payment solutions, and what factors contributed to their success?

Tue, 05 May 2015 19:04:18 +0000

Faisal KhanAnswered May 5, 2015

In addition to M-Pesa, there is EasyPaisa in Pakistan, which also allows millions of Telenor customers to buy/pay/send money using the mobile phone.

In the developing countries, the success depends on adoption, which is directly related to the distribution network of the MNOs (Mobile Network Operators) from where these phones can be charges, on-loaded or off-loaded with money.

Agnostic players are few in this mobile space, but the fever is catching on fast. The mobile payment would be made by the a subscriber of any MNO using any bank at the background. This is yet to be proven as a successful model, but give it a few years and we will know for sure.

Right now - the distribution network remains the underlying factor towards a success of a mobile payment network. The agents are not only the on/off-loading points but also are merchants who accept such mobile payments.

What are some examples of Bitcoin exchanges?

Tue, 05 May 2015 19:04:17 +0000

Faisal KhanAnswered May 5, 2015

CoinX - Coinx - Probably the only legal (licensed) exchange in the US.

Which U.S. states contribute the least federal tax revenue?

Tue, 05 May 2015 19:04:16 +0000

Faisal KhanAnswered May 5, 2015

Vermont; Source: Federal tax revenue by state

Can Visa debit cards with a Pakistani billing address be used for online shopping?

Tue, 05 May 2015 19:04:15 +0000

Faisal KhanAnswered May 5, 2015

Two things here:

You need to ask Faysal Bank or SCB to open your card for Internet transactions. If that fails, then...
Go signup for MCB Lite. Its a beautiful card to use on the Internet. You need to open it (i.e. request) for Internet transactions. Since it is a wallet, you simply IBFT money into the wallet and your exposure is limited. It is a great card for online purchases.

How can money laundering involving as much as $6 billion occur?

Tue, 05 May 2015 18:45:34 +0000

Faisal KhanAnswered May 5, 2015

There is much more to the Liberty Reserve story than just the money laundering component. There is no doubt that LR in the strictest of sense was operating without a license (in Costa Rica and other territories as well), that is not being debated. What is debatable are two issues:

What constitutes as money laundering?
The global policeman role that the US financial regulators have started playing.

Money laundering is difficult to define, as definitions change across the border of each country. In a recent meeting of the Financial Action Task Force (in Paris, France), it was almost impossible to have all the major financial services regulatory bodies agree on the definition (just an FYI, at the end of the summit, they still could not agree to it). So a transaction set that could be perfectly legal in one country, could very well be violating antimoney laundering laws of another. FATF Home Page: Financial Action Task Force (FATF)

Liberty Reserve is not a new phenomenon. They did not just spring up and started doing massive transactions totalling US$ 6+ Billion. They started with low amounts, went through a lot of teething problems and eventually became big. If you were to read the forums at Warrior Forums or Digital Point (Forums), you will see literally 10,000s of posts related to Liberty Reserve and/or mention of the LR system for payments.

Where were all the financial regulators when it was happening at their watch? Inherently, almost every central bank in the world has made it impossible to set and designate an alternative currency method. There are many other examples of currency systems and/or payment systems that are perhaps in their infancy stages (Bitcoin?) and once they slowly mushroom and grow, the regulators come clamping down. I'm not being sympathetic to LR being shut down (because what they did was without a license), since that is the law of the land, LR should have followed it to the dot. But if you strictly talk about the law, 1000s of financial companies overlook it, break it, bend it, twist it on a daily basis. Some do it voluntarily, others not so. Its all about setting an example. Have no doubt, LR is an example and a warning to other companies (again think Bitcoin operators), to come under the regulatory magnifying glass or cease and desist.

When LR came under the regulator's radar, why wasn't hue and cry made? Its because the AG office and DFI's office get paid to do this, bring the alleged bad guys, parade them up and down and then book them.

How come the British regulator (FSA) did not stop LR, or the financial regulator of Canada or Russia? Why was it the moral obligation of the US financial regulator to start building up a case and then essentially play the lead policeman in bringing LR down. Why not slap them with a fine (based on the volume of business they have transacted). Why not slowly bring them to implement enhanced AML/KYC into their product offering.

One of the world's largest MTO (Western Union) is known to launder Billions of Dollars, yet, the US regulator never seems to spend ample of time building up a case with them, is WU too big to fail? Is it because WU is a trusted American brand?

The HSBC case pointed in the other answer was all about the Saudi Bank Al-Rajhi, shelled and dressed up in an HSBC report. Why didn't the US regulators go after Bank Al-Rajhi? Was it because doing so will serious offend the Saudis, the eminent Arms deal that was in play 3 years ago, the consequences it could have on Saudi American Bank (SAMBA), etc.

Ask the Swiss, who now have to alter essentially their entire banking system when it comes to doing banking with American citizens. Why? Because the IRS and the US Financial Regulator can strong arm Switzerland. The British banks, specifically SCB (Standard Chartered Bank) wanted to challenge the money laundering allegations levied byt he NY State financial regulator, but doing so, SCB knew their US Banking licensed could easily have been cancelled, and thus they threw in the towel and paid the fine. Easy money for the NY State's DFI.

There will always be slippage through the nets. Always. However, tight the controls you levy, no matter how much Big Brother tactics you enforce, the grey and black markets will always coexist. They have been doing so for 100s of years, and they will continue to do so.

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Payment Processing: What technologies and systems power gift cards?

Mon, 04 May 2015 19:03:09 +0000

Faisal KhanAnswered May 4, 2015

Its the very same as that of debit/credit cards. The same analogy of credit (or balance check) is applied towards these cards. Because Gift cards don't have to run through and qualify the hoops of compliance and risk like say traditional credit cards, this makes the software less expensive and much less complicated. Their are many solutions in the market.

To be able to run a system, you don't need to invest in say CTL or Card400 systems. Solutions as low as US$ 5,000-10,000 are there in the market to cater to the needs of most clients.

Card printing is essentially numerical based and mapped to database with activation PINs and in turn associating those card numbers and PINs to an account. The activation process itself can be overly simple (i.e open packet and use) or provide KYC information and then activate.

Depending on how the closed loop system is setup (universally all gift cards / loyalty cards are closed loop) redemption or use of the card is on a closed network. The channel may be the traditional POS (with the correct alignment to route transaction to the gift card software) or over TCP/IP, which today is the preferred method.

How does Quicken retrieve information from my bank about my loans and account balances?

Mon, 04 May 2015 19:03:07 +0000

Faisal KhanAnswered May 4, 2015

They use a middleware server that is installed by Mint and connected to all the member banks that Mint has. This is usually done over the FIX protocol.

Mint, which was bought by Quicken, has partnerships with all the leading banks to be able to extract non-transactionable data from your bank account.

Is Mint.com secure to use, and why or why not?

Mon, 04 May 2015 19:03:06 +0000

Faisal KhanAnswered May 4, 2015

Mint.com is safe. The date you see being ported out of your bank account is obfuscated data using the FIX protocol, that is extracted from the middleware layer between you and the bank.

The data can only be used in reports.

Transactional capability (if any on Mint) is a different story all together.

How did the U.S. and other countries negotiate taking Iranian banks off the SWIFT network?

Mon, 04 May 2015 19:03:04 +0000

Faisal KhanAnswered May 4, 2015

They did not negotiate per se, it was the result of European Union's and US sanctions against Iranian banks associated with Iran's nuclear program, including the Central Bank of Iran.

Iran sanctions

In January 2012, the advocacy group United Against Nuclear Iran (UANI) implemented a campaign calling on SWIFT to end all relations with Iran's banking system, including theCentral Bank of Iran. UANI asserted that Iran's membership in SWIFT violated U.S. and EU financial sanctions against Iran as well as SWIFT's own corporate rules.[22]

Consequently, in February 2012, the U.S. Senate Banking Committee unanimously approved sanctions against SWIFT aimed at pressuring the Belgian financial telecommunications network to terminate its ties with blacklisted Iranian banks. Expelling Iranian banks from SWIFT would potentially deny Iran access to billions of dollars in revenue and spending using SWIFT but not from using IVTS. Mark Wallace, president of UANI, praised the Senate Banking Committee.[23]

Initially SWIFT denied it was acting illegally,[23] but now says "it is working with U.S. and European governments to address their concerns that its financial services are being used by Iran to avoid sanctions and conduct illicit business."[24] Targeted banks would be — amongst others — Saderat Bank of Iran, Bank Mellat, Post Bank of Iran and Sepah Bank.[25] On 17 March 2012, following agreement two days earlier between all 27 member states of the Council of the European Union and the Council's subsequent ruling, SWIFT disconnected all Iranian banks from its international network that had been identified as institutions in breach of current EU sanctions and warned that even more Iranian financial institutions could be disconnected from the network.

Source: Society for Worldwide Interbank Financial Telecommunication

Also read the press release that SWIFT itself posted on the issue.

SWIFT instructed to disconnect sanctioned Iranian banks following EU Council decision

Why did Citibank Pakistan discontinue ecommerce gateway services, and what systemic issues make banks reluctant to offer them?

Sun, 03 May 2015 18:43:41 +0000

Faisal KhanAnswered May 3, 2015

Internet Payment Gateway Services are coming to Pakistan. It was not that the Banks were hesitant to provide such services, the business case just did not make sense at the time.

Here are some factors that contributed to the low use of online credit cards in Pakistan and for the numbers not working in favor of the business case

The number of credit cards in circulation at the time were low
Internet number for Pakistan were dismal at the time (circa 2002-2003, etc.)
Debit cards were not prevalent at the time
Risk mitigation systems, explicitly with respect to AVS, etc. were not working.
IP mapping services were poor (think MaxMind)
Business Rules for Fraud Mitigation were not defined well for this part of the world (they are now).
Fraud Management Systems that would cater to market segments outside the West, were not widely available. If they were, they were not acclimatised to the local geographical variables
Very few merchants were online
Online shopping posed a huge challenge to the general online population on the whole
The transaction numbers and the income from those, did not make a strong business case. The numbers were dismal with a few players and it really required a few 1000 active merchants to be in the space (which never happened)
Infrastructure cost and payment gateway connectivity charges were very high, thus the per unit cost per transaction was very high

All of the above have now changed.

Internet users are 30+ Million
Facebook has transformed the online experience for millions
8+ Million Facebook users
Per unit cost for hosting, infrastructure has gone down dramatically
Banks are not well connected
Large numbers of Debit and Credit card holders
People are more inclined to making online purchases
Over 650+ merchants online (still low, but nonetheless much better than what it was a decade ago)
Ease of setting up an online presence
Seasoned risk mitigation and fraud management services now available
Large populous of technical talent in the IP space
Rise of e-services (e-banking, etc.)
Mobile usage, especially smartphones are pushing the case for online transactions
Transaction number have improved dramatically
Multiple payment gateway connectivity now available
Geo-IP services have improved dramatically
Business Rules for Fraud management, etc. have evolved
Ease of connecting to EFT and Core Banking Softwares
Bank's infrastructure is now more IP tolerant
Connectivity costs have plummeted
Market demand has improved

Statistics Source: Asia Internet Usage Stats Facebook and Population Statistics

Why do Pakistani banks currently avoid offering merchant accounts for ecommerce businesses?

Sun, 03 May 2015 18:43:39 +0000

Faisal KhanAnswered May 3, 2015

Updating the answer:

The following four banks are now providing merchant accounts in Pakistan for online acquiring.

NIB Bank, which is using the MIGS (MasterCard Internet Gateway Service)
MCB Bank, which is using the MIGS (MasterCard Internet Gateway Service)
HBL, which is using Cybersource (VISA Gateway)
UBL, which uses Etisalat's payment gateway.

__________

There are too many reasons for why it wasn't so. However, that is changing.

Internet Payment Gateway Services are coming to Pakistan.

Starting in June this year, a couple of options will be available to businesses in Pakistan. Three banks in Pakistan would be offering direct internet payment gateway processing solutions, whilst two payment service providers are slated to go online by then.

What this translates to is as follows:

Better MDR and competition for IPGS (Internet Payment Gateway Services)
This will jump start large online merchants to have alternatives now with respect to online credit card sales processing
No more complex bespoke codes (read: APIs) to connect and get payments approved
Easier signing process for merchants
Catering to both big and small merchants
Plug-and-play solutions
Jump start to the local merchants who have been wanting to go online.

What’s the best way to move money between two bank accounts using cryptocurrency as an intermediate token, ideally at near-zero cost?

Sun, 03 May 2015 18:04:14 +0000

Faisal KhanAnswered May 3, 2015

Ripple and Stellar are both designed explicitly for this purpose. Hand-in-glove-fit.

So Joel Yarbrough cites it well.

One really doesn't need a cryptocurrency to move money between banks. Once you learn how money really moves, it is all about consensus and honoring the IOUs that have been issued.

You could issue token using Hyperledger, even. However, in all fairness, Ripple comes out on top, Stellar still has some teething and directional (read: survival) issues.

Is there any way to create a PayPal account from Pakistan?

Sun, 03 May 2015 18:04:13 +0000

Faisal KhanAnswered May 3, 2015

No really, No. There are hacks all over the internet. Using Dubai address, or using Payoneer card and family's address in the US, etc. But in many cases they backfire eventually.

What are the requirements for becoming a Western Union agent?

Sun, 03 May 2015 18:04:10 +0000

Faisal KhanAnswered May 3, 2015

WU agent requirements differ from country to country. The basics are the same. You fill out an application, and you need to show that you are in what WU calls a high-traffic location to be able to solicit business. They are interested in learning more about where your business is located, what sort of signage and vestibules can be setup, do you have enough counter-space, etc.

In addition to this, you will have to undergo some basic AML/KYC training, which nowadays is done online.

For each territory there is a base reserve, that WU will keep. If you business exceeds the reserve requirements, they will assess your business, and require you to put up more funds into your reserve. The higher the reserve fund, and business your location generates, the more money you make.

You don't have to be in the money transfer business to become a WU agent.

Who are the top remittance aggregators, and how do they generate revenue?

Sun, 03 May 2015 18:04:08 +0000

Faisal KhanAnswered May 3, 2015

Remittance aggregators are those who essentially cater to the home-remittance market and specialize in cross-border settlements. Think of them as the wholesale dealers for remittance payments.

They make money on FX and float. What they don't have to worry about is the cost of sourcing clients and business. Because they are wholesale, they only need to pursue business development on a B2B basis. The upside is, clients and business come to them if they remain competitive, offer great APIs for integration and have access to multiple countries and currencies to settle in.

Can a digital currency be backed by or integrated with a commodity like gold?

Sun, 03 May 2015 18:04:07 +0000

Faisal KhanAnswered May 3, 2015

Joseph Wang sums it well.

Most of the companies that I talk to, who are trying to integrate gold with their own crypto-currency of choice (and in some cases even their own issued currency) are still (in my opinion) trying to perfect the case of purpose? (One such company that comes to mind is Taariq Lewis' Serica Trading - https://sericatrading.com/)

Zoom out, and it looks like a nothing more than a trade-able gold contract, that is has fractions that can be traded. The upside is that you have a commodity backed currency, so, your base currency is always valued against how much gold you are holding, and on the spend side, you're doing a real-time conversion to the digital currency for trade.

Commodity backed digital currencies are great if you feel that the digital currency by itself won't hold much value, and you need to preserve the value of your investment by a much more stable pair, which in this case would be gold.

What opportunities and growth potential does Bitcoin have in Asia?

Sat, 02 May 2015 18:56:38 +0000

Faisal KhanAnswered May 2, 2015

Huge! Humongous! Enormous! Did I say immense potential?

Bitcoin has a huge potential for inter-country payments in the regional (SAARC, ASEAN and GCC block) as well as intra-country payments.

Expecting and waiting for modern peer-to-peer payment solution to come here and present a homogenous payment experience all across the region, then we all are mistaken and it would be a long wait.

Bitcoin can short-circuit this and in some way is short-circuiting it. The regulators and the governments need to embrace Bitcoin as opposed to running away from it. Barring the FUD factor, if market makers and gateways are allowed to establish themselves and run in the region, then bitcoin has a huge potential. Imagine if the like of say EasyPaisa in Pakistan is able to send money to AliPay user in China and someone in Dubai is able to send their salary across to BDO card in Philippines using Bitcoin without the overhead as it is usually charged nowadays.

The main threat that Bitcoin poses in Asia is the channelling of illegal (read: undeclared wealth of which there is plenty) out of the country and moving it around. Not that the governments have been able to do much in this regard, but hand over a tool in people's hand to channel money, you can bet your bottom dollar that the abuse risk would be factored in before the regulators give an all okay. Granted it will be a small portion and it can be controlled, but nonetheless.

Either way, Bitcoin will grow in the region. If legalized, the growth rates would be exponential.

What are some interesting or notable facts about the creator “Satoshi Nakamoto”?

Sat, 02 May 2015 18:56:37 +0000

Faisal KhanAnswered May 2, 2015

That out there, there is a genuine person named Satoshi Nakamoto who probably has a blog, or some form of an online presence, but his life has been turned up-side-down from an SEO point of view, because some dude who invented the Bitcoin, just screwed him over on Google's SERPs.

Are prepaid debit cards a good way to avoid reliance on traditional banks?

Sat, 02 May 2015 18:56:35 +0000

Faisal KhanAnswered May 2, 2015

What's the definition of a traditional bank? If you imply, the branch, the cheque book, the loans and mortgage offers, etc. then yes, the Prepaid debit card does not include all that. But are you walking away from a bank? No. The prepaid debit card is issue by a bank. It may be branded with Walmart or a Tiger logo, etc., but the underlying issuer is a bank and that is where your money is kept.

In most cases, you're simply loading funds into a debit card wallet. In advance cases, the prepaid debit card may be associated with a wallet that is bank and mobile carrier agnostic.

But have no doubt, no matter what prepaid card you pick, there is a issuing bank behind it and that is where your money is at.

Why would a consumer prefer to pay with Bitcoin instead of credit cards, debit cards, or PayPal?

Sat, 02 May 2015 18:56:34 +0000

Faisal KhanAnswered May 2, 2015

To cite a personal example:

I'd be wary of using my Debit Card online anywhere as the layer between the debit card and money in my bank is just the transaction waiting to happen.

I don't subscribe to Credit Cards. period. I know a lot many people also don't use credit cards.

With Bitcoin, the wallet is not tied to my bank account and the money can very easily be loaded onto to my wallet to send across. I don't have to worry about a decline! or a network that is busy! no forms to fill out! No more threat of my data! I just shoot the money across to a Bitcoin Wallet, wait a few minutes and voila! Transaction done. For a minimal cost.

Everyone is happy!

What key innovations are needed for cryptocurrencies to reach mainstream adoption?

Sat, 02 May 2015 18:56:32 +0000

Faisal KhanAnswered May 2, 2015

The necessary innovations in my perspective would be:

Easy to Buy/Sell Bitcoins (make it as easy as loading money on to a card or mobile), so that a vast majority of people can engage with it.
Adoption, the more merchants adopt Bitcoins, the more people are likely to use it. Build it and they will come.
Crypto currency for the immediate 3-5 years will not be competing with the fiat currencies, but will draw a parallel. For this parallel to happen, transactions need to happen (buying and selling of products/services and paying them with crypto currencies). Until and unless people don't start trading with it, the much needed traction will not happen.

Is there a historical or current example of a country recognizing two currencies as legal tender at the same time?

Sat, 02 May 2015 18:56:31 +0000

Faisal KhanAnswered May 2, 2015

Maldives, where the Maldivian Rupiah is accepted as the country's legal fiat currency as well as the US Dollar, British Pound and the Euro.

Almost everywhere in the Maldives the Rupiah, US Dollar, British Pound and the Euro are accepted.

What fees do banks pay to connect to ATM networks or per ATM transaction?

Fri, 01 May 2015 19:13:08 +0000

Faisal KhanAnswered May 1, 2015

It depends which part of the world you are in and how the interbank network connectivity arrangements are handled. Most banks pay a membership fees to connect to a network (this is a flat fee). Sometimes banks prefer to connect to multiple networks for sake of redundancy.

Almost all the banks pay a per transfer fees. The fees is highly depended on how and where the ATM network is being accessed. Universally the fees is anywhere from 5 cents to 10 cents - and hovers in between. ATM end-points charge typically anywhere from 50 cents to $1 for each transactions. Cross-border or cross-network fees can be as high as $2.50 per transaction.

This fees is paid by the person who is conducting the transaction on the network. The Interbank network operator then settled with the transacted parties on a daily/weekly/monthly basis (again depended on where in the world you are operating).

The largest Interbank network is PLUS (by VISA): Plus (interbank network) followed by Cirrus: Cirrus (interbank network) - they each have over 1+ Million ATMs connected to their network.

Other notable players are: Armed Forces Financial Network (AFFN), NYCE, Euronet, Pulse, Link (UK), Interac (Canada), etc.

Which aspects of Bitcoin appeal most to everyday, non-technical users?

Fri, 01 May 2015 18:54:34 +0000

Faisal KhanAnswered May 1, 2015

The people I have talked to, usually don't get the 21 Million limited production of Bitcoins, or the 100th of a Million sub-parts, the non-reversible transaction, the near instantaneous transfer or the open ledger. The one thing that blows them away (in some sense) is that anyone with a TCP/IP connection can accept and/or trade in Bitcoins.

No need to qualify, no need to do this or that, just get a wallet and you're up and running. Analogous to email. Just as email was the great unification protocol for sending messages, Bitcoin will be the unification protocol for money.

The fact that its non-discriminatory and totally made for the Internet and available to all is what resonates most with the people I talk to (who are mostly non-techies and non-financial).

Who is best positioned to disrupt the money-transfer market using Bitcoin?

Fri, 01 May 2015 18:54:33 +0000

Faisal KhanAnswered May 1, 2015

There are no easy answers to this question. It would be highly speculative (at best) to try to name a company that would possibly dominate the space in Bitcoin Remittances.

However, before I attempt to give an answer, here is something you need to know.

Below is a diagram of a traditional remittance model (cross-border transfer)

Just to explain the diagram, the left-side is the "Sender" (or Remitter) and the right-side is the "Receiver" (or Beneficiary). This diagram is how a typical remittance corridor looks like.

The Central Bank (and/or the Financial Regulator - if separate) grants a license to a Money Transfer Operator (MTO), which (assuming) has some sort of an Agent network where people come and pay money to send (or receive).

The MTO works with a Remitting Bank and a Settlement Bank (not necessarily both, they can be the same one). The receiving bank is responsible for amassing the funds into the MTO's Banking Account (a Nostro account).

The FX portion of the receiving country is provided by the Settlement Bank on the receive side to the Remitting Bank on the Send side. This is now even more so because of the Dodd-Frank Act (Sec 1072).

In plain English, the FX Rate between US$ and Pakistan Rupees (as per example above) has to be provided by a Bank in Pakistan to the US Bank or MTO's Bank before a Rate can be setup by the MTO that has to transmit the money.

Both sides of the cross-border are governed by the KYC/AML rules.

So the flow of funds would be something like this:

Remitter walks up to an Agent to send US$ 1,000
Agent has the Rate displayed as provided by the MTO for how many Rupees you can get from 1 US$
The Rate to the MTO was provided by the Settlement Bank in Pakistan
The MTO and the Remitting Bank setup their margin on this rate before quoting it to the Agent.
Once the money is accepted, it is aggregated (lets assume everything is aggregated) and send to the Remitting Bank.
The Remitting Bank then channels the money (in US$ form - minus its fees, etc.) to the Receiving Bank in Pakistan.
The Receiving Bank (can also be the same as the Settlement Bank) then provides this money to the settlement bank in Pakistan Rupees (based on the agreed rate earlier on, at which the transaction was booked).
The Settlement Bank then disburses the remittance out either via the Agent network or direct account debit.

Now if Bitcoin is introduced into the equation, then the system would look something like this:

Since Bitcoin is an additional layer, and to be in compliant with the Dodd-Frank Act, (assuming the US-Pakistan example), then the first question is:

Who sets up the FX rate? The Bank in Pakistan will only provide the FX rate for US$/PKR. It does not have any mechanism to provide a rate that is tied and locked in for the day to Bitcoin?
Who provides the liquidity on both ends to ensure that enough Bitcoins are available. Granted this may not be a problem on the Send side in the US, but what about the receive side? Who will change the Bitcoins into USD?
The whole purpose of Governments accepting remittances is so that the national reserves get shored up, i.e. their Dollar (or Euro or British Pound) reserves increase for Payments the government has to be abroad in other currencies periodically.
Let us assume for simplistic purposes, that 1 BTC = 1 US$ and 1US$ = 100 Pakistan Rupees.
Then a transaction of $1000 from US to Pakistan would be something like: 1,000 US$ -> 1 BTC (US Side) -> 1 BTC (Pakistan Side) -> 1,000 US$ -> 100,000 Pakistan Rupees.

Looks pretty simple, the issue here is - Who in Pakistan accepting Bitcoins and giving the US Dollar equivalent to the Pakistan Government (Banking Channel)?

How are these Bitcoins amassed by whomsoever the organization is, how are they getting the Dollars channeled into Pakistan without being hit for double-taxation, or forcibly being classified as escrow remittance ? (Many countries simply do not understand or even allow escrow remittances). In most countries, pre-funding is required, how are those rates fixed in?

What if during the transfer the 1BTC fell from 1,000 US$ down to 850 US$ - who takes this hit? How can this pricing mechanism that has to be locked in at the time of transfer be guaranteed across the ocean to the liquidity or market marker in the beneficiary country that is handling Bitcoins-US Dollar conversions?

Needless to say, there are solutions to this, however, that is something I personally don't want to cite in public. Whomsoever cracks this problem easily and across-the-board for various emerging markets (read: countries), would very likely have a successful run.

The AML/KYC issue will remain, regardless. The more mature model would be to have a matching database that would link the Bitcoin address and map it to an existing bank account (in the receiving country).

The regulatory licensing issue would be a hurdle. Many companies in the Bitcoin space don't have the license to do nationwide transactions (where a Money Transmitter license) is required. Very few are actually pursing this (think CoinX - my bet would be on them if they were to enter this market). Others are simply agents for their upstream processors or have a waiver because of the nationwide bank that they are using, who are exempted.

I believe each country will have a distinctive (geographically positioned) player who will service some very specific remittance corridors.

Despite all the hoo-hah, there is a huge deficit of options on how to buy or sell bitcoins in emerging markets. Whilst I may instantly get money from my family in the US, what am I going to do with those coins? How to I get the native currency (which is what i want) if there are no established players who are not charging a huge premium on the conversions (kinda defeats the whole purpose of using bitcoins if the transaction costs will be equal, higher or marginally lower than the traditional models).

The disruption will only come when liquidity on a banking level and on the grass-root level is available for exchanging (trading) of Bitcoins in the beneficiary countries.

Online Banking: What’s a good way to programmatically create virtual savings “buckets” for users?

Fri, 01 May 2015 18:54:31 +0000

Faisal KhanAnswered May 1, 2015

I doubt any US bank would allow you to do a carte-blanche user sign-up via an API. What they will do (considering you have a strong business case and they want your business), is that if you're numbers are good enough, they will designate you within their Banking software as a virtual branch, and within the branch, you can then sign-up as many accounts you want. However, the entire entity would be treated as a singular account. Though you will be able to distinguish between the sub-accounts and move money amongst them, the bank will see you as a singular entity. Since this would most likely be a commercial arrangement, it is questionable that this would be protected under FDIC (Checking/Savings) program.

This would have to be a specialized arrangement with the bank and the bank (depending on how they are setup) provide you with a Web Services or an API.

There is nothing like this (to the best of my knowledge) that any bank is offering as a standard, off-the-shelve product offering.

In which U.S. state is it easiest to obtain a state banking license?

Fri, 01 May 2015 18:54:30 +0000

Faisal KhanAnswered May 1, 2015

Generally if you're not looking at California, Texas or New York, you relatively have a much easier task at hand. Each's state's licensing methodology varies, but it will inherently be a lot simpler and easier than CA, TX and NY (collectively know as the 3 hard states to crack).

Your other option is to look at local state based community banks up for sale.

Online Banking: What does the future of internet-based finance look like?

Sun, 12 Apr 2015 18:53:58 +0000

Faisal KhanAnswered Apr 12, 2015

The potential future of Internet Banking is extremely promising, however, it should not just be limited to the internet as in, the bank's internet web portal.

This is a problem plaguing a large majority of the banks, they see the Internet portion as just another alternative delivery channel. They are not giving it the seriousness it deserves, nor harnessing its true potential.

So many traditional pillars in the banking society are preventing innovation that is long over due in banking industry from coming forth.

A great perspective on Internet (or rather Banking 3.0) is obtained by reading Brett King's book called "Bank 3.0", the book provides a really great insight onto the Internet side of things for Banking. A must read if you're in this space.

Amazon: Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do: Brett King: 9781118589632: Amazon.com: Books

Does FATCA apply to people with dual citizenship?

Sun, 12 Apr 2015 17:55:12 +0000

Faisal KhanAnswered Apr 12, 2015

Yes it does. The rules are simple, if you hold a US Citizenship, its applicable to you. Its irrelevant if you have other citizenships.

What makes Bitcoin attractive or special compared with traditional options?

Sat, 11 Apr 2015 18:52:49 +0000

Faisal KhanAnswered Apr 11, 2015

One thing interesting I find about Bitcoins is that all transactions are transparent in the ledger, i.e. any transaction made by Bitcoin is recorded for all to see. You may not know the identity behind the transaction, but the transaction detail in itself is recorded for all to verify and view.

How does International ACH function?

Sat, 11 Apr 2015 18:04:02 +0000

Faisal KhanAnswered Apr 11, 2015

International ACH is simply the ability to do international transfers, with direct account credit. There are many ways to do this, and it starts with the originating country. If the originating country is the US for example, then the next step is to see, which payment networks will work with the US entity to do direct account credits. This can be done by establishing direct relationships with terminating (receiving) country's bank or by means of going through an intermediary that already has the relationship established (the like of Earthport, Tipalti, etc.)

When an intermediary is involved, the single party risk is high and the costs do go up (regardless how the likes of Earthport, Tipalti may tell you otherwise). When you go directly, the financial risk for default goes high, but the costs are lowered and single-party risk is curtailed to a larger extent. The downside being it becomes a gigantic task to implement multiple settlement corridors.

What ever happened to Thomas Cremer’s multi-billion-dollar plan to build the world’s tallest tower in Karachi?

Fri, 10 Apr 2015 17:52:21 +0000

Faisal KhanAnswered Apr 10, 2015

The economic realities are harsh when it comes to Pakistan and tall buildings.

Various projects have been shelved because feasibility studies have shown ownership rental of such building is out of whack when it comes to ROIs etc.

In the absence of commercial mortgages, one would be hard pressed to own real estate in such a building and then rent it out x4 to x7 the cost of average rentals in the vicinity.

Most models collapse after 30 stories or so. Cost of borrow and project financing is too high.

How do so many Pakistanis have PayPal accounts if PayPal doesn’t operate in Pakistan?

Fri, 10 Apr 2015 17:52:18 +0000

Faisal KhanAnswered Apr 10, 2015

Proxy accounts courtesy of friends and family.

Self owned account courtesy of a visit outside Pakistan to a country where PayPal is operational.

How and where can I network with companies that rent or lease money-transmitter licenses?

Fri, 10 Apr 2015 17:52:17 +0000

Faisal KhanAnswered Apr 10, 2015

You cannot.

Renting and/or Leasing of a Money Transmitter Licenses is strictly not allowed.

You can become an Agent of a Licensee, but then you'd have to be in the same business as the Licensee and expand upon the delivery/marketing of the product/service that the principal licensee has.

How hard is it to correct a mistaken transaction at a Pakistani bank?

Fri, 10 Apr 2015 17:52:15 +0000

Faisal KhanAnswered Apr 10, 2015

An error is an error is an error. It needs to be fixed. Be it small or large.

Here is what I would suggest.

Document everything!
I really mean that - Document everything! Your calls (whom you spoke to, their full name, designation, time/date, etc.)
Make notes of your conversations
Follow up with a written email/letter if necessary.

Send your grievance to:

Banking Ombudsman (See: http://www.bankingmohtasib.gov.pk/)
Write a letter to the Head of Retail Banking of your bank
CC the Head of Internal Audit of the Bank
CC the President of the Bank
CC the Head of Customer Support for the Bank
CC the Banking Ombudsman
CC the Director of BPRD (Banking Policy & Regulation Department)
CC the Director of Banking Inspection (On-Site) Department
CC your Lawyer.

Politely include all the facts, and explicitly state that you want remedial action within 5 business days on receipt of this letter.

If that doesn't work, inbox me and I will try to help you. Usually, the above works VERY well.

What could be the implications if Microsoft applied for MSB (Money Services Business) status?

Thu, 09 Apr 2015 18:04:01 +0000

Faisal KhanAnswered Apr 9, 2015

I just wrote a post on this, which can be read here: Microsoft Payments: Fashionably Late.

The long and short of it can best be summed by the logo below. Skype would be the ideal platform IMHO for Microsoft to roll-out payments on its messaging platform.

If WeChat is doing it. Facebook Messenger is doing it, Samsung Pay (on the phone) will do it, ApplePay on the phone will do it, so why not Skype?

Why haven’t Asia-based online remittance startups like TransferWise become prominent?

Thu, 09 Apr 2015 17:50:37 +0000

Faisal KhanAnswered Apr 9, 2015

Countries in Asia (well at least a majority of them) are receive only countries. In order to be a start-up, the best way to tackle the problem is on the sending side (which are the origination countries).

The problem is the high-cost of remittance. It makes more sense to setup a company in the market that will generate the transaction rather than a market which would receive it. If a company like TransferWise started in Asia, they would have a huge issue in marketing. The method would be that the receivers would ask the Remitter to go and check if TransferWise is operational in their country and use that.

Also, TransferWise most successful model is P2P - where they do net-off. Net-off is not allowed in most of the high-in-ward remittance countries. So makes no sense for TransferWise to start out here.

They do have presence or connections in this part of the world to better understand the markets and to be able to facilitate the best deal (price-wise and distribution-wise) for their clients.

Which payment processors can a SaaS startup in Thailand use?

Thu, 09 Apr 2015 17:50:34 +0000

Faisal KhanAnswered Apr 9, 2015

SiamPay and AsiaPay are the two I am aware of.

Why do acquiring banks for card processing avoid serving money-transfer and remittance businesses, and which acquirers do work with companies like Remitly and WorldRemit?

Wed, 08 Apr 2015 19:08:17 +0000

Faisal KhanAnswered Apr 8, 2015

Money service businesses (who are money transmitter) to many financial institutions and processors represent businesses that are classified as high-risk.

There is a reasoning behind such classification and it boils down to a few elements:

Inadequate HR resources that specializes in AML/KYC for the remittance business
Inadequate Computing/Software resources to implement the necessary AML/KYC/BSA, et. al. policies that would make the FI/Processor compliant from a regulatory aspect.

Because banks/financial-processors would have to invest more in HR and technology to cater to money transmitters, many just cannot justify the expense, based on the estimated revenue.

Fraud represents a high-risk, even though fraud itself would be covered by a deposit by the remittance companies (in the event of a chargeback). The 3PP are extremely jittery that because of high-fraud rate, their underwriting capability might be adversely affected by the card schemes. To give you some semblance of fraud, Faisal Khan's answer to Online Payment Gateways and Processing: What is the average chargeback rate in the US? (which still holds true today).

Then there is the added (misplaced?) that should a transaction that was a money laundered, terrorist financing or drug financing transaction slip through the crack, the banks/financial processors go ape shit as to what the possible repercussions would be from the regulator.

For 90% of the processors, the refusal is based on FUD (Fear / Uncertainty / Doubt) factor, and just because the others are not processing, they will not either. Its a reflection of what is going on with other colleagues and peers.

In reality, the business is very safe. Let me repeat that, the business is very safe. If you don't have the HR / software, needless to say, you're not ready for it, and most are not.

Removing the HR/Software aspect of it, Banks/Financial institutions /financial processors with well-experienced Risk Departments, do provide transaction processing to remittance companies, but do so to those who have a solid operating history in the US, who have sold financials, AML/KYC policy, whose flow of funds they are comfortable with, whose correspondent partners are equally responsible, and all parties are properly licensed.

The above prerequisites eliminates easily 2/3rd remittances companies. What's left, are companies who either don't want Credit/Debit card processing based on the fraud or deposit requirements.

To answer your last question, in the money service business / money transmitter business / remittance / money transfer business, the financial institutes or financial processors who are willing to work with you, are guarded well, i.e. their names are not shared and are considered hidden treasures (example if you know of a processor who will work with MSBs or if you know of a bank that will open an operating account for an MSB), you keep that information to yourself.

How long should someone wait between transferring two $10,000 amounts to the U.S. to avoid reporting issues?

Wed, 08 Apr 2015 18:51:03 +0000

Faisal KhanAnswered Apr 8, 2015

The US does not have such a rule per se. You can at any time request a SWIFT MT-103 Message Confirmation from the sending party to find out the exact status of wire. It could very well be that there is a correspondent bank being utilised and/or the information provided in the wire is not complete for the end settlement into the Beneficiary's account, etc.

The MT-103 message you then provide to your bank and ask them to trace the wire.

What are effective ways to accept credit-card payments when customers manually enter their card numbers?

Wed, 08 Apr 2015 18:51:02 +0000

Faisal KhanAnswered Apr 8, 2015

Its pretty simply. This is still treated as a MOTO (Mail Order/Telephone Order) transaction, or (CNP - Card Not Present) transaction.

There is nothing much to it, you are simply using the DTMF tones of the phone system to enter your minimum credit card information required to complete the transaction.

Its the phone system's software that would take this information (CC details, expiry details, amount, sometimes the CVV code, etc.) and parse this to the payment gateway software for processing.

The separation and hold is to ensure that the Customer Service Representative does not steal and/or note down your number.

Is there a difference between a mobile wallet and a digital wallet?

Wed, 08 Apr 2015 18:51:00 +0000

Faisal KhanAnswered Apr 8, 2015

A digital wallet is simply tokenization of money, digitally! Apps and Banking Systems can use it very differently. In the Banking system this can (for example) be treated as a Nostro or Escrow holding, or a sub-titled account. The wallet can contain a previously defined payment instrument (think credit card credentials) or a digital equivalent of the base currency (think US Dollars), stored and kept digitally.

A mobile wallet, is simply the digital wallet on the mobile handset (and in some cases the carrier).

Who invented the ATM, and in what way?

Wed, 08 Apr 2015 18:50:57 +0000

Faisal KhanAnswered Apr 8, 2015

Donald Wetzel

After looking first hand at the experiences in Europe, in 1968 the networked ATM was pioneered in the US, in Dallas, Texas, by Donald Wetzel, who was a department head at an automated baggage-handling company called Docutel. Recognised by the United States Patent Office for having invented the ATM network are Fred J. Gentile and Jack Wu Chang, under US Patent # 3,833,885. On September 2, 1969, Chemical Bank installed the first ATM in the U.S. at its branch in Rockville Centre, New York. The first ATMs were designed to dispense a fixed amount of cash when a user inserted a specially coded card.[13] A Chemical Bank advertisement boasted "On Sept. 2 our bank will open at 9:00 and never close again."[14] Chemical's ATM, initially known as a Docuteller was designed by Donald Wetzel and his company Docutel. Chemical executives were initially hesitant about the electronic banking transition given the high cost of the early machines. Additionally, executives were concerned that customers would resist having machines handling their money.[15] In 1995, the Smithsonian National Museum of American History recognised Docutel and Wetzel as the inventors of the networked ATM.[16]

Source: Automated teller machine

If we charge customers’ credit cards worldwide and then wire funds to other users (minus a service fee) like Airbnb, do we need money-transfer licenses (MSB/MST) in the U.S. or Europe?

Tue, 07 Apr 2015 19:07:17 +0000

Faisal KhanAnswered Apr 7, 2015

If you will be holding on to the funds in any manner (i.e. even a short time) and then disbursing the funds out, then Yes! (from a US perspective).

How can I build a basic online banking system from scratch?

Tue, 07 Apr 2015 18:49:44 +0000

Faisal KhanAnswered Apr 7, 2015

You might want to give Cyclos a look, its an ope-source core banking software (debtable?), and reviewing through the various areas, would give you a good sense of semblance of what you are trying to achieve. Open source on-line banking software

Which regions of the world are underserved yet rapidly expanding their online presence?

Tue, 07 Apr 2015 18:47:42 +0000

Faisal KhanAnswered Apr 7, 2015

South Asia. (India, Pakistan, Bangladesh, Nepal, Sri Lanka, Bhutan, Maldives).

If you look at the total population of these countries, vs percentage of population online vs percentage of the online population with some form of an online presence, the numbers are low and poised for growth.

What systems do banks typically use to maintain and reconcile customer accounts?

Tue, 07 Apr 2015 18:03:59 +0000

Faisal KhanAnswered Apr 7, 2015

Most banks have on-premise solution.The likes of Temenos, Misys, et. al. dominate outside the US, whilst within the US, FIS, Jack Henry, et. al. are more prevalent.

In the US, because there are 1000s of small banks, ASP solutions do exist, here is the break-down of ASP vs. In-house.

How did banks send funds to other banks before the telegraph was introduced around 1832?

Tue, 07 Apr 2015 18:03:57 +0000

Faisal KhanAnswered Apr 7, 2015

Funds transfer was done through a variety of ways. To start with, a bank in Paris would establish a relationship with a bank in London. Both banks would agree to have deposits in each others banks and in their respective currencies (or gold). These would be physical deposit of coins, gold, currency notes, etc. These would essentially be the credit-lines each bank was providing to the other.

The initial deposit from one bank to another was indeed a physical movement of wealth, i.e. gold, coins, silver, etc. was moved in secure boxes and physically made its journey to the other city.

Once the wealth was in place, then the two banks would have an agreed method/code of how to present money promissory notes to each other and how they are to be cashed out.

At a predetermined period (weekly, monthly, etc.) the notes would be collected and the ledger entries be updated. Along with this, the credit lines would be replenished as well.

The actual transfers were very much physical, and were essentially promissory notes (IOUs) being channeled across from town to town. For small value transfers people preferred to carry their wealth with them, i.e. their gold and silver coins with them, on person. This is also how a lot of the people got robbed.

If you read up on it, the early pilgrims traveling from Europe to the Holy Lands (now Israel), a lot many of them had their wealth stolen, this is how the Knight Templars came up with their own coded and sealed method of transporting an IOUs. You gave up your coins in say London, and were issued a cryptic IOU that only the Knight Templars knew how to decode. Reach the other end of your journey and present the note to receive equal amounts of gold (less fees).

They (the Knight Templars) were essentially responsible for setting up the early international correspondent banking.

If you could redesign SWIFT today, what would you change and how would you build it?

Tue, 07 Apr 2015 18:03:55 +0000

Faisal KhanAnswered Apr 7, 2015

This is a tough one. For those in the know, you would understand, the similarity of SWIFT and the whole correspondent banking model and the decentralized nature of the blockchain. There are a lot of parallels, but the main differentiator is the centralized nature of SWIFT versus the decentralized nature of crypto-currencies.

I would most likely go the Ripple (http://www.ripplelabs.com) route. Ripple for sure has got this right. They are out to fix just what this question poses.

One of the unique thing about Ripple is that it is not fundamentally changing the entire payment stack for payments, but tying in various payment networks together, those that are on the Ripple protocol. See the slides* below.

This is how correspondent banking looks like today (2-5 days of settlement time):

And this is how it looks like with Ripple in the equation:

So, the simple answer would be to have and implement the Ripple protocol, all across, in place of SWIFT.

*All slides courtesy of Ripple Labs.

How costly is it to transfer money from Europe to the United States?

Tue, 07 Apr 2015 18:03:54 +0000

Faisal KhanAnswered Apr 7, 2015

Quite an open-ended question, but the answer is, it depends. It depends on the type of transaction and from which country it is being done in Europe (part of EU or not?).

Generally, if the transactions is small, (say less than US$ 500), expect to pay about US$ 20-25 for the wire-transfer (not counting your bank's fees, which couple be implemented in between for correspondent banking).

If using a 3rd party service, expect to pay about US$10-15 for the same.

For larger amounts, more banking towards the commercial payments, the rates can vary vastly. Average is about 50-80 basis points from the interbank rate.

Are there any “startup banks” today?

Tue, 07 Apr 2015 18:03:53 +0000

Faisal KhanAnswered Apr 7, 2015

I believe Fidor Bank in Germany would qualify.

How do you develop an app that connects directly to users’ checking and savings accounts?

Mon, 06 Apr 2015 19:06:15 +0000

Faisal KhanAnswered Apr 6, 2015

The easy way out would be to use account aggregator services, Yodlee, ByAllAccounts, Quovo, Plaid, Aqumulate, et. al.

If your country/territory or bank is not on one of these account aggregation services, ask if they are planning to come anytime soon. If not, ask if the bank would be willing to work with the OFX protocol and provide non-transactional data streams, i.e. obfuscated data for you to work with.

How can I legally build a multi-currency NS/RTGS system based on banks’ current accounts?

Mon, 06 Apr 2015 19:06:14 +0000

Faisal KhanAnswered Apr 6, 2015

You've asked a couple of questions, so here are your answers:

This relationship is perfectly legal (from a banking point of view only). This would come under the purview of corporate banking or cash & transaction management functions within the bank. Regular banking would not be applicable here because of the number of sub-accounts involved.

Building an RTGS system could be subjected to regulatory approvals. It definitely puts a liability and risk strain on the banks, so even though you might be approved by the regulator, the banks may deny you their banking facilities/platform.

In order to on-board and off-board clients in any country, you would need to be regulated. For example even if you are using banks, you would need a money transmitter license (sorry if that is something you did not want to hear).

On the risk front, because you would be a money transmitter and are exhibiting the functionality of a cross-border money transmitter along with a settlement provider, in UK and (especially) in the US, you are deemed high-risk. You would have a tough time finding a bank to work with.

Regardless of the fact that you are taking the risk, the currency and flight capital risk is still in play, and banks could be held equally liable by the regulators. In particular your capability to have adequate AML and KYC controls in your transaction management system (TMS) is something that would be scrutinized in depth and in very fine detail.

Even though you are bunching transactions together, you could be subjected to the bank's risk & compliance department to have in-depth over view and audit of your AML/KYC in your TMS. If they are not satisfied, they can deny you banking privileges.

You would also need to show the segregation of pooled accounts vs Nostro/Vostro accounts, vs in-transaction accounts, etc.

On a technology stack-wise you would need a treasury (FX) system along with a micro-core banking software that hopefully can pool information in real-time from the bank's core-banking system (most likely they will provide you with OFX data streams for account reconciliation) as well as a corporate banking terminal access (which might have an API to connect to).

What is PayPal’s main purpose or core function?

Mon, 06 Apr 2015 18:46:53 +0000

Faisal KhanAnswered Apr 6, 2015

Person to Person payments is still PayPal's main revenue earner. 41% of Ebay's revenue is PayPal.

Source: https://www.paypal-media.com/assets/pdf/fact_sheet/PayPal_Q1_2013_Fast_Facts.pdf

Does PayPal allow payments for travel-related products?

Mon, 06 Apr 2015 18:46:52 +0000

Faisal KhanAnswered Apr 6, 2015

Yes, but for travel services, PayPayl Buyer Protection is not available.

Is it safe to send credit card details by email?

Sun, 05 Apr 2015 19:04:11 +0000

Faisal KhanAnswered Apr 5, 2015

No. it is not safe to transmit credit card details in an email. Best is to fax this information to them. That is how most of them will accept it. Or scan he form, zip it and then send it across in an email. Even more secure is to put a password on the zipped file and let them know this by phone.

I have been scammed out of money online—how can I make the other party repay me?

Sun, 05 Apr 2015 18:45:33 +0000

Faisal KhanAnswered Apr 5, 2015

Nothing much you can do, except perhaps keep persisting and hope the other party will eventually respond back.

If you are from the US, and/or the site is hosted in the US, you can send a notice to their host citing DMCA (Digital Millennium Copyright Act) and request the information be taken down for which you have worked (provided the information can be seen on the website).

Other than this, you don't have much recourse. This, unfortunately is one of the negative aspects of freelancing when you go direct. The other party can simply back away, and refuse to pay you, since the funds are not pre-paid with some escrow (like Elance or the way oDesk does).

Are there technology startups operating in Pakistan?

Sun, 05 Apr 2015 18:45:31 +0000

Faisal KhanAnswered Apr 5, 2015

First of all, that's a very presumptuous statement to assume the country being trapped in its own politics. Isn't everyone? if you disagree, then I beg to differ.

There are literally 1000s of startups in Pakistan. A day does not go by when I do not encounter online/offline a person who is not wanting to start up their own business, etc. The entrepreneurial spirits are high.

However, if startups are only equated with IT (a wrong assumption), then no doubt, we are much less. We do have a lot of startups, but most of them keep under the radar, make their money and carry on. Not everyone in the space is looking for an acquisition or an exit. Most are happy to startup a business, and then make it into something for the 2nd generation, i.e. keep working hard, go through a couple of up and down cycles, grow, expand, and hand over the reins to a new management. A lot many IT starts of the 80s and 90s are quite big power houses of today. Not everyone strives to be a Google or an Infosys (such luck and hard work is limited to a few), but with what we have in the country, the human resources (considering there is a lot of brain drain, a lot many freelancers who work for themselves) we make good use of the remainder.

There is a lot of work being done in farming, alternative energy, renewable energy, water sanitation, water filtering, drip irrigation, sustainable housing, microfinance, vocational training, medicine, food services, animal farming, etc. that are a direct result of startups entering this arena. In almost every case, IT is the enabler.

If media started paying attention to such positive side, you and the world in general would hear and see a very different side of Pakistan. Unfortunately, good news is bad news, and only bad news is good news as far as the populous media is concerned (worldwide).

Which countries are largely card-only where you can pay almost everywhere with a credit card?

Sun, 05 Apr 2015 18:03:51 +0000

Faisal KhanAnswered Apr 5, 2015

Turkey, particularly Istanbul. Turkey has a population of 75 million and 2.3 Million POS machines. Barring 4-5 very small street cart vendors, I was able to find everyone has a machine and would accept your credit/debit card. Even small magazine/newspaper stands, cigarette stands, ice cream carts, taxis, etc.

What are the biggest fintech challenges in New York City, and what would help companies address them?

Sun, 05 Apr 2015 18:03:50 +0000

Faisal KhanAnswered Apr 5, 2015

It wouldn't be out of place to say, there that fintech challenges aren't related to NYC or a particular city. Fintech itself is an amalgamation of finance (or financial) and technology. Using technology to cater to financial services is fintech. Whether you are based in NYC or some other corner of the world, the goal is to seek a financial services problem for which you think a technological solution can be juxtaposed to solve it.

Licensing remains the main challenge for all fintech companies. As more and more regulators are clamping down on money-related activities, many fintech companies are finding themselves in a tight-spot, they have the solution, but no license to operate it.

Access to license holders (be it money transmitters, or banks, etc.) is a vital requirement for fintech companies. The number of problems areas are many, access to banking, money movement, financial services partners, etc.

Second challenge is based around the regulatory compliance aspect of it. Whilst many fintech companies utilize technology and behavior to solve a problem, being compliant from a regulatory point of view is another challenge. In some instances, the very solution model is disturbed by being compliant.

How do banks move money between themselves?

Sun, 05 Apr 2015 18:03:48 +0000

Faisal KhanAnswered Apr 5, 2015

The transfer of wealth amongst different countries or banks is not more than a ledger entry. Wealth of each country is created on paper (electronically) and is nothing more than a journal entry of so much money is now available in a particular economy. The transfer of this wealth is by a consensus ledger entry on both the ledgers of the giver and the receiver.

You can learn more how money is actually moved by reading this answer: Faisal Khan's answer to How does money transfer between banks and different countries work?

The physical side of money is actually move physically, by employing secure transit of currency notes in planes (or trucks) and are delivered to the banks of the other countries.

Are all U.S. dollar transactions routed through the United States?

Sat, 04 Apr 2015 18:44:44 +0000

Faisal KhanAnswered Apr 4, 2015

It depends on which Bank you use. If you have an account with Citibank and you use the Citibank equivalent in Saudi Arabia, then the transaction is a global system debit/credit, but because Citibank is a US Bank, the reporting is done to the US.

Since no bank in Pakistan has a branch in Saudi Arabia (other than NBP and they too use US correspondent banking), any transaction you do, is typically via US correspondent banking channels.

Most of the correspondent banking from the large banks in Saudi Arabia like Al-Rajhi, Al Bilad, Samba, NCB, HSBC all do correspondent banking via JP Morgan Chase (NY) with the exception of HSBC.

So yes, your money does get routed via NY.

What are some promising startup ideas that can be launched in developing countries today?

Fri, 03 Apr 2015 18:57:51 +0000

Faisal KhanAnswered Apr 3, 2015

Some ideas...

Food Delivery Services (as Dominik Losman pointed out, Food Panda by Rocket Internet is a great starting point)
Real-Estate Classifieds (ones that actually work and are not hijacked or spam'd)
Niche Resume building services and job portals
VISA/Mastercard associated e/mobile wallet service
Quick Tap-and-go payments (NFC based) with reload-able cards
Auctions (done right)
Shared Office Space, Temp Office Space, Share Co-working Space (daily, weekly, monthly model)
Ubiquitous person-to-person payments
Packaging Supplies (think packing peanuts, bubble-rolled sheets, air filled spacers, cardboard boxes, injection foam, etc.)
Niche Business Directories (still a huge market for it)
Loyalty Programs and management of these programs based on social media sites like Facebook and FourSquare.
Simple.com Banking Model
Medical & Dental Records Keeping (Online storage and access)
PFM (Personal Finance Manager) Apps, that are integrated with your bank account

Has Nick Szabo responded to the LikeInAMirror blog post claiming he might be Satoshi Nakamoto?

Thu, 02 Apr 2015 18:56:29 +0000

Faisal KhanAnswered Apr 2, 2015

Nick Szabo, could very well be Satoshi Nakamoto, but in so far as I know, he not explicitly denied the article in detail.

Most pundits now believe that Satoshi Nakamoto is more likely to be a pseudonym behind which there is more than one person and hence dismiss this article which cites Szabo.

The compelling argument of Nick Szabo being the creator of Bitcoin is the analysis that was done. The fact that no other names prop-up for this analysis is what makes Szabo a strong candidate likely matching Satoshi Nakamoto. However, because this analysis was only done on Nick Szabo, the results can be termed biased in some manner.

The likely number of candidates who could invent Bitcoin is low, which makes Szabo a great match. However, many now believe we will never know the true identity of the person(s) who created Bitcoin.

What major factual mistakes has Noam Chomsky allegedly made?

Thu, 02 Apr 2015 18:56:28 +0000

Faisal KhanAnswered Apr 2, 2015

There is a PDF titled Top 200 Noam Chomsky Lies - Page on paulbogdanor.com - which lists a lot of his mistakes/lies, always an interesting read.

Where can I learn the fundamentals of Bitcoin?

Thu, 02 Apr 2015 18:56:27 +0000

Faisal KhanAnswered Apr 2, 2015

I would highly recommend you read this post:

Explain Bitcoin Like I’m Five

I also wrote a post that you may want to skim through: Bitcoins: Everything you wanted to know about Bitcoins, but were afraid to ask!

What is the most effective way for an India-registered company to accept card payments from the U.S.?

Wed, 01 Apr 2015 19:13:06 +0000

Faisal KhanAnswered Apr 1, 2015

You may want to take a look at this link regarding PayPal and list of approved countries: International Payments - PayPal Worldwide

Additionally for Merchant Services, I compiled a list (not full by any means, but still worth looking into): Merchant Account Providers

How does the hawala system for moving money actually work?

Wed, 01 Apr 2015 18:54:28 +0000

Faisal KhanAnswered Apr 1, 2015

Hawala is a much debated issue. In addition to the answer given by Vrinda Kumar you also need to be cognizant that Hawala's basic definition is something that many regulators debate and often disagree on. Something that may be illegal in one country, becomes legal in another. Strictly speaking, even the Financial Action Task Force in its various meetings has debated this subject to a large disagree without coming to a global consensus as to what Hawala is. (See Financial Action Task Force (FATF))

Most agree that at its basic premise Hawala is the undocumented transfer of money. Most of the hawala done now is based on net-off basis. If someone wants to send $1000 from US to Bangladesh and vice versa, the hawala system would net off the transaction and provide money to both parties.

Liquidity is the main issue here for those operating on net off basis. Besides this, one-way transfers work in a huge manner. If someone I can accept the $1000 in the US (under the radar), and payout in Pakistan (also under the radar), then the transaction is treated as a hawala. It is all about not getting the money in the documented field, so that taxation or source of funding is not questioned. In many countries, there are inherent tax benefits by surrendering your foreign currency and getting paid in local currency (Pakistan for example has this law), which is used a lot - legally, for hawala purposes.

For any hawala transaction to work, you need a demand for the currency in both the countries.

Do any banks conduct direct sales by phone, and if so, how do they verify an existing customer’s identity?

Wed, 01 Apr 2015 18:54:27 +0000

Faisal KhanAnswered Apr 1, 2015

You can subscribe to Identity validation services, which for example in the US can provide some basic information based on your SSN (information on your car/house loans, your bank, etc.) based on this information which is known (usually) to the owner of the account themselves, pre-screening can be done over the phone.

What do you read each week to stay informed about virtual currencies?

Thu, 12 Mar 2015 18:53:57 +0000

Faisal KhanAnswered Mar 12, 2015

Coin Desk for sure. Its perhaps the best source out there (for me at least) to know all what is going on in the digital currency world.

Website: http://www.coindesk.com/

What is the difference between a digital wallet and a shopping cart in how payments are initiated and processed?

Thu, 12 Mar 2015 18:02:57 +0000

Faisal KhanAnswered Mar 12, 2015

Honestly, remove the word digital from your question and what is the difference between a wallet and a shopping cart?

The digital wallet is what stores your payment instruments (or methods). The shopping cart is what stores your physical (or digital) goods that you are buying and intend to pay for with the payment instrument of choice in your wallet.

In your view, is internet banking the best way to manage banking needs?

Thu, 12 Mar 2015 18:02:56 +0000

Faisal KhanAnswered Mar 12, 2015

Internet banking one way to bank, ie it is one channel of banking.

A good way to bank is to have an omni-channel banking platform, so you could start a transaction on one channel say the web and literally complete that transaction using another channel like the mobile phone.

The transaction session is preserved across all the channels. That is a good way to bank.

If a wire transfer sent to my account is recalled by the sender, can the funds be pulled back without my consent?

Thu, 12 Mar 2015 17:55:11 +0000

Faisal KhanAnswered Mar 12, 2015

No. Only erroneous or mis-credited wire transfers can be pulled from your account. In both cases, the erroneous or mis-credit has to be done by the bank or the payment network.

The sender has no option to pull a wire back once credited, unless it was a mis-credit and the bank agrees it was.

What are the differences between ACH, SEPA, and RTGS payment systems?

Wed, 11 Mar 2015 18:52:47 +0000

Faisal KhanAnswered Mar 11, 2015

ACH is usually referred to as the US (e-check) system that takes between 3-4 days to clear. All ACH payments in the US are done by one of the two ACH: either the EPN or FedACH. ACH rules are governed by NACHA.

RTGS is a settlement technique, it is used by various central banks around the world to do large payment settlement of their member banks. Best way to describe RTGS is as a real-time settlement system for banks for large value payments. Banks hold Nostro accounts with the central banks and all large payments are settled on a gross basis by the central bank. It is also the mechanism via which deferred net settlement is done on a periodic basis.

SEPA is the European equivalent of bank transfer for all countries Euro. It is implemented in all the countries where Euro is and a couple of other participating countries. So the payment is a single payment instruction/set regardless if the payment is being made within the Euro country or to another (cross-border) Euro country. It is not real-time yet, but eventually would be heading there.

In the U.S., how can a non-resident non-citizen open a bank account online?

Wed, 11 Mar 2015 18:02:51 +0000

Faisal KhanAnswered Mar 11, 2015

You would need to be present (physically) at the bank branch. Doesn't matter if you are a non-resident. Show your passport and your US Visa copy and they will open an account for you. They might require a secondary form of ID.

How does Xoom authorize payments from a sender’s bank account?

Wed, 11 Mar 2015 18:02:50 +0000

Faisal KhanAnswered Mar 11, 2015

Xoom has paid out using pre-funding on the correspondent payout side. Your transaction was advanced by the correspondent paying out on the guarantee that Xoom will settle with them.

When you executed the transactions, you are legally binding Xoom to deduct the money from your account. Any NSF or cancellation from your end, will result in collection and for Xoom to pursue legal action in recovering money from you. In short: they assigned you a short-term credit, like writing a check, you are providing in good faith an electronic check that would not be bounced and would be honored.

The ACH from your account will be completed in a day or two.

What happens if a government or billionaire buys and holds 90% of litecoins, artificially reducing supply?

Tue, 10 Mar 2015 18:52:08 +0000

Faisal KhanAnswered Mar 10, 2015

Can happen, but then disposing of the stock will be a problem. Just like you have artificially inflated the price, by introducing scarcity, without liquidity in the market, the price will stay up, but then it will take a long time for you to clear all the stock you have held, and the more you sell, the more liquid the market becomes thus reducing your ability to manipulate the market. Day traders could adversely go against your strategy.

Who are the leading global thought leaders in payments?

Tue, 10 Mar 2015 18:02:49 +0000

Faisal KhanAnswered Mar 10, 2015

Here would be my list (in no particular order):

Carol Coye Benson (Glenbrook Partners)
David Marcus (Facebook Messenger)
Rob von Behren (Braintree, formerly, one of the developers of Google Wallet)
Ben Milne (Dwolla)
Dave Birch (Consult Hyperion)
Jack Doresy (Square)
Patrick Collison (Stripe)
Pony Ma Huateng (Tencent / WeChat CEO)
Jack Ma (CEO AliPay / Alibaba)
Nadeem Hussain (CEO Tameer Bank)
Justin Ho (formerly CEO of Utiba)
Chris Skinner (Financial Services Club)
Susie Lonie and Nick Hughes (of M-PESA, yes, they designed it)
Brett King (Moven)
Chris Larsen (Ripple Labs)
Matthias Kröner, CEO of Fidor Bank AG
Mary Carol Harris (formerly of VISA Mobile, now at Apple Pay)
Brian Roemmele, our resident payments batman!
Marion King (MD RBS)
Kristo Käärmann and Taavet Hinrikus (both TransferWise)
Satoshi Nakamoto :P
Leslie Berland (American Express)
Dilip Ratha (Lead Economist, World Bank)
Howard Schultz (Starbucks)

and so many more that I am sure I have missed.

What are the pros and cons of an EU member state building a national debit-card payment scheme?

Tue, 10 Mar 2015 17:52:14 +0000

Faisal KhanAnswered Mar 10, 2015

I think one of the best examples you can look at is Poland (an EU member country).

Six commercial banks decided to do just that, setup their own payment network (essentially a localized debit card system) and by-pass VISA/MasterCard.

The card schemes were definitely not happy, but in light of the fees, and money that goes to VISA/MasterCard, a lot many countries are thinking along the same lines.

Suffice to say, VISA/MasterCard literally resort to heavy arm-twisting, citing that they will cut off their card & network support to the banks, thus making your debit cards worthless outside the closed-loop network.

Travelers would find they cannot shop using their cards outside the network, where VISA/MasterCard dominate.

It is a double-edge sword. Damn if you do. Damn if you don't!

I have heard in some cases (albeit have not been able to find the exact clause) that VISA/MasterCard rules forbid the collusion of card scheme offerings with non-card-schemes offering where payment networks can by by-passed for local networks.

You can research as to what the success of the Polish experiment has been. Here is the original news article: Polish banks prep mobile payments system to take on card schemes

How do large banks and financial institutions benefit from participating in microfinance?

Mon, 09 Mar 2015 19:09:15 +0000

Faisal KhanAnswered Mar 9, 2015

Couple of ways:

The distribution network of a well-thought of microfinance bank is something that is very hard to beat
The ROI on micro-loans given out is great
The default rate is very low (compared to traditional commercial loans)
The profiling you get on a per sector basis is something not available otherwise
Ability to move people from microfinance to traditional banking (possibility of up sell)
Transaction behavior influences physical expansion plans
Grassroots level understanding of how the economy is doing

What additional infrastructure is needed to boost real-world acceptance of cryptocurrencies?

Mon, 09 Mar 2015 19:09:14 +0000

Faisal KhanAnswered Mar 9, 2015

Sub-decimal banking and payments infrastructure. If a Bitcoin is a 100 Million Satoshis, your current infrastructure cannot handle anything after 0.XX

Are online payment services regulated by governments and financial authorities?

Mon, 09 Mar 2015 19:09:13 +0000

Faisal KhanAnswered Mar 9, 2015

Depends where in the world you are. In most cases yes. Sometimes they are directly governed, ie regulated, sometimes it is a result of hand me down policy, that is when your acquiring bank or upstream processor may require you to adhere to a defined ruleset.

If you are touching the money, chances are you'd be directly regulated.

Is PCI compliance still required if a system uses tokenization?

Mon, 09 Mar 2015 19:09:11 +0000

Faisal KhanAnswered Mar 9, 2015

As of date, yes, it is required. Just because a token is being generated, does not mean the transaction is 100% safe. The entire system needs to be secure to outside access, need to know access, and 100s of other variables in maintaining a secure system. The token in itself represents a small (but important) element of the overall structure of the payments ecosystem.

PCI/DSS aims to secure the payment ecosystem that one is operating.

In simple terms, why do banks maintain nostro accounts with other banks?

Mon, 09 Mar 2015 19:09:10 +0000

Faisal KhanAnswered Mar 9, 2015

Let us assume there is a bank in India, that does a lot of business from the US. This Indian bank has no presence in the US. The only was it can accept funds from transactions on its behalf in the US, is via a Nostro account.

For example ICICI Bank in India receives a lot of remittances from US to India. Now ICICI Bank needs a bank account in the US, to be able receive the money from people in the US, to facilitate this, ICICI would probably approach JP Morgan Chase and ask them to open a Nostro account for them in the US.

A Nostro account doesn't have a cheque book, etc. It is pretty much an account that is operated remotely by the bank on whose behalf the account was opened, and is operated via a governed set of instruction from the head office.

Which banks received emergency loans from the Federal Reserve during the financial crisis?

Mon, 09 Mar 2015 18:51:29 +0000

Faisal KhanAnswered Mar 9, 2015

This page provides information on all those banks that applied for TARP (Troubled Asset Relief Program).

Tracking the $700 Billion Bailout

From a payments perspective, what challenges do multinational companies face when paying for employees’ travel or corporate expenses abroad?

Sun, 08 Mar 2015 18:50:56 +0000

Faisal KhanAnswered Mar 8, 2015

Great question! This is a problem that a lot of companies in the financial space are trying to address, each in their own unique manner.

First and foremost, it depends from where (Country) you are trying to make the payment from (payment source). Some countries may have restrictions on sending cross-border payments, most do not. You would need to check that first.

Second, in which countries (markets) are you trying to dispense payments out. If you are lucky enough, a global bank may be covering all the countries in question. Practically speaking, this is rare. You would be very lucky to find a bank in all the locations the MNC works in. This is especially true of developing countries.

In any case, the Forex component will come into play (there is no avoidance on that). The whole issue now is how to streamline the entire process to that

(a) You get the best Forex rates for your global payments (based on your volume and value, MNCs can surely luck out here).
(b) You have to deal with a singular entity to make all the payments. This is the not so easy part.

If there is one thing the MNCs hate, it is to deal with multitude of payment providers to dispense payments in various geographic regions. This is a paperwork and management nightmare for most. Not to mention each provider will have to go through a vendor on-boarding process (which itself is a tedious process).

There are Forex companies who specialise in such global payouts, but there is an inherent issue that most of the developing countries might not be covered, so they will be making the payments via a correspondent bank, hence another payment provider is inserted into the payment layer. This essentially translate to a higher payout fees. The lesser the layers, the more economical it is for you to do a payout.

MNCs would ideally prefer a single point of contact for their payments. They would also have to ensure that the payment provider in question is duly licensed and complaint in all the regions they operate in. Most global payment providers would by-pass the regulatory issue by simply hopping onto the SWIFT Payment network and pushing the payments out to end employees local accounts (via a correspondent bank). Whilst you would still have a singular contact point to deal with, you will have payment variances as far as the forex rate is concerned.

You could try to find a company that has fostered localised banking arrangements with all parties (read Banks) in the geographic regions you operate in.

Here essentially you have three choices:

(a) Western Union / MoneyGram / RIA type money transfer operators (MTOs). The transactions costs would be higher, but you would have to check, most countries will not allow MTOs to do inward commercial payments. That is if WU/MG/RIA decide to do commercial transactions with you.

(b) You can issue pre-paid debit cards in the markets you operate in. Almost every country, be it first world or developing, nowadays has a Visa/Mastercard presence. You can make arrangement to load these cards directly. In this manner, your forex rate would be determined by the acquiring network, but it would still be economical and speedy.

If say the MNC is in UK and dispatches prepaid debit cards to all its employees, the payment are being made in GBP, but the payouts will be made as per the payout bank's arrangement with Visa/Mastercard network and the acquiring bank will come into play. Could be costly.

(c) Try to find a payment provider that has localised presence in each country, where they can do a direct deposit into accounts, and save on the interchange fees of a cross-border money transfer. I have yet to find such a company, but this would be the most beneficial. Even better would be then to provide each employee in each country with a locally issued Visa/Mastercard debit card (a task which will require you to have a solid relationship with issuing banks in each country).

Reporting and collection of data of the payouts would be another challenge. Very few providers would be able to provide a uniform, reporting structure as per the MNC's requirement.

Another challenge is interconnect. Large MNCs would like their payrolls for their 1000s of employees to be automated. If your provider cannot handle automation, this would require some form of an interface between their system and yours for a seamless transaction execution process.

AML and KYC would also be challenges. You might have to conform to specific reporting in certain countries when the payouts are being done, and for your payouts you would most definitely have to report the same to your local financial regulator. Needless to say, your provider has to be licensed to do this and should take the onus of the AML/KYC ops.

Tax Deductions and Filing. In some countries for payouts, you may need to do mandatory tax deduction at source and file the same information with the tax authorities. Who will file this and do this on the MNC's behalf? What about the tax rebate that might be applicable back to you? How is that handled.

Thorough understanding of the markets. Most MNCs Billing and Payments Departments are cognisant to the rules & regulations of payments and payment systems in their geographic region only. Understanding and deploying a global solution would require understanding and working knowledge of the payments ecosystem in each territory, which very few global payment providers themselves understand.

These are the main issues in my opinion that MNCs would be facing.

How does a weak rupee against the U.S. dollar impact the Indian economy?

Sun, 08 Mar 2015 18:50:55 +0000

Faisal KhanAnswered Mar 8, 2015

Its great for Exporters, but bad news for Importers. WIth the current account deficit and trade imbalance (more imports than exports), everything will be most costly, starting with fuel and imported raw materials.

Are paperless checks as insecure as they appear?

Sun, 08 Mar 2015 18:50:53 +0000

Faisal KhanAnswered Mar 8, 2015

What you are referring to is the archaic ACH (ACH) system in the US.

Whilst it may seem that with that the minimal information as given on a cheque your account can be debited, this much is true, there is a security check that is in play here which you may not be aware of.

For an ACH processor to process a payment and deduct money from your account, they need to have proof of authorisation, that you explicitly authorised them to debit funds from your bank account. The only recourse you have (if such a proof cannot be supplied, or if you don't agree with it) is that you can ask for a reversal of the charges up to 60-90 days.

Why do banks charge monthly account fees?

Sun, 08 Mar 2015 18:50:50 +0000

Faisal KhanAnswered Mar 8, 2015

Maintenance Fees to put it simply. This is typically the aggregated fee of customer support and customer ops broken down and applied to client. Central banks (Regulators) can restrict as to how much you can and cannot charge, this is usually reflected in a Bank's Schedule of Charges, whose operating brackets are governed by the Central Bank.

After exchanging currency on CurrencyFair, how can you access your funds?

Sun, 08 Mar 2015 18:50:49 +0000

Faisal KhanAnswered Mar 8, 2015

Its deposited in your bank account. There is no other payout mechanism. You will need a bank account in the same currency to have the funds realised.

How do offshore bank accounts function?

Sun, 08 Mar 2015 18:02:47 +0000

Faisal KhanAnswered Mar 8, 2015

Same as any other bank account, with the exception being, on how the reporting might be done with certain countries, i.e. disclosing account information.

Offshore accounts are essentially structured on the basis that you are essentially opening a bank account in another country, thus, in many instances, escaping the taxation that you would otherwise be subjected to in your home country.

Because your country laws do not apply outside your borders, off-shore accounts thus are able to by-pass various personal and/or corporate laws regarding, money, disclosure, taxation, pension, permissible investment, holding, distribution, investments, etc. that you would otherwise be subjected to in your home country.

Do note, it may be illegal for you to open an offshore account, depending on your country of residence or your principal country where your business is registered.

All in all, offshore accounts are used to take advantage of a different country's banking services and low (or zero) taxation rate and escape the taxes in your own country.

If money moves electronically between bank accounts, how is physical cash “settled” or accounted for?

Sun, 08 Mar 2015 18:02:45 +0000

Faisal KhanAnswered Mar 8, 2015

As Mark Harrison explained, when you settle or transfer electronically, there is no paper money involved.

However, if you deposit paper money into a bank account and then transfer the money electronically elsewhere, those are two different transactions. The paper money becomes part of the currency in circulation, and represents a portion on the ledger statement that each bank reports to the central bank (cash in hand), and the non-cash balance is the electronic equivalent of money.

Are there risks that France might retaliate against U.S. banks operating there after the large fine imposed on BNP?

Sat, 07 Mar 2015 19:07:16 +0000

Faisal KhanAnswered Mar 7, 2015

Nope. No retaliation. Lots of soured relationships, but no retaliation. The fiduciary responsibility of the bank management is to increase revenue for shareholders, they are not paid to make it personal.

There would however be lots and lots of questions raised if the American market exposure is worth it or not.

Have no doubt, the US Regulators are making it extremely difficult for banks and financial institutions to do business in the US. There is preferential treatment, and the US is slowly choking money supplies where it does not want it to go. Simply put, the big bully in school is at work.

Why did Visa advertise during the 2014 World Cup final when most people choose cards based on factors other than the network brand?

Sat, 07 Mar 2015 19:07:13 +0000

Faisal KhanAnswered Mar 7, 2015

Card schemes are very rarely designed by bank executives for VISA. VISA does however have a very active network for feedback and charting a product line for 3-5-7-10 years down the line. The reason VISA spends this kind of money is purely for brand recognition. They want everyone on the planet, regardless from which country, etc. to be able to recognize the VISA brand. Brand recognition makes customer acquisition easier.

In addition, when VISA spends money on a global event like the FIFA World Cup, the branding power is equally pushed out to all the countries/territories involved. Bank Executives come and go. So spending money on them does not yield a return on investment (if it could be measured) like say FIFA World Cup.

With over 25,000+ Banks worldwide, how do you choose which bank to invest with?

Spending money on the event for brand promotion served it well.

How difficult is it to legally transfer $800,000 (or any large amount over $100,000) from Pakistan to another country such as Australia, and what is the process?

Sat, 07 Mar 2015 19:07:12 +0000

Faisal KhanAnswered Mar 7, 2015

You need to go to a Money Transfer Company (any licensed A money transfer company) and ask them to remit your funds. This is where the legal element would come into play as you would have to show proof on the source of funds. This would be a requirement for the receiving bank in Australia as well as the MTO (Money Transfer Operator) who would be transiting the transaction.

Your bank can assist you in finding an MTO to work with.

What types of organizations are authorized to issue credit cards?

Fri, 06 Mar 2015 19:06:12 +0000

Faisal KhanAnswered Mar 6, 2015

Those who can extend credit, either directly or through an intermediary who can issue credit.

In both cases this is usually a bank, who has been authorized by the financial regulator to issue credit.

Do we actually need cents anymore, and why not price everything purely in whole dollars?

Fri, 06 Mar 2015 19:06:11 +0000

Faisal KhanAnswered Mar 6, 2015

Depends on the currency, if you are referring to the US Dollar, the currency is quite strong and there exists quite a large payments network that deals in sub-Dollar transactions (think vending machines - how huge that industry is) or any and everywhere where a Quarter coin still holds values.

Nothing stops one from eliminating Cent coins, but in the absence of a system where such small values can be transferred electronically to one another, the issue will remain and hence the coins will remain.

Other alternative is to multiple the price of the entire economy by x100 so as to eliminate the decimal all together.

So that 1 cent in the new system would be 1 Dollar.

How disruptive could Facebook be in the payments industry?

Fri, 06 Mar 2015 18:46:50 +0000

Faisal KhanAnswered Mar 6, 2015

For Facebook to do anything truly disruptive, they can do quite a few things, but in the strictest of definition of the word disruptive peer-to-peer money transfers would be the best bet.

Facebook with its 1+ Billion active users, can do a lot in the payments space. They can roll out worldwide money transfers, they can for example look at the model of say Ripple (see Ripple) and absorb that into their ecosystem and essentially become one of the world largest payment network.

They could use the same network and launch a peer-to-peer funds transfer based on net-off trading, something similar to CurrencyFair or Transferwise.

For some reason, for the past few years, Facebook has had its foot on the proverbial brake pedal, not letting go. They can be a serious disrupter in the payments space, but for some odd reason, they are seemingly not doing much about it (in terms of results).

Will Facebook ever introduce a PayPal-like service?

Fri, 06 Mar 2015 18:46:49 +0000

Faisal KhanAnswered Mar 6, 2015

They could, but it would be one heck of a challenge. Facebook has all the right ingredients to enable a payment platform that can get them up and running with P2P payment. Barring the legal/compliance/regulatory angle, nothing stops Facebook from doing so.

If Facebook were to launch such a payment offering globally, they would see much more success outside of the US than they would within the US. The ROW (Rest of the World) is thirsty for a unified, globally accepted payment system, sadly PayPal is not that. Facebook can be.

Read my answer on: Faisal Khan's answer to Why are start-ups or Facebook itself not using Facebook's large user base for money-transfer services? (Scroll down and read the part of Facebook entering money transfer business).

What is the best way to ensure international clients pay on time?

Fri, 06 Mar 2015 18:46:47 +0000

Faisal KhanAnswered Mar 6, 2015

There are none. Either you do an advance payment or hold the funds in an Escrow.

How do you connect a website with a payment system?

Fri, 06 Mar 2015 18:02:44 +0000

Faisal KhanAnswered Mar 6, 2015

Too board of a question, but I would assume you are talking about integration with a payment system.

Typically the way you can integrate are:

API
Shopping Cart Plug-ins
Embed Code
Redirect/iFrame Code

Was Liberty Reserve’s shutdown an attempt by the U.S. to control digital or e-currencies, and how severely did it impact Bitcoin?

Thu, 05 Mar 2015 18:45:29 +0000

Faisal KhanAnswered Mar 5, 2015

Jon Matonis would probably be the best person to answer this question. But, generally speaking, the US is trying to regulate and slowly mitigate Bitcoin based exchanges, asking that these exchanges get regulated and registered with FinCEN and then presumably the States will follow suit asking them to have a Money Transmitter license.

See: FinCEN's Virtual-Money Guidelines Add Roadblocks for New Companies

Do banks hire consultants to help review and process loan applications?

Thu, 05 Mar 2015 18:02:42 +0000

Faisal KhanAnswered Mar 5, 2015

Not the review process from an individual application point of view, but banks will occasionally hire consultants to review the loan application process (in accordance with the internal mandates) to improve upon the review process, specifically steps and/or mechanisms to be added into the process to mitigate risk on the loan portfolio.

Independent consultants, better known as ISO (Independent Sales Organization) will aid the bank as external workforce to market the loans and sign-up people. They essentially are marketeers who do the paper work and basic screening, before filing the loan application. The application will still go through the rigor and process the bank has set for review of all loan applications.

Which Basel Accord requirements must be reflected in Philippine banking regulations?

Thu, 05 Mar 2015 18:02:41 +0000

Faisal KhanAnswered Mar 5, 2015

The Basel III Framework very clearly summarizes the requirements for any bank that would like to take advantage of the best practices that the Basel committee sees as a mandatory requirement in order to continue doing banking in a safe and limited risk manner.

To quote from the framework:

"Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
improve risk management and governance
strengthen banks' transparency and disclosures.
The reforms target:
bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.

Source: International regulatory framework for banks (Basel III)

The laws that would need improving start with the paid-up capital requirements, and better risk control for the loan and deposit portfolios.

BSP's banking regulation department are the ones supervising the updates in the law, especially for more comprehensive reporting and disclosures.

What features would persuade you to use a new alternative or mobile payment system from Apple, Facebook, or Google?

Wed, 04 Mar 2015 19:03:03 +0000

Faisal KhanAnswered Mar 4, 2015

On the flip-side, i.e. outside of the US and looking at users from developing and emerging markets, the reason that Apple, Google, Facebook, et. al. are offering a payment service is a good enough reason to accept. That's the feature set.

The US is a have market. Lots of options. For ROW (Rest of the World) they are mostly have-not, so when giants like say Apple, Google, Facebook, Amazon, etc. step into the payments space, you can bet your horses that we will grab on to it like this *snaps-fingers*

What security advantage is gained when a bank mails your credit card separately from the letter containing your PIN—couldn’t a thief just steal both anyway?

Tue, 03 Mar 2015 18:57:49 +0000

Faisal KhanAnswered Mar 3, 2015

The probability of a thief having access to both drops, when you separate the mail. It was an old age practice which now really isn't necessary as almost all cards delivered are non active, and require a call-in to activate the cards.

However, some issuing banks feel that the knowledge required to activate a card can be still be compromised (assuming the thief has access to the card+PIN), so best to send the PIN and Card separately to further reduce the probability.

Who are some of the top lawyers and law firms specializing in money-transmitter licensing for both startups and established companies?

Tue, 03 Mar 2015 18:57:48 +0000

Faisal KhanAnswered Mar 3, 2015

Two come to mind:

Perkins Coie (http://www.perkinscoie.com/) and
Nesenoff & Miltenberg (http://nmllplaw.com/), especially look up the attorney Marco Santori (http://nmllplaw.com/attorneys/marco-a-santori/)

Can peer-to-peer payment platforms transfer money across state lines without obtaining money-transfer licenses?

Tue, 03 Mar 2015 18:43:38 +0000

Faisal KhanAnswered Mar 3, 2015

No. Moving money across state lines and/or internationally (across borders) with respect to the US, requires a Money Transmitter license.

We had a client that required this clarification, and we got this not only from FinCEN, but from a local law firm as well and both say the same. If you're moving money (physical, digital or alternative), other than being an MSB, a Money Transmitter license is required.

Can an individual legally create their own currency?

Tue, 03 Mar 2015 18:43:36 +0000

Faisal KhanAnswered Mar 3, 2015

Yes. A private person can indeed create or invent a new currency and/or currency system. But to then be able to use it as a legal tender or a tradable exchangeable commodity would depend on the specific country they are in, and how the laws are structured by both the Government and/or the Financial Regulator.

You can certainly create it, whether or not you can use it - is an entirely different question.

Mobile Commerce: What is the smoothest way to redeem coupons without relying on a POS device?

Tue, 03 Mar 2015 18:43:34 +0000

Faisal KhanAnswered Mar 3, 2015

You can do this a couple of ways:

Use a Bluetooth reader, which would either connect to your PC or your Phone (+App). Example of this is: BTMag Three Track Secure Bluetooth MagStripe Reader
You can also use the Phone's camera and if your scan is available as a Barcode or a QR code, you can use that mechanism to process the coupon.
Old fashioned key-in on your Phone app.

What were the early phone-based credit card readers before Square?

Tue, 03 Mar 2015 18:02:39 +0000

Faisal KhanAnswered Mar 3, 2015

Prior to Square being launch, mobile POS (mPOS) was the prevalent technology. Essentially it was a POS machine with a built mobile phone and came with a bluetooth receipt printer.

There was this French company that was one of the earliest innovators, but they quickly went out of business because of pricing pressures from China/Hong-Kong who not only copied their design, but improved upon it.

Why haven’t banks implemented fingerprint identity checks at point-of-sale terminals?

Mon, 02 Mar 2015 18:56:25 +0000

Faisal KhanAnswered Mar 2, 2015

There are a couple of reasons for this. What do you check the fingerprint against? The prevailing privacy laws may or may not allows such fingerprinting to take place where regular picture ID would suffice.

If the laws do allow it, what are the fingerprints checked against? Is there a national database of fingerprints that can be accessed and return the biometric credentials. Pakistan is one of the few countries in the world that has this system, other countries like India, Bangladesh etc. are building it and implementing such systems as well. In Europe such a system would see massive opposition.

The KYC rules set in play today, make it adequate for a state provided picture ID to be used for KYC purposes. ATMs can very easily implement this, but then again, if there is no database at the back-end to verify the ID, then there is not much use in providing the ATM with the biometric option.

How much could PayPal earn from interest on funds stored in user accounts?

Sun, 01 Mar 2015 19:13:05 +0000

Faisal KhanAnswered Mar 1, 2015

Question is very subjective and speculative, but to answer, you would need to know what sort of lending PayPal is doing. Assuming that it is doing overnight lending only at 0.3% per year (assuming no rate changes), then PayPal makes the following on a per Million Dollar basis:

- Per Day Basis: US$ 8.21
- Weekly Basis (5 Days): US$ 41.09
- Monthly (30 Days roll-over): US$ 246.30
- Yearly: US$ 3,000.00

What are the major challenges and emerging trends in international payment systems?

Sun, 01 Mar 2015 18:54:25 +0000

Faisal KhanAnswered Mar 1, 2015

There are so many. For payment systems that are expanding horizontally and vertically, there are many challenges and hurdles.

First and foremost, Licensing & Compliance are the most important elements that require constant monitoring and adjustment. For expansion, becoming a legal registered entity in all the major territories would be a monumental task. One need not necessarily be present everywhere as a legal (registered) entity, but in many countries if a payment system in terminating and/or souring transactions, then they may need to be legally registered as such with the regulator.
AML & KYC compliance issues. Just because you are the IOU message format of a transaction, does not mean you are some how exempted from the AML/KYC taps and/or checks.
Connectivity to settlement switches and/or settlement networks.
Competition from LCR (Low Cost Route) networks (that are usually domestic) or regional networks.
Banking requirements [either direct bank accounts, Nostro arrangements of having a settlement bank(s)] - these are every changing.
Exhaustive dispute resolution systems which again are constantly changing.
Launching of new products/services, requires regulatory approvals and also some bespoke elements to make them merchantable in specific environments.
Internal Audits outlay and structures and external audits SOPs and procedures (as seen by the regulator of that country)
The constant push to lower rates and be innovative at the same time.
Consolidation
Balancing transaction times with monetary floats (applicable to certain markets)
SEC (or equivalent) regulations with respect to revenue share and market dominance.
Market knowledge of new markets

How does a remittance agent make money when send and receive amounts differ? For example, sending AUD 1,000 to the US from Australia, and when $100,000 USD is sent from US to Australia?

Sun, 01 Mar 2015 18:54:24 +0000

Faisal KhanAnswered Mar 1, 2015

You are assuming that the Remittance transfers in this case is peer-to-peer. Ideally (in most cases that I know of), the Inward remittance from US to AU would be treated as a separate transaction from AU to US. Net-off in remittances are now discouraged worldwide (for reason of accounting and to prevent anti-money laundering).

The remittance agent is not responsible for being the market maker. I cannot think of an example or a scenario where one would be. In P2P transfers, its the liquidity that comes into play for both markets that would enable dual transactions (equally).

For most, the remittance agent deals with the transfer based on the SWIFT Wire transfer and the exchange rates are quoted by the settling bank (by their treasury / FX department). The agent is merely executing the transaction with the in-built margins. Hope that clarifies.

Why does the banking sector require regulation?

Thu, 12 Feb 2015 18:01:36 +0000

Faisal KhanAnswered Feb 12, 2015

Today's regulations mitigates market and invest risk on the money that depositors have with the bank.

An unregulated bank poses a much higher risk of losing your money than a regulated bank. The regulation comes on behalf of the depositors who are not financially savvy to understand how their money is going to be kept safe, invested, etc. hence they turn their trust to the financial regulator to ensure the same.

Whether you agree to this line of regulation (read: control) or not, is your prerogative. But history will tell you, unregulated businesses have a much higher chance of losing your money or in many cases, defraud depositors.

For web-based payment processors, what key pieces are still missing in today’s payments infrastructure?

Thu, 12 Feb 2015 18:01:35 +0000

Faisal KhanAnswered Feb 12, 2015

This is a pretty large (read: open-ended) question. The answer can vary from geography, payment instrument, payment intent, fraud, authentication, etc.

Here are some of my thoughts on the subject:

Financial Routing: Being able to route on to multiple payment systems on the back-end to facilitate a payment over the web.

Nowadays, a merchant has to get various payment solutions on their website, to be able to facilitate the various payment methods.

This should essentially be solved, by making it easier to signup with a single payment solution provider and be able to accept all forms of payments. This becomes even more so applicable, in developing and/or emerging markets.

Default two-factor authentication. 2FA is missing from a lot many payment systems, and is essential to combat fraud.

Interoperability: Being able to connect to various payment systems and being able to accept those payments, even if not subscribed to that payment network. The analogy comes from email. One can accept email because of the underlying SMTP protocol (hate to be redundant) and the network effect of all networks connected. Just because I do not have access to say PayPal (which a website accepts), should not prevent me from paying with some other payment instrument, provided the safety and authenticity of the transaction can be guaranteed to the merchant.

Can TransferWise’s P2P matching model work only in two-way corridors, or can it also work in one-way remittance corridors from developed to developing countries?

Thu, 12 Feb 2015 17:55:09 +0000

Faisal KhanAnswered Feb 12, 2015

The TransferWise model, is best known as net-off model in remittances, meaning, there is no money moved between the two countries, only the local demand/supply pair is settled with the supply/demand pair from abroad.

The question is where can it work? It can work almost anywhere, provided

The Regulator allows net-off settlements in remittances. In most countries, net-off settlements are not allowed. The Regulator (usually the Central Bank) would most likely like to see the money coming into their country, i.e. inward foreign exchange, and this foreign exchange is surrendered for the local currency. This not only increases the Forex Reserves of a country, but also improves the financial health of the country on the whole. If the regulator has banned or disallowed net-off settlements, then needless to say TransferWise Model will not work.
Second element is liquidity. If there is not enough liquidity in both directions, the model does not work. Lets take an example of India. If someone from London wants to send GBP 5,000 to India, the way the model will work is to find someone or a couple of people who collectively would be sending GBP 5,000 from India to UK. If you cannot find the latter, then the model cannot function.

I would say in the end, it is in order of priority, the regulations in the sending & receiving countries and then it comes down to liquidity in the market place to ensure such transactions can be executed.

In what ways have banks lobbied to reduce or remove financial education from public school curricula?

Thu, 12 Feb 2015 17:55:03 +0000

Faisal KhanAnswered Feb 12, 2015

I wouldn't use the word lobbied, but the way banking is today, specifically how fractional reserve banking works, is very important. After all understanding any institution of money, especially those that draft our monetary policies is critical to our understand of the financial world around us.

Banks have employed endless streams of people who further employ endless streams of financial jargon, double-meaning words, vague plausible causes, complex graphs and scales, coupled with intimidating mathematics which quickly deters people from understanding the basics of our monetary system and how flawed it is.

In short: It is to the advantage of banks, to confuse us in the complex jargon!

Economics: At what oil price level would Saudi Arabia be forced to respond to falling crude prices?

Thu, 12 Feb 2015 17:55:00 +0000

Faisal KhanAnswered Feb 12, 2015

I don't think the Saudis will cut production. The falling oil prices are already affecting the US shale/fracking oil production, so the overall supply excess in the market will be reduced eventually. The Saudis would like to see the US shale/fracking oil business go out of business. It cost Saudi's between $5-$6 to get the oil out of the ground, their cost of production is much lower, and they have adequate financial reserves.

The toughest part about playing chicken is knowing when to flinch. I think the Saudis are pretty good at this game.

Can Bitcoin exchanges trade on their own platforms and gain an unfair advantage over normal users?

Thu, 12 Feb 2015 17:54:58 +0000

Faisal KhanAnswered Feb 12, 2015

In addition to the answers here, I would also say proprietary trading by the exchange and take advantages of block trades that the exchange can arrange as well as the fees advantage (the exchange most likely would not charge themselves the fees).

Front-running will also happen and it does, so as a regular trader, you lose out.

What is the usual process for closing a bank account in Pakistan?

Thu, 12 Feb 2015 17:54:55 +0000

Faisal KhanAnswered Feb 12, 2015

Written application to the branch manager. That is all that is required. You will have to turn in your cheque book if they ask for it.

How do Chinese exporters handle customs, taxes, and related costs when shipping goods to the U.S., and how much do these add to prices?

Wed, 11 Feb 2015 18:52:45 +0000

Faisal KhanAnswered Feb 11, 2015

Import taxes and surcharges (if any) are the responsibility of the buyer, not the exporter (or seller). In any case the Chinese company would simply sell the item at its sale price and add to this Insurance and Freight.

Upon landing in the US, the Customs will levy a duty/tax on it (if applicable) and add that to the Invoice amount that accompanies the goods and the importer (buyer) would have to pay that.

Under-invoicing is serious offense, so it should be avoided at all costs. Every Chinese seller should be able to provide you with the HS Code (Harmonized System) Code for purpose of duty calculation.

What is the lowest-cost way to transfer money between countries?

Wed, 11 Feb 2015 18:52:44 +0000

Faisal KhanAnswered Feb 11, 2015

There is no set answer to this question, each corridor (the term used to indicate the transfer corridor between two countries) can be different from the next. Society for Worldwide Interbank Financial Telecommunication (SWIFT) is perhaps the most widely adopted money-transfer scheme used by banks, which charges pretty much a flat-free to move your money from a bank to bank. However, when dealing with multiple currencies, the banks that move money, may set your rate.

Individually, options for money transfers between countries vary. For example, from US to India, Xoom (company) is the preferred method, giving you perhaps the best rate for your US Dollars. In other corridors you will find very niche players operating or many a times, none at all.

Peer to Peer transfers are taking ahold of the the market, but their coverage is limited. You might want to check with companies like Currency Fair or Transferwise and see if they are available in your area.

It is always a good idea to ask around and research. Some preferred the sure and sound method of bank to bank transfers using SWIFT, whilst others may happily be able to use Bitcoins or Ripple for transfers.

How can I buy Bitcoin while living in Canada?

Wed, 11 Feb 2015 18:52:43 +0000

Faisal KhanAnswered Feb 11, 2015

From the ATM of course (if you are in Vancouver).

See: World's First Bitcoin ATM goes live in Vancouver.

In addition to various exchanges, etc. Local Bitcoins (trade of bitcoins in person) is perhaps the next best thing: Page on Localbitcoins

Why do Bitcoin exchanges show so many very small BTC trades?

Wed, 11 Feb 2015 18:52:41 +0000

Faisal KhanAnswered Feb 11, 2015

Bitcoin trades are charged on the percentage of their value, so if a Bitcoin trade is for 0.0001 BTC, the associated charge might be 0.5% of 0.0001 BTC.

the smallest unit that can be traded is: 0.00000001 BTC and has been aptly named a "Satoshi" most likely paying homage to its anonymous founder.

If the value of Bitcoins becomes too large, then dealing in these Satoshis would be the norm, which would then result in the Bitcoin ecosystem being:

21 Million Bitcoins x 1 Million Satoshis = 21,000,000,000,000 Satoshis, or

21 Trillion Satoshis.

Why is there a ceiling in the number of bitcoins that can be created?

How do you obtain ISO status through a bank relationship?

Wed, 11 Feb 2015 18:01:33 +0000

Faisal KhanAnswered Feb 11, 2015

Very simply: Apply to become an ISO. Banks 5 hat offer an ISO program have an application process, fill it up and see if you qualify.

How do international bank-to-bank transfers function end to end?

Wed, 11 Feb 2015 18:01:29 +0000

Faisal KhanAnswered Feb 11, 2015

Its simply a ledger adjustment. All banks report to the central banks and central banks exchange ledger positions with each other.

So, when money needs to from UK to say Philippines, its simply a debit on one side and credit on the other (though I am putting this in a very very simplistic way).

Another easy way to picture this, is to imagine a classroom. Each classroom has many students and one teacher.

Each student = bank
Teacher = central bank.

Now imagine each student (bank) has a ledger in front of them. Anything they write, others can see, and more specifically the teacher (central bank) also writes down in its ledger.

For any student (bank) to cheat, all other students (banks) will know and there would be a discrepancy between the cheating student (bank)'s ledger and the teacher (central bank)'s ledger position.

For cross-border to occur, imagine all the teacher (central banks) now sitting in one class and exchanging their ledger positions.

All this is done electronically.

The cash is physical movement and for that, yes, planes are used and cash is transported via the aircraft.

As of February 2015, had Visa officially rolled out its P2PE solution?

Wed, 11 Feb 2015 18:01:28 +0000

Faisal KhanAnswered Feb 11, 2015

Nope. To the best of my knowledge it hasn't been launched yet. It was slated for 2014 under the DSP program, but still nothing.

Which Bitcoin startups in 2015 were considered the most exciting and genuinely innovative?

Wed, 11 Feb 2015 18:01:26 +0000

Faisal KhanAnswered Feb 11, 2015

I'm partial to Bitcoin remittance (money-transfer) services companies. A couple of names to look out for:

Bitpesa (Kenya)
Rebit (Philippines)
Bitspark
HelloBit
Aircoinz
Beam Remit

Another company that piques my interest is ChangeTip.

How does ACH work in practice, how are payments processed, and how does ACH differ from RTGS and other local payment switches?

Wed, 11 Feb 2015 17:53:29 +0000

Faisal KhanAnswered Feb 11, 2015

Gusto (formerly ZenPayroll) probably has probably the best explanation of how ACH works:

How ACH works: A developer perspective - Part 1
How ACH works: A developer perspective - Part 2
How ACH works: A developer perspective - Part 3
How ACH works: A developer perspective - Part 4

Another great resource to read is by Dwolla - which provides a great write up as well: ACH Payments for Developers (by a developer)

How does Dwolla generate revenue when its fees are close to zero?

Tue, 10 Feb 2015 18:01:25 +0000

Faisal KhanAnswered Feb 10, 2015

The make money on transactions greater than US$10, and presumably they get earnings credit from their credit union for the money they hold in their wallets on behalf of their customers.

The zero cost transaction (those under $10) are actually an incentive to increase their user base and attract more customers.

In the end, Dwolla is a transaction based company, the more transactions they have, the more money they make.

What is the most valuable banknote ever issued to date?

Tue, 10 Feb 2015 18:01:24 +0000

Faisal KhanAnswered Feb 10, 2015

The US Series 1891 Red Seal US$ 1,000 Dollar Bill

Extremely rare, last one was auctioned off for US$ 2.5 Million (See: $1,000 Bill Sets New World Record At Auction)

Other examples would the Ming Dynasty Banknote, which would be worth in millions. Priceless!

Then there are supposedly 40 or so titan notes that Bank of England has stashed away. Value? 100 Million British Pounds.

Read the story about this note here: Britain's £1m and £100m banknotes

Present circulation-wise, Martin van der Neut's answer is correct.

What is the best payment system to integrate into a website that operates as a platform?

Tue, 10 Feb 2015 17:52:12 +0000

Faisal KhanAnswered Feb 10, 2015

What you are describing is a marketplace, with the marketplace being an aggregator for payments. This is typically referred to the industry as the marketplace being a Payments Facilitator (PF for short).

You can use one of the many payment service providers who provide payment processing for marketplaces:

Balanced
Braintree (company)
Stripe (company)
WePay (company)

Do note, with the marketplace being a PF, there are rules that MasterCard and VISA, etc. impose on an aggregator. For example an aggregator cannot work under an aggregator. So you (the marketplace) would have to register with VISA/MasterCard as a PF and then go to a PSP to provide you the platform to process payments and on-board sub-merchants who participate in the marketplace as Sellers.

WePay (company) for example has an excellent paper on this, you can read more about it here: https://www.wepay.com/files/paym...

Typically, any PSP platform you use, would automate the payment processing (there is always manual intervention to look at flagged transactions chargebacks, fraud, etc.) but overall, this is what a PSP brings to the table, they bring a wide variety of payment tools to make the whole process seamless for you.

Is there a website payment system that automatically converts fiat to Bitcoin and sends it to a specified Bitcoin address?

Tue, 10 Feb 2015 17:52:11 +0000

Faisal KhanAnswered Feb 10, 2015

In addition to the other answers (Coinbase, BitPay, Coinvoice): there is http://www.bips.me

Does PCI DSS specify any maximum acceptable network latency for card transactions?

Tue, 10 Feb 2015 17:52:09 +0000

Faisal KhanAnswered Feb 10, 2015

To the best of my knowledge they do not. VISA and MasterCard rule manuals cite for your network to have low latency, but a cap is not mentioned, nor do the PCI DSS rules define a cap.

How does Bitcoin trading work in Pakistan?

Tue, 10 Feb 2015 17:52:07 +0000

Faisal KhanAnswered Feb 10, 2015

To trade Bitcoins. No.

I should cite that the No is conditional. The condition being that State Bank of Pakistan, specifically the EPD (Exchange Policy Department) has not banned the trading of Bitcoins. In fact, SBP does not have an opinion on Bitcoin to date.

However, there are certain caveats in the law that allegedly make this illegal, but that is subject to interpretation.

If one were to setup an online exchange for Bitcoins, that is clearly in violation of the SECP (Securities and Exchange Commission of Pakistan) rules. Any/all trading exchange dealing in any kind of open-market securities (and the definition of securities is wide-open) needs to be licensed and regulated under SECP guidelines.

How do U.S. banks run background checks on non-citizens?

Mon, 09 Feb 2015 18:01:22 +0000

Faisal KhanAnswered Feb 9, 2015

If you are opening a bank account, a background check is not required. The only thing the US bank would do is to check the person against the various lists they have such as OFAC, SDN, etc.

If a background check is required for some other purpose they might outsource this task or contact a specific background check company in the country from which the person came from.

Why did M-Pesa succeed so strongly in Kenya while similar products underperformed in South Africa or India?

Mon, 09 Feb 2015 18:01:21 +0000

Faisal KhanAnswered Feb 9, 2015

At a conference I had the rare privilege of speaking to one of the original product development managers of the M-Pesa launch. I asked her why M-Pesa was successful, and barring the technology element, why did it take off the way it did.

She gave us various reasons (technology, BIT, etc.) but the reasons she gave me was entrepreneurial spirit of the Kenyan people.

Though a big hard to understand, she cited the following example, I am paraphrasing from memory here, so please do not take this to be her literal quote.

Before M-Pesa, in a little town outside 100 kilometers from Nairobi, there is this bus stop, one that is frequently used by merchants / traders and farmers coming into Nairobi. Switching buses from this stop and then entering the city.

The bus stop had a tuck shop (a small cold-drink/snack type shop). Really broken down, walls with fading and long peeled out paint, hardly any shade, dusty all around etc.

After M-Pesa, the shop now has a been thoroughly expanded, refurbished, repainted and restocked. It is painted with bright colors and has chairs and shade around it. Many people can be seen congregating and loitering around it (too much for it to serve the purpose of a small shop). Turns out on the back wall of the shop, some entrepreneurial spirited Kenyan painted the wall black (properly) and with chalk started quoting prices prevalent in the city for vegetables and other highly traded commodities. Farmers and traders made this a last stop so to speak before venturing out further into the city, if they wished to trade. The prices were being quoted daily, were being texted all around to those who inquired and there was a bidding paid by M-Pesa to get listed on this wall, etc. Many traders met at this shop and traded. The shop in many ways became the mid-way point for trading.

This is what M-Pesa did to my people. It transformed them. There are 100s of such stories. The shop doesn't exist now. The pricing now is communicated purely on the mobile phones and the need for the chalked wall is no longer necessary.

M-Pesa transformed lives more so in Kenya than anywhere else (though I seriously would argue that). It is not the biggest success story, it is one of the most well marketed and documented story. There are stories like M-Pesa in Bangladesh, Philippines, Pakistan, etc.

The product really solved multiple problems and even more so, it inadvertently solved problems that were not thought of before (such as price quotes and trading cited in the example above).

How does Visa settle funds between acquirers and issuers at day-end—what rails/mechanisms are used (ACH, switches, etc.)?

Mon, 09 Feb 2015 18:01:19 +0000

Faisal KhanAnswered Feb 9, 2015

In various countries that VISA operates, it has an designated bank(s) that are VISA settlement banks. The accounts maintained within these banks are used for settlement purpose. So depending on the geography and territory, this could be as simple as an interbank funds transfer using whatever the local preferred method is.

All foreign settlements is done by doing a net-off using SWIFT between VISA accounts.

Why does it seem like most people don’t really understand how money works?

Mon, 09 Feb 2015 18:01:17 +0000

Faisal KhanAnswered Feb 9, 2015

It is made so deliberately (whether you agree to it or not). It is made complex by design and association.

There is a great documentary called How Money is Created, which is a must watch.

I want to quote from the opening scene:

There is no system that is taken for granted or misunderstood as the monetary system.

Taking on nearly religious proportions, the established monetary institution exists as one of the most unquestioned forms of faith there is.

How money is created, the policies by which it is governed, how it truly affects society, are unregistered interests of the great majority of the population.

And whether we are aware of it not, the lifeblood of all of our established institutions and thus society itself is … money.

Therefore understanding this institution of monetary policy, is critical to understanding why our lives are the way they are.

Unfortunately, Economics is often viewed with confusion and boredom.

Endless streams of financial jargon, coupled with intimidating mathematics quickly deters people from attempts at understanding.

However, the fact is, the complexity is so seated with the financial system, is a mere mask.

Designed to conceal one of the most socially paralyzing structures, humanity has ever endured.

How Money is Created: Part 1

https://www.youtube.com/watch?v=...

Can money laundering be done via large-scale art purchases, and how does that affect art pricing and valuations?

Mon, 09 Feb 2015 18:01:16 +0000

Faisal KhanAnswered Feb 9, 2015

Can it be done? Sure! Will it be worth the effort? Probably not. The liquidation aspect of art might be a problematic area. I'm sure buying of art is used within the money-laundering construct, but the percentage would be low. Real-estate, cars, boats, jewelry are on top of the list.

Why aren’t PayMaya and GCash in the Philippines widely viewed as success stories despite clear benefits?

Mon, 09 Feb 2015 18:01:14 +0000

Faisal KhanAnswered Feb 9, 2015

You know that is a very good question to ask. The long and the short is: Africa took over.

Smart Money / GCash, and before that the Smart network being used for remittance payments literally encompasses one of the remittance bibles (See: Remittance Bibles: The 5 must read documents.) Within the early remittance days, Smart money was a case study. Then came M-Pesa and Africa. M-Pesa was the darling of all aid organizations, all case studies, all academic endeavors for financial inclusion, etc.

Somewhere and somehow people totally forgot about Smart Money which was the true and early adopter of mobile payments and mobile based money transfers.

Smart Money / GCash have had case studies been made out of it, but not to the extent that M-Pesa has been paraded around.

For me, personally, Smart was always the beginning point.

How many Swiss banks exist in total?

Mon, 09 Feb 2015 18:01:13 +0000

Faisal KhanAnswered Feb 9, 2015

A list has been compiled here, not sure how accurate or up to date it is: Alphabetical list of Swiss banks

Bitcoin in 2014: Which companies offered Bitcoin merchant acquiring/processing?

Mon, 09 Feb 2015 18:01:11 +0000

Faisal KhanAnswered Feb 9, 2015

Here is my curated list of Bitcoin merchant processors all over the world:

Alternative Currencies: List of Bitcoin Merchant Processors

Why are banks wary of Bitcoin?

Mon, 09 Feb 2015 18:01:10 +0000

Faisal KhanAnswered Feb 9, 2015

I talk to a whole lot of bankers everyday, and I've yet to really come across a Bank/Banker that fears Bitcoin.

Most of the bankers are oblivious about Bitcoin and how as they put it the whole Bitcoin economy works. Scanty knowledge is prevalent amongst bankers. Very few really understand how the Blockchain works and what it means for bankers.

Fear would be a wrong word. I think they don't view it as a threat so much (do remember, there is much more to banking than just what exists in the US), there are 220 countries and territories that have banks. Cumulative popular opinion is that bitcoin, at present is not a threat. It might be interesting, but not a threat, and nothing to fear.

I feel, complacency is the right word.

Why are there so many physical bank branches concentrated in Manhattan?

Sun, 08 Feb 2015 18:01:06 +0000

Faisal KhanAnswered Feb 8, 2015

New York is the banking capital of America. From the early days, the island of Manhattan has literally been the first port of call for all things banking. Investment Banks, Merchant Banks, Retails Banks and then Commercial Banks all took their roots in New York.

The gateway to American transfers (in or out) also happens to be New York. The same is true for foreign banks wishing to do business in the US, the first city of choice is New York.

Because all banks and Financial Institutions doing business in the State of New York are regulated (by NY's Department of Financial Services), a physical location is a must for any bank to obtain a license. There are no virtual licenses.

Think economy, the stock exchanges, the gateway element, etc. and New York would be the ideal place to setup a bank, for it is where the money is. Hence you see so many brick and mortar banks in NYC.

History: How did wealthy Europeans move assets to the New World during the colonial era?

Sun, 08 Feb 2015 18:01:05 +0000

Faisal KhanAnswered Feb 8, 2015

Crown Banking was already established in the New World, in fact, quite a few merchant banks were setup just for this purpose. They would take Promissory Notes and transfer wealth, physical wealth, which was gold and silver bullion at the time.

How can someone get a meeting with a major tech company like Apple or Samsung?

Sun, 08 Feb 2015 18:01:03 +0000

Faisal KhanAnswered Feb 8, 2015

I'd agree with Joel Yarbrough - an introduction through a friend is the best way. People would gladly make an introduction, provided they feel after the introduction, they would not be termed as an ass for doing so.

If you have something relevant to share, reach out to your network (LinkedIn is a great resource) and tell them. They will find someone relevant for you to talk to.

Its all about trust. If your common friends value your judgement (and sanity), the introduction will happen.

What items does PayPal need to recognize and account for in its financial statements?

Sun, 08 Feb 2015 18:01:02 +0000

Faisal KhanAnswered Feb 8, 2015

PayPal's financials, are a sub-division of Ebay's financials. Ebay at present does not provide a separate P&L/Balance Sheet for its subsidiary PayPal.

From an accounting perspective, everything is taken into account, when they report it on their books, so yes, total money transferred is the net revenue that was booked. Profit/Loss is a separate matter.

State licensing requires that PayPal report to each financial regulator the total amount of funds transfers handled for that particular state.

How are large-value bank transactions executed in practice?

Sun, 08 Feb 2015 18:01:00 +0000

Faisal KhanAnswered Feb 8, 2015

If the amount has to be transferred, it would go through the Fedwire, the US RTGS. Cost $25 probably and you could literally transfer $10 Billion for the same price. Just have to have the money! :)

Banks: Which financial services brand is doing a strong job marketing “innovation”?

Sun, 08 Feb 2015 18:00:59 +0000

Faisal KhanAnswered Feb 8, 2015

Within the banking community, four brands are doing what I would deem to be a great job:

BankMobile (tackling the millennials behavior and how they do banking) - BankMobile: The Mobile Banking App Revolution
Umpqua Bank (reinventing their community bank branches) - Umpqua Bank
Fidor Bank (starting banking from the 21st century tools, and 2010+ web tools) - Banking mit Freunden
Moven (taking a great UI/UX experience and offering financial services on the mobile phone the way they were meant to be served today) - Moven

Does Dubai have its own stock exchange?

Sun, 08 Feb 2015 18:00:57 +0000

Faisal KhanAnswered Feb 8, 2015

Yes it does, its called Dubai Financial Markets: Dubai Financial Market, PJSC

Is there a country-by-country directory of financial regulators, or an online database of regulatory enforcement actions and breaches?

Sun, 08 Feb 2015 18:00:56 +0000

Faisal KhanAnswered Feb 8, 2015

Wikipedia has a list, but it seriously outdated and in many instances flawed: List of financial regulatory authorities by country

A more accurate list of financial services regulators is maintained by the Financial Regulators Gateway which is more accurate: Financial Regulators Gateway

There is no common database of regulatory breaches, however, if you have access to a Bloomberg terminals, you'd pretty much be able to search for any such breaches that were made public.

Why hasn’t peer-to-peer money transfer seen widespread adoption?

Sun, 08 Feb 2015 18:00:54 +0000

Faisal KhanAnswered Feb 8, 2015

This is such a powerful question, the answer is a long one, highly opinionated and is still being written.

I'm summarize in a bullet form as to some of the points that prevent a global, frictionless, interoperable P2P money transfers.

MFS (Mobile Financial Services) are predominantly closed-loop ecosystems and are dominated by the mobile carrier and their partner banks. Because of the closed loop, P2P has limited tentacles to connect with other systems.
Interoperability remains a huge issue. Not from a technical point of view, but more so from a consensus and behavior point of view.
P2P money transfer is all about need. The need might be higher in say Ghana or Bangladesh than say in Singapore or UK. We're getting there. As all payments are P2P (strictly speaking), we will see the P2P money transfers take a bigger role in the years to come.
Agnostic: As much of the systems are closed loop, they do not offer users products and solutions that are agnostic to the bank, carrier and the mobile handset.
Mobile payments are just taking off, we're still cruising down the runway. Expect more traction in the days to come.
Regulations keep much of the systems separate.
Dominance of existing players
Costs - if P2P money transfers becomes really cheap, which it will, existing players don't like this idea, until they can dominate the space.
Monopolistic payment systems. Open access is not provided for.
FUD (Fear, Uncertainty and Doubt) prevails with many financial regulators.
Micro-transactions are still not available in P2P money transfers like they ought to be.

When did societies begin using currency to trade goods across borders?

Sun, 08 Feb 2015 18:00:52 +0000

Faisal KhanAnswered Feb 8, 2015

The Song Dynasty in China was credited with the very first issuance of currency notes for trading, a fact that was recorded by Marco Polo amongst his travel logs.

As stored in the British Museum, the Great Ming Circulating Treasure Note Ming dynasty, first issued circa 1375 CE

Though not explicitly moved, the Rai Stones on the island of Yap, were also the first currency (albeit in heavy stones) that was used to trade value between the islands, dating back to 1,000-1,400 CE.

For Gold, to be used as money (or currency), was around the 550BC when Lydian merchants (from Lydia, ancient Greece) used gold lumps to trade.

Proper gold/silver trading was around the 100-120AD when these precious coins saw their way in India for spices and China for silk.

How can I set up a Ripple gateway for African/Asian currencies, and what would it cost?

Sun, 08 Feb 2015 18:00:50 +0000

Faisal KhanAnswered Feb 8, 2015

To become a Ripple gateway, you must be in the business of moving money in and out of the Ripple network.

A gateway is not so much a particular business model as a specific role in the Ripple ecosystem.

Many different types of business act as Ripple gateways. (Banks, payment processors, money transfer services, remittance companies, etc.) Each bring their own specific user base, use cases and customer value proposition.

Source: Ripple for Gateways

If you are licensed in your geographic region to move money into and out, you can become a Ripple gateway.

Ripple for Gateways explains the concept of a Ripple gateway very well. The basics of any Ripple gateway is as such:

Source: Gateways | Ripple

You can build your own gateway using the developer tools that Ripple has provided: gatewayd | Ripple and once you are up and running you can write to Ripple to include it in their list, subject to Ripple's approval: Gateway Information

The costs would be determined by your ability to provide liquidity and the cost of integration. Besides this, there may be ancillary costs associated at your end, in terms of licensing, business licenses, registration fees, insurance, etc.

The gateway itself is free to build. You just need money to integrate both on to Ripple and to your offline system, as well as the liquidity you will provide.

Welly Sculley from Ripple can perhaps best add on to this.

The UK Faster Payments website says around 400 payment service providers access the system indirectly via sponsor banks—who are these providers and what level of access/service do they get?

Sun, 08 Feb 2015 18:00:48 +0000

Faisal KhanAnswered Feb 8, 2015

The list is not public. The core members are 10 banks (Current Members | Faster Payments), the others who connect are indirect customers who connect through these core members.

Most likely they are FCA regulated companies who are connecting to the system for payments processing.

Which payment gateway providers let Pakistan-based e-commerce businesses offer PayPal as a checkout option?

Sun, 08 Feb 2015 18:00:46 +0000

Faisal KhanAnswered Feb 8, 2015

None of the 3 existing gateways.

Which banks and financial institutions are supported by Yodlee?

Sat, 07 Feb 2015 19:07:10 +0000

Faisal KhanAnswered Feb 7, 2015

Certainly not the best source, but here is a rough list: Bank Feed Status - Xero Blog

What exactly is involved in Check 21 processing services?

Sat, 07 Feb 2015 19:07:09 +0000

Faisal KhanAnswered Feb 7, 2015

Check21 (as it is called in the US), is essentially a cheque truncation system and methodology. Other name that is used is remote deposit capture.

Rather than the physical paper cheque traveling to various places in order to be cleared, a cheque truncation system will take digital copies (i.e. photographic snapshots) of the front and back of the cheque. Specialized cheque scanners are used for this purpose:

Example of a Canon CR55 Desktop Scanner.

The scanner will also read the MICR (Magnetic Ink Character Recognition) Code on the cheque (the computerized numeric code at the very bottom row of the cheque):

In addition to this, the scanner will read the LAR and CAR. LAR or Legal Amount Recognition is the amount written in words. This is the legal amount of the cheque. The CAR or the Courtesy Amount Recognition is the numeric amount "2.56" in the example above, that is written in the box. Should there be a discrepancy between the LAR and CAR, LAR would prevail.

In addition to the MICR Code, LAR/CAR, other pieces of information are stamped on the digital image (this varies from territory to territory),

Date
Time
Scanner Number
Scan Station Number
OK image code
Station of Capture
Depository Institution Name
LAR/CAR amounts are Stamped
ABA/Routing #
Check #
Account Number
Name as read on the cheque (optional)
Pay to (Optional)

The input process varies depending in which country you are, but the basics of any scan is something like this:

The output file is something like this:

The file is then sent forward for onward processing and the image is now the cheque, with the paper cheque having been truncated. Specialized software & network connectivity between/within the banks and processors allow the movement of such a file and its onwards processing and payouts, etc. In the US this is the ACH network. Information retrieved from the scan is then populated into the ACH file for processing by the ACH processor.

Online Banking: What happens if you accidentally deposit money into the wrong account?

Sat, 07 Feb 2015 18:47:41 +0000

Faisal KhanAnswered Feb 7, 2015

Depends. Your definition of accidental usually would not hold up to the bank for a reversal. Both the legal name and account number has to match. If there is an account number mismatch, then the account name to which the funds have been deposited into MUST match the name that the person who did the accidental deposit cited.

Can funds sent to the wrong account via NEFT/RTGS be reversed?

Sat, 07 Feb 2015 18:47:39 +0000

Faisal KhanAnswered Feb 7, 2015

If reported to the bank, the bank can request a reversal of funds only if the transaction was fraudulent or accidental on account of the bank.

Reversals otherwise are not possible.

Why do banks ask “public records” verification questions when confirming identity?

Sat, 07 Feb 2015 18:47:38 +0000

Faisal KhanAnswered Feb 7, 2015

IN addition to what Christian Bee has cited, banks usually use tools/services like ID (See: http://www.idology.com/ to screen you on the spot (either over the telephone or online) to determine who you are based on your SSN information and credit report and/or public records. Your failing does not necessarily mean you are not who you say you are, it just means, you need to be screened and verified further as the system clearly was not able to do this comfortably for the bank. You are essentially "flagged" as being not who you are. This can go both ways.

I live in India and have no U.S. contacts—how can I open a U.S. business bank account remotely?

Sat, 07 Feb 2015 18:47:36 +0000

Faisal KhanAnswered Feb 7, 2015

This line of questioning has been asked here a lot. The simple answer is, you cannot. Without physically being present in the US with a valid ID/Passport, you cannot open an account, regardless what people may advise you.

Somalia’s currency is unrecognized internationally—what does that mean and what are the consequences?

Sat, 07 Feb 2015 18:47:35 +0000

Faisal KhanAnswered Feb 7, 2015

It basically means that no central bank and /or its banking members will accept this currency in its native form, which means, you cannot trade it as a legal tender (physical or digital) with any other banking partner (be it central bank or those licensed by the central bank).

The only way to trade with this currency is via an intermediary party that will do cross between the Somali Shilling and an acceptable currency, like the US Dollar, GBP, Euro, etc.

At current, all deal and/or trades involving the Somali Shilling are done, after the currency has been swapped with a more recognised and readily acceptable currency, like the USD.

The currency currently plays an internal trading role within Somalia and is pegged against the US Dollar (Interbank rate) for conversion.

What paths can someone take to enter investment banking without experience?

Sat, 07 Feb 2015 18:47:33 +0000

Faisal KhanAnswered Feb 7, 2015

Internship would be the most recommended approach. IBs get a lot of resumes, etc. You will need to fight your way in towards an Internship.

In your case, inside contacts help, everything else, really doesn't matter. Its networking that will get you in, nothing else.

What is the best dataset available on global remittance flows and average remittance costs?

Fri, 06 Feb 2015 19:06:10 +0000

Faisal KhanAnswered Feb 6, 2015

There is no accurate or centralized source to tap into something like this. The World Bank, Remittance Group has been pursuing this agenda with many countries, to obtain more granular data, but the sheer magnitude of something like this data gathering is not possible.

For starters, each country's regulator themselves are not compiling data in such granular format. The banks and MTOs have the data, but it is being consolidated into currency types and countries only. They are not providing the regulators with data such as:

Tie-up partner who sent the remittances
Whether the on-boarding of the remittance was online, mobile, payroll card, cash, walk-in, etc.
Cost of the remittance

The World Bank has suggested to make a universal template and data exchange protocol standard for obtaining such data on a daily basis from all the regulators, but there has been stiff resistance on the basis of privacy, etc.

In so far as I can tell, nothing is in the works at present for the next 2-3 years that would make WB Remittance Group publish more granular data. Your best bet is to look at the major corridors, and hope you are able to extract such data from the regulators of these corridors (which itself is difficult), considering Bangladesh, India and Pakistan do not wish to give more granular data than they already are. Nigeria, Philippines and the GCC Countries too have cited the same - that granular data is not needed.

When I transfer money from my bank to PayPal, where does the money actually go behind the scenes?

Fri, 06 Feb 2015 18:46:46 +0000

Faisal KhanAnswered Feb 6, 2015

Your money is being held in escrow by one of the various banks that PayPal works with. For example if you transfer money from your small community bank to PayPal, your balance would be held with Bank of America (as an example), under PayPal's account, under an escrow/nostro account for your PayPal ID.

The funds are held on behalf of PayPal by the bank.

What is the minimum ACH debit settlement time needed to reduce fraud risk?

Fri, 06 Feb 2015 18:46:44 +0000

Faisal KhanAnswered Feb 6, 2015

There is no way around it in the ACH system per se. However, some processors do have advanced mechanincs to employ within the ACH transaction framework, for checking up on the account, etc. Based on their internal fraud checks, they can release the funds to you on either a 2-day cycle or a 3-day cycle (typical is almost a 4 day cycle). Under such early release, the processor will charge you a percentage of the total amount being processed for early release of funds (typically hovering between 0.25% to 0.75%) depending whom you work with.

The risk of reversal remains. So best to wait it out for 1-2 additional days.

Payment Processing: What should I understand before becoming a merchant of record?

Fri, 06 Feb 2015 18:46:43 +0000

Faisal KhanAnswered Feb 6, 2015

Your payment processor should take care of those, the PCI compliance, fraud management, etc. As an MOR you are simply the beneficiary of the funds through the sales proceeds and bear the end responsibility of the transactional risk, as seen by your issuing bank. You need not go about reinventing the wheel with regards to PCI, etc. Simply choose and work with a payment processor that provides all this services. Customer support is something you would be responsible for.

Is it better to exchange currency before leaving your country or after arriving in the destination country?

Thu, 05 Feb 2015 18:45:28 +0000

Faisal KhanAnswered Feb 5, 2015

This would depend on the the two countries. For example if you were going from say Philippines to the US, your best exchange rate would be given in Philippines (not the US). Because your Philippines notes have a lesser value in the US than they do in Philippines.

For robust currencies, etc. like GBP, Euro, etc. you would probably get a better rte in your country of origin, than the US.

For US to Mexico, the exchange rate in Mexico would be better. Also, never exchange anything at the airport or the hotel. Change only enough for taxi fare and a lunch or two, but your remainder of the money should not be exchanged at the airport/hotel. Your best bet is to look for a money exchanger in the shopping district, they are competing for business and will give you a much better rate.

What opportunities exist for U.S. or European startups within the remittances sector?

Thu, 05 Feb 2015 18:45:27 +0000

Faisal KhanAnswered Feb 5, 2015

Remittances (or Migrant Workers Money Transfer) by the numbers, is a large industry. Today, (May 2013 estimates) show officially recorded Remittance data to equal to roughly about US$ 401 Billion. World bank's estimates for 2013 was at US$ 404 Billion, a mark which would very easily be surpassed.

The remittance to the developing countries will continue to grow at an annualised rate of 8.8% to reach US$ 515 Billion by 2015.

Very few US start-ups are actually in this vertical. There are many startups in the payments field, but very few in the cross-border remittances vertical. The earliest known one was PayQuik, which used to serve the US-India, US-Pakistan, US-South-Asia corridor. PayQuik was later acquired by Citibank in early 2008. The other well know US start-up example is Xoom (company) (who recently went public and are VS funded).

European start-ups are way ahead in this game because of the licensing and the remittances corridors that EU/UK serves.

Remittance business is a straight-thru profitable business. There is no, 3 years period to profitability. Profitability is achieved per remittance corridor literally within a 4-5 months (if not earlier).

You can get some form of semblance on the cost of sending money via the graph below, the decline over the last 5 years (considering the competition and players in the market) has faired well.

You can also refer to World Bank's Remittance Prices database to find out the cost of sending remittances: Remittance Prices Worldwide: Making Markets More Transparent (Caution: these figures are weighted averages and should not be deemed as final figures). For some countries there is a large variance in pricing, depending on the players who are in the market.

The margins are very decent. Certainly better than say the PSP market or the domestic US payments market.

The countries below are needless to say, the most important countries to work in as far as remittance corridors are concerned.

Innovative remittance products from corridors like US, Canada, EU/UK, Middle East (huge market), AUS/NZ can easily enable companies to make a lot of money.

Then there are other remittance corridors that may not be that evident or profitable, but trust me they are. There is no doubt that these countries do represent some challenge from the outside, but once you have studied these countries and are well versed with the market dynamics governing remittances, making an entry into these markets with the right ground partner is not difficult.

Here is another graph to help you visually understand Remittances as per of their GDP (for each country):

The US is one of the largest sending remittance corridor for sure, and it is in many ways under served. It is dominated by players like Western Union, MoneyGram and RIA. There are literally 100s of small MSBs who are funnelling business to beneficiary countries, but there is much room for improvement, i.e. a huge opportunity does exist.

Do refer to this post, which will show you bilateral money transfer figures around the world (albeit this is World Bank 2010 data), nevertheless it offers an interesting insight as to how remittance flows between two countries are shaped. Infographic: Remittances.

The hurdles (if you will) are by understanding that the remittance world is not a one-sided equation, i.e. if you develop a product/service state side, then you need to have on-ground partners in the beneficiary countries (as payout agents or settlement banks). Without such a relationship, you can have the best product, but will not have much progress without an on-ground partner. On-ground partners are able to provide business intelligence with regards to specific remittance corridors, remittance data & statistics, legal and compliance understanding, market competition, seasonal up/down cycles, correspondent settlement, regulatory reporting, etc.

From the US side, MSB and MT are the two issues that many startups venturing into this area do not fully comprehend. The US financial regulators (both Federal and State level) have made it a complex stew. Unlike their Canadian, UK or European counterparts, becoming an MSB with the ability to do cross-border transfers, is a very well black-and-white laid out procedure. The US, is very gray in this manner. Think 50 States and 50 shades of gray.

If one were to just assume that a start-up would be looking to work in the US-Country-X corridor, then that in itself can be a big plus. You develop a product for say US to India, then you can very easily replicate the same for Pakistan, Bangladesh, Vietnam, Thailand, Nigeria, Egypt, Nepal, Lebanon, etc. The aggregation helps.

Although technology plays an importnat part in this field (owning your code versus buying it, has tremendous advantages), the real differentiator is thoroughly understanding the remittance flows between two countries. This requires a lot of reading.

You need to understand what the regulatory issues are.
What the AML/KYC requirements are and how they would be handled.
Who will the funds capture and payouts take place.
How to mitigate risk and fraud.
What sort of reporting is required and how will it be fulfilled.
How will agent/principal settlement work.
How will the FX component work.
Nostro arrangements.
Etc.

Whilst, this may seem like a gargantuan task, it is not for a well-versed company / partner.

Startups who wish to venture into such a field need to comprehend the flow areas which are profitable, volume-based and are easy to enter into. This may include your principal country or may not. For example a US based startup may find it inherently very difficult task to enter the Saudi-India market, or the Kuwait-Philippines market. These markets are extremely closed, yet equally profitable and high-volume.

Understanding the breakdown of remittances of each country is essential. Then further on-ground business intelligence can be obtained regarding each corridor and the break-ups of the channels: Who provides these remittances? How much they charge? Average charge? Etc.

Africa, for example is a continent that is shunned by many. African countries are perhaps the most exploited countries when it comes to remittances. The cost of delivering a remittance to Africa is quite high (I've personally seen figures as high as 30% for remittances up to $300).

In the remittance world, it is all about relationships, the risks arise when you partner up with entities that either refuse to follow the rules and regulations and try to make a quick buck, or by having weak relationships, which will affect your bottom-line because you may not have enough transactions traversing through your system to make the corridor profitable.

Relationships does not just start and end with the partner, but must also include banks, regulatory authorities, industry experts in the field of transactional banking and cross-border money transfers, AML & KYC experts, etc.

Many big banks North America, EU/UK do not get involved with small markets or for that matter even large markets. A recent example is a tsunami that is happening right now in the UK, where Barclays Bank (of UK) has sent notices to 100s of MSB in the UK and is terminating its relationship with them, deciding only to work with 10-15 large MSB businesses (WU, MG, RIA, Etc.) This decision was based on the small and mid-sized players exploiting loops holes in the AML/KYC process and Barclays Bank did not want to end up being chastised for it financially by the Financial Regulator, as was the case with HSBC in US.

For start-ups to leverage this market, they need to have the domain knowledge (amongst other variables) and a half-way decent marketing budget. The technology aspect can very well be developed and/or leased. The market is not difficult to enter, but you cannot expect to win in this market by sitting on one side of the fence only. Proactive reaching out is a must.

What does a payment analyst do?

Thu, 05 Feb 2015 18:00:42 +0000

Faisal KhanAnswered Feb 5, 2015

Traditionally, ops position, compiling reports and statements based off the accounting and/or other softwares in use.

In dev, they structure how the transactions reports will be compiled, all the I/O functions, etc.

In audit, they create checks and balances on top of the underlying data that comes in.

Who is currently in charge of Facebook’s payments division?

Wed, 04 Feb 2015 19:03:01 +0000

Faisal KhanAnswered Feb 4, 2015

Sean Ryan, Facebook’s vice-president of platform partnerships (source: FT)

Why do many self-proclaimed payment-processing experts provide inaccurate information?

Wed, 04 Feb 2015 18:44:43 +0000

Faisal KhanAnswered Feb 4, 2015

It all comes down to a person's experience, exposure and opinion.

The payments field is not as simple as one is lead to believe. There are many components at work, law, technology, banking/finance, processes, regulations, etc.

Sometimes we get it all wrong. Sometimes, we are spot on. Most of the time, we hover in between. This is because my experience, perspective and opinion on a certain matter may inherently be very different from yours despite being in the same field.

Those who are well-read in such matters, will know where to cite their answers with references, as opinions or speculation. Since we cannot possibly know everything (think information overload), there is no shame in admitting we are wrong, and it is a perpetual learning experience for everyone.

How does PayPal actually process a transaction when a customer submits a payment?

Tue, 03 Feb 2015 18:57:45 +0000

Faisal KhanAnswered Feb 3, 2015

There are a couple of scenarios:

If both the Payer & Payee are PayPal customers, the transaction is internal to PayPal's ecosystem and hence it is just an intra-adjustment funds within PayPal's accounting.
If a Customer pays to a PayPal user using their own Credit Card or Debit Card, then PayPal is acting as the payment processor for the card transaction and then crediting the amount into PayPal user's account.
If a PayPal customer wants to charge their PayPal Debit Card, then it is a straight forward Card transaction, provided the PayPal account has the money to cover the transaction.
If a PayPal customer wants to load funds into their PayPal Account from their own bank, this is nothing more than an ACH transfer into PayPal.
The same is true for reverse, when you want to withdraw into your bank account, this again is an ACH transfer from PayPal's bank into your own bank account.

To get a better understanding of How/What PayPal is - you can read this descriptive answer that answers visually what PayPal is: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

How do banks use encryption in ATMs, and where is ATM-related data stored?

Tue, 03 Feb 2015 18:00:39 +0000

Faisal KhanAnswered Feb 3, 2015

Banks use specialized hardware for the encryption, all PINs (for example) are validated from the HSM (Hardware Security Module).

HSMs support a wide variety of encryption and key-management. Thales is the world leader in this field and pretty much has the market cornered on this front.

Encryption support:

Cryptographic algorithms supported:
Symmetric
AES (128, 192, and 256 bit)
Aria (128, 192, and 256 bit)
Camelia (128, 192, and 256 bit)
Triple DES (112, 168 bit)
Asymmetric
RSA (1024, 2048, 4096, 8192 bit)
Diffie-Hellman
DSA
ECC Suite B
Hashing
SHA-1, SHA-2 (224, 256, 384, and 512 bit)

Source: Network-attached HSM: nShield Connect

What steps are required to accept Bitcoin payments in countries where PayPal and similar services are not available?

Mon, 02 Feb 2015 18:56:24 +0000

Faisal KhanAnswered Feb 2, 2015

Technically speaking, it is not difficult to accept Bitcoins. You simply need a wallet to do so. However, to accept it on your site, you would need an equivalent of a service like Coinbase or BitPay to accept the equivalent price of your product in Bitcoins (as offered by the prevailing exchange rate at the time). Once the sale is made, your money (if you choose) is immediately and automatically converted to US Dollars.

On the legal side of things it is not so simple. There are a couple of issue to look at:

Does the economy that you are working in allow repatriation of funds?
Does the economy allow foreign-exchange to be held?
Bitcoin itself would need to be legal in the economy
You would need an exchange and/or a market maker to ensure that your Bitcoins can be converted to US Dollars (or other currency of choice, similar to what Coinbase or Bitpay would offer).
Some form of a bank would need to come into play to be able to allow the exchange / market maker / gateway to connect with the local banking system.

In the absence of any particular ruling by the financial regulator, you would be hard pressed to invest in an exchange or gateway to do bitcoin conversions. You can certainly do it, but once a ruling (say against Bitcoins) comes out, you would have to cease operations (as was the case in India and Thailand).

Right now, both Coinbase and Bitpay do not support countries like say Pakistan or India (just to cite two examples). So you would have to make alternate arrangements if you were to sign up with them to liquidate you bitcoins and get your money back.

If you feel comfortable in accumulating Bitcoins only (a move that is usually not recommended due to price volatility) then you don't need to do anything, you can simply put your wallet address and many shopping carts today allow you to accept bitcoins.

How can I set up my own mobile money-transfer startup?

Mon, 02 Feb 2015 18:56:22 +0000

Faisal KhanAnswered Feb 2, 2015

To setup a mobile money transfer company, you essentially have two options:

Wallet based, but carrier/bank agnostic, or
Mobile Carrier based Wallet

Both the options above would require that you partner up with a bank. A bank that specifically has the license (or permission) to conduct wallet based banking (i.e. branchless banking).

If you are able to find a bank, then you need to start your search for a wallet company. There are many such companies from Fundamo (owned by VISA, which means it is expensive), Utiba (horrible customer support), IDMission (powerful but expensive), Gemalto, Sequent, Tagattitude, to 100s of companies now offering wallet management applications like Xpwallet, etc.

With the Banking arrangement sorted out and a wallet app to run it on, you will need to then find an operator to run this for you. You could run this yourself, but since the question itself is being asked on Quora, I would say your experience in this field might be low to none, so in this case you will need to partner up with a company that knows how to run an online wallet. The bank could possibly do this for you, but then again, why would they need you.

If you are going to be opting for a carrier based wallet, then you're looking at a much simpler solution but one that is tied on to the USSD channel rather than any particular smartphone app.

In both cases there is a long drawn process on how users are on-boarded, how merchants are on-boarded, how fraud and other screening methods are applied, how accounting is done, how funds settlement is done, etc. (the list is quite exhaustive).

Needless to say, you will need a pretty large agent network to do the cash-in/cash-out for you (depending on the permissions you get from the regulator) and an adequately large enough network to handle the KYC and on-boarding process.

If to this you want to add, cross-border remittances, then you need a regulatory approval and tie-ups with whom you can connect and send across money (a sentence that sounds simple, but is incredibly complex).

What is the fastest and cheapest way to send money to someone in another U.S. state, excluding MoneyGram or Western Union—perhaps via a bank?

Mon, 02 Feb 2015 18:56:21 +0000

Faisal KhanAnswered Feb 2, 2015

For Nationwide chartered banks, if you do an intra-bank funds transfer it is almost instant. 10-15 minutes later, money is transferred.

What are the biggest problems with today’s payment systems?

Mon, 02 Feb 2015 18:56:19 +0000

Faisal KhanAnswered Feb 2, 2015

There are so many issues with payment systems, but they arise not so because of being entities themselves, but arise when you juxtapose these payment system in the global scheme of things. So from a global perspective, some issues are:

KYC data for the beneficiary side
KYC data validation services for the developing world or in countries where established or open credit check and/or validation checks are not openly available as in the West
Quoted FX rates to be taken into account for specific payment transactions (still quite a manual process)
Correlating AML activities using sensors within the payment system
Monopolistic networks for value transfers across borders
Monopolistic mobile networks and channels for mobile-to-mobile transactions
Least-Distance Routing
Least-Cost Routing
Being ability to directly peer and settle with a financial network as opposed to going through a complex series of expensive switches. A globally adhered transaction framework and protocol for this would be required.
Quick-Connect (One-time User) correspondent banking relationship to facilitate transfers from a trusted financial network to another trusted financial network
Access to network for non VISA/MC/Amex cards who prefer to operate on a flat-fee model
Micro-transactions
Validation and Capture methods (vary differently across various payment system)
Reversals of transactions, especially when cross-border and currency conversions have been done
Real-time Title Fetch
Funds authorization and blocking for non-cards based transactions
More efficient and near real-time settlement methods on both the Sender/Payee side and the Bank-to-Bank settlements
More transparent pricing
More simplified understanding of the legal and regulatory framework of each payment system (by a universal code).

Why don’t banks integrate Mint directly into their sites, and is that good or bad for Mint?

Mon, 02 Feb 2015 18:56:18 +0000

Faisal KhanAnswered Feb 2, 2015

Most do, most don't. Mint (or its equivalent) that are using a free-connect model are great apps, but banks would prefer that clients use their own apps. In such cases, they use providers like Yodlee to increase their own customer revenue, retention and up-sell from their own apps and portals.

The attraction of Mint is a ready-to-use app (provided your bank is supported on it), otherwise it is really useless. For those banks that do not want to invest in an app, they would rather that their customers just go and download and start using Mint. The bank would simply make an arrangement to ensure Mint connects to their systems for account reconciliation. All this to keep clients happy and not having to worry about maintaining a competitive app.

Why do banks typically not charge fees for transfers within the same bank?

Mon, 02 Feb 2015 18:56:17 +0000

Faisal KhanAnswered Feb 2, 2015

Because it is free and they want to incentivize it by keeping the fees $0. If there were to charge, and a competing bank did not charge, it would make you think about switching accounts. Banks would prefer that the money stays (as long as it can) within the bank, so they want to give you the option of moving money under their umbrella in a frictionless manner.

How are banks regulated?

Sun, 01 Feb 2015 18:00:36 +0000

Faisal KhanAnswered Feb 1, 2015

Depends. Universally, all banks are regulated at a Federal level by the Central Bank. In the US for example, either the Federal Reserve, FDIC or OCC will regulate you, and then if you are a State chartered bank, they local state regulator also has regulatory jurisdiction over you.

Elsewhere, it is pretty much the central bank that is enforcing regulations on to you. The list of all central bank worldwide can be seen here: List of Reserve & Central Banks of the World

If I want to launch an international money-transmission business, do I need licensing in every country?

Sun, 01 Feb 2015 18:00:33 +0000

Faisal KhanAnswered Feb 1, 2015

Not necessarily. If you do not want to go the authorized delegate (Agent) route in every country, what you can do is to work with a licensed operator and drive continuous referral traffic to their website (assuming they are working online).

The ISO (Independent Sales Organization) model does just this. It allows you to work with licensed MTOs in various countries, and let them deal with the complexities of setting up operations, etc. whilst you take care of marketing. The customer's transactions with the MTO will earn you commission on the sales (as per your setting).

Not many people know of this and they dismiss the ISO model as being some affiliate driven model. It is very much a money maker.

What are the best books on payment infrastructure?

Sun, 01 Feb 2015 18:00:29 +0000

Faisal KhanAnswered Feb 1, 2015

Honestly, nowadays, you need not invest in books. I learned everything without buying books, but then, that's just me.

I would highly recommend the Committee on Payments and Market Infrastructures section on the BIS (Bank of International Settlements) website: CPMI - BIS. Especially look at the Red Book: various countries.

In addition, you can also go to the websites of various regulators (i.e. Central Banks) and they publish books or papers on their payment systems. It does to a very large degree the explanations of the payment infrastructure in existence very well.

Scribd is another solid source for learning. They have many presentations / papers that will aid you in understanding the payment infrastructures.

Lastly, albeit it won't qualify as books per se, YouTube is highly recommended to explain various principals.

Why don’t developed countries like the U.S., U.K., and Australia have instant interbank transfers?

Sun, 01 Feb 2015 18:00:26 +0000

Faisal KhanAnswered Feb 1, 2015

USA does not have a what is now affectionately called a faster payment system. To understand the magnitude of the problem, the US has some 8,000+ banks & credit unions, and over 90,000+ branches. Connecting them all on a homogenous payments platform is all about lobbying and standards, etc. There are many players (read: vendors) who are pushing their technology/solution for such. Then there is NACHA, which is divided by complacency. ACH payments in the US in 2012 were about US$ 36 Trillion. This means that a lot of money was sitting with banks, for over-night lending. Banks presumably made a lot of money with this float (even with the interest rates as low as they are).

The common knee-jerk reaction is to avoid having one, considering the huge eco-system that ACH has as far as vendors and solution providers are concerned.

The US very recently published a paper on this: You can read it here, with the Fed's offering four options. http://www.americanbanker.com/ne...

A real-time interbank funds transfer system is not going to be cheap in the US. UK which already has a Faster Payment System (FPS) cost the UK government over US$ 300 Million spread out over 7 years to implement. (Source: Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States)

Australia has called in RFPs for implementing one, and chances are VocaLink might win that one (VocaLink are the operators of the current system).

The problem or issue is not technology, the issues very clearly are vested interests, and how each particular lobbying group wants their own solution to go into place. You can read a lot on this, when the Feds asked for comments on a real-time interbank funds transfer system.

Because of the Dollar values associated in the US with real-time settlement, there is even a tussle within the various Fed banks as to whom would be the settlement bank. One train of though is to have it centralized, other is to divvy it up into various zones and then have the zones settle in realtime (which in my personal opinion is a mess). NACHA has a very powerful lobby and they would ideally like to see a transitioning effect, to 1 day payment over the next 2-3 years and then real-time payments 4-5 years further down the line.

Can merchants using processors like BitPay or Coinbase shield themselves from Bitcoin’s exchange-rate volatility?

Mon, 12 Jan 2015 18:53:55 +0000

Faisal KhanAnswered Jan 12, 2015

You are safe as far as volatility is concerned. If you accept Bitcoins with say BitPay and want them to be converted to US Dollars, when a sale is made, the prevailing exchange rate would be applicable and your Bitcoins would be exchanged for USD. This money can then be wired to your account. There is no volatility faced by the Seller (that's the whole point).

You can read more at: Bitcoin Exchange Rates

What does it currently cost to purchase one bitcoin?

Mon, 12 Jan 2015 18:53:54 +0000

Faisal KhanAnswered Jan 12, 2015

You can use Preev.com to find out. Here is the link for the Indian Rupee: Bitcoin to Indian Rupee

As of Wednesday, December 25, 2013 (GMT) 8:11 AM

Which bank performs the currency conversion during a cross-border wire transfer?

Mon, 12 Jan 2015 17:57:44 +0000

Faisal KhanAnswered Jan 12, 2015

This is a treasury/FX function. From Sweden-to-US, the deal will most likely be executed on the Swedish side, where the Swedish Bank's FX desk with purchase Dollars being quote on the USD/SEK pair. This will most likely happen in Sweden, and then the Dollars are forwarded to the American Bank. The US bank would most likely not be doing the FX conversion.

What would the US bank do with the SEKs?

The only variable is that the FX dealer could be based in Sweden, or in Europe. Unless some FX dealer in the US would like to take SEKs.

If $100 million suddenly appeared in my room and I deposited it into my bank account, would authorities investigate or visit me?

Mon, 12 Jan 2015 17:54:54 +0000

Faisal KhanAnswered Jan 12, 2015

$100 Million is a serious increase on any level. Any decent BI system tracking AML, will easily detect this anomaly against your profile and flag it.

No one will visit you from the bank per se, but they will be interested to know the source of funds. They will report this to the Feds, i.e. FinCEN. The Feds depending on the nature of the query submitted to them, may decide to pay you a visit via the local State regulator's appointed nominee.

What do consultants at the World Bank typically do?

Mon, 12 Jan 2015 17:54:52 +0000

Faisal KhanAnswered Jan 12, 2015

Most World Bank consultants are niche experts in a specific field (subject matter experts) and in some cases have additional knowledge for a particular geographical area.

They assist the bank in studying, deriving policy document, making reports, roll-out projects, oversee projects and interact with clients that WB works with.

What is CoinX, and how does it differ from other companies in the space?

Mon, 12 Jan 2015 17:54:50 +0000

Faisal KhanAnswered Jan 12, 2015

CoinX (Money Transmitter Licenses - Bitcoin Exchange |) Is a fintech startup based out of Atlanta, GA.

They are no different from any other Bitcoin exchange when it comes to the pure exchange portion of it. Where we do enjoy an advantage at present, is that we are licensed in 40+ US States as a Money Transmitter for our Bitcoin Exchange.

This puts us squarely at the time of this writing, the only Legal and Licensed Bitcoin Exchange operating in the US.

There is a lot of talk by other exchanges that they are regulated or compliant, so I would like to address that.

If you ask someone a question, is the banking industry regulated, the answer is obviously Yes. If someone opens a bank, and says "we are regulated" what exactly are they saying?

What they are saying is, we (the banking industry) are regulated. In no particular manner are they implying that they have a license. Sort of fooling you with English and legal speak.

Most of the Exchange who claim they are regulated, have only a FinCEN registration. That everyone can get, by merely filling in a form. Even you can get it.

What is needed however, are the US Money Transmitter Licenses from the department of financial services/institutions (or equivalent) from every exchange. That is the differentiator.

FinCEN's recent ruling says, if you pick up clients in the US, whether your exchange is in the US or not, you need to have Money Transmitter Licenses. (Another FinCEN ruling has classified Exchanges, Brokers and Payment Processors) in the Bitcoin space as MSB, so they now need to get licensed.

Between legal and illegal, we are the only legal bitcoin exchange at the time of this answer in the US.

What is a recent change in the banking industry, and what might it mean for a technology analyst?

Mon, 12 Jan 2015 17:54:49 +0000

Faisal KhanAnswered Jan 12, 2015

The mobile wallet is a pretty huge issue (if you will) in the banking industry. What the email did to the fax machine, what the mobile phone did to the landline, the mobile wallet is doing the same to the traditional bank account.

How to have an bank agnostic yet bank concentric wallet is a tough one to crack.

How is money “virtualized,” what prevents banks from misreporting funds, and what would a new bank need to do to accept and hold digital balances?

Mon, 12 Jan 2015 17:54:47 +0000

Faisal KhanAnswered Jan 12, 2015

William Emmanuel Yu answers this correctly. You cannot just unilaterally go and change a value in a database. Even if you tried, it would not be possible. Banks use multiple ledgers, for an account that holds $1 Million to be made in $2 Million, the bank would have to show a double-ledger entry, if an account is being credited, there has to be a debit somewhere. If a cash deposit is made, then the bank's ledger for cash deposits would change. At the end of the day if the bank cannot show that $1 Million in cash, then something somewhere is wrong.

The entire money supply is very meticulously tracked by the central banks and other banks via cross-ledgers. If a bank says the $1 Million came from another bank (say Deutsche Bank), then Deutsche bank's ledgers would have to match the transactions (which they clearly would not).

When banks have a ledger mismatch (a very very rare occurrence), they have to inform the regulator immediately, and may even cease activity on the ledgers until the issue is resolved.

There are many controls in place, specifically for self-induced forging of the ledger or collusion based forging of the ledgers.

Its a issue that is very well known and very acutely addressed so that collusion based malicious attempts are thwarted.

What is accurate and what is misleading about the article claiming M-Pesa and Bitcoin are mirror images of each other?

Sun, 11 Jan 2015 17:57:43 +0000

Faisal KhanAnswered Jan 11, 2015

The comparison is correct. A little skewed, but correct.

Three parallel comparisons going on here:

Bitcoin the protocol
Bitcoin the money
M-Pesa the money

Bitcoin will draw parallels with almost any stored value monetary system out there. In fact, the one thing Bitcoin is good at, is due to it late stage of development, it is the ideal system for electronic value transfer. Beats the heck out of the existing monetary systems in play.

M-Pesa was born out of necessity on a country level (wasn't necessity the mother of all creation?), Bitcoin was developed out of necessity for Internet based value-transfer (without the ability of double-spend).

M-Pesa is a brand (that is the way I see). Its an ambassador brand for all-things-mobile (money). Bitcoin is much more than that (mobile inclusive).

There is a lot of reflection amongst the two monetary systems (that is my opinion - I see them both as monetary systems), however, M-Pesa has a very small subset in the offering, compared to Bitcoin.

I believe, eventually, the MFS (mobile financial services) space, may draw upon the bitcoin protocol, or parts of it, to include more flexible financial solutions for it users.

M-Pesa enjoys the adaption and adoption rates in the real-world much much better than Bitcoin.

Which Bitcoin startups have achieved—or are closest to achieving—product-market fit?

Sun, 11 Jan 2015 17:57:41 +0000

Faisal KhanAnswered Jan 11, 2015

I would say the following:

BitPay (because merchant processing for Bitcoins is still a huge play)
BitAccess & Robocoin two companies that are poised on changing the world of Bitcoin ATMs with ancillary services that one had not thought of before.
"X" - A decent Bitcoin wallet provider (don't know who that is yet, but a good wallet provider would be like the Gmail of mail, in the Bitcoin world).

What is the cheapest way to send money from Europe to India?

Sun, 11 Jan 2015 17:57:40 +0000

Faisal KhanAnswered Jan 11, 2015

Probably Remit Guru or Times of Money. Both these services come highly recommended.

http://www.remitguru.com/
https://www.remit2india.com

What is a batch payment?

Sun, 11 Jan 2015 17:57:38 +0000

Faisal KhanAnswered Jan 11, 2015

Payments that are held with an aggregator, i.e. processor and then processed at an anointed time during working day.

ACH is one such example.

Why do so many people find Bitcoin difficult to understand?

Sun, 11 Jan 2015 17:53:28 +0000

Faisal KhanAnswered Jan 11, 2015

If you look at it as Currency, it is difficult for an average person to understand it because it is different.

Bitcoin, being a different kind of a digital currency, it breaks down conventional thinking in many aspects. No central regulatory body. The concept of mining. The open-ledger (blockchain), the way miners are rewarded, how transporting value is determined by its packet size and not value, the hash rate, the concept of limited supply. The 100 Million pennies in a Bitcoin, etc.

Its difficult enough for people in the money space to thoroughly understand Bitcoin (we all say we understand it, but do we really?).

For a common person, its an overkill. Its like trying to explain the concept of TCP/IP, Networking, Routing, the Internet for someone who wants to use email. Overkill.

In simple terms, what is a clearinghouse?

Sat, 10 Jan 2015 17:52:05 +0000

Faisal KhanAnswered Jan 10, 2015

Consider the following players: Bob, Linda, Mike, Jose, Megan, Patrick, and Eugene.

Now consider the following scenarios:

Bob owes Linda $2.50
Linda has a payable to Megan and Patrick of $1.25 each
Patrick owes Bob, Linda and Eugene 10 cents each
Eugene owes everyone $5
Jose has to pay everyone 18 cents (except Linda to her he owes $1.98) and yet, Jose has an IOU from everyone else for 63 cents
Megan owes Mike 83 cents, $1.83 and $9 for the three transactions she did with him.
Mike owes Megan 11 cents, 81 cents and $1.24 for the three transactions he did with Megan
Bob, Linda and Mike each owe Eugene and Patrick 3 cents each.
Mike has 5 IUOs of 8 cents (as receivable) from Patrick.
Etc.

In the simplest of terms, A Clearing House, does all the above math and settles everyone's accounts for say 1 cent per transaction (Debit/Credit).

Now imagine the above list comprises of say 2,000 people. Each person averaging 5,000-10,000 transactions, you can see how relatively complex the whole situation can get. A Clearing House will do the math. Guarantee the accounting and everyone's balances would be adjusted either in real-time or net-settlement time.

What is the cheapest way to buy Bitcoin in Pakistan?

Sat, 10 Jan 2015 17:52:04 +0000

Faisal KhanAnswered Jan 10, 2015

Well, Pakistan's first Bitcoin Exchange opened up, give that a try: UrduBit bitcoin exchange. Fees are reasonable, considering if you had to do the same internationally. In fact pricing is quite good.

There isn't mentioned anything about liquidity or market price when I visited the website on 13th Oct/2014.

LocalBitcoins has a premium associated to it, so they are definitely not cheap.

What are some standout startups in Pakistan?

Sat, 10 Jan 2015 17:52:02 +0000

Faisal KhanAnswered Jan 10, 2015

Here are some examples (not knowing how much you want to invest in):

Corner grocery/convenience store
A hair-cutting/shave salon (they rarely seem to go out of business)
A Branchless Banking Agent for one or more of the banks.
Localized Delivery Service (or even localized distribution service)
Juice Corner
After-hours/Late night Groceries & Snacks delivery service
A small decent Cafe
Stationery / Art Supplies / Office Supplies and Printing bureau

When will Facebook add person-to-person payments to WhatsApp?

Sat, 10 Jan 2015 17:52:01 +0000

Faisal KhanAnswered Jan 10, 2015

Most likely next year.

See also: Faisal Khan's answer to What is David Marcus' game plan for Facebook and Messenger as far as Payments are concerned?

I forgot my ATM PIN—what should I do next?

Fri, 09 Jan 2015 19:09:09 +0000

Faisal KhanAnswered Jan 9, 2015

Call you bank's customer support department. Most bank now a days have a method by which you can set your ATM PIN over the phone, after you've been authenticated.

In the absence of such, you may be required to visit the branch to have it reset.

Is there an efficient way to automate making hundreds of payments to online retail customers besides PayPal?

Fri, 09 Jan 2015 18:51:28 +0000

Faisal KhanAnswered Jan 9, 2015

A good (read: tech savvy) ACH processor would be able to do that for you. You would need to have the account details to which you would like to push payments into. Be a whole lot cheaper too. Only downside is that this would be US concentric.

What is the proper definition of a third-party payment service?

Thu, 08 Jan 2015 19:08:15 +0000

Faisal KhanAnswered Jan 8, 2015

It is really not that easy to describe. Traditional definition cites as someone as a third party payment service if they are not the owner of the transaction but are still processing the funds.

This definition becomes invalid when we consider a licensed money transmitter who for all purposes is the transaction owner, but still behaves as a 3PP.

How do banks in Pakistan recover money from borrowers who don’t pay?

Wed, 07 Jan 2015 19:07:08 +0000

Faisal KhanAnswered Jan 7, 2015

I'm going to assume you are talking about consumer collection.

It us usually done via collection agencies to whom banks outsource this. Collection services in Pakistan have gone through a very up/down period in the past. Some collection agencies resorted to unprofessional tactics, while others were border-lining.

Today, at most all they can do is harass you at your home or work place, and nothing more. For smaller amounts, the banks (via their collection agencies) will even try to settle down to a smaller lump-sum amount against your outstanding. For larger amounts, the letter from the lawyer is the typical route.

How can a charity in Pakistan set up an online donation system to accept credit card payments?

Wed, 07 Jan 2015 19:07:06 +0000

Faisal KhanAnswered Jan 7, 2015

If you are all set to accept credit cards and you have your paperwork in order (NTN, N-f-P paperwork, provincial registration, etc.) you have the following options to obtain credit card processing in Pakistan:

MCB provides MIGS (MasterCard Internet Gateway Service)
NIB provides MIGS
Habib Bank provides CyberSource (VISA)
UBL provides processing via its Etisalat processor.

In all four options above you will be able to process Visa/MasterCard transactions and have that money available directly to you in your account in Pakistan. You might also qualify for a tax-break (if applicable, since you are an NGO/NfP - you might already have that break).

Connect with these banks and you should be golden. If not, inbox me, and I'll help you connect.

Why do companies use Stripe instead of local banks if banks can offer much lower fees?

Wed, 07 Jan 2015 17:57:37 +0000

Faisal KhanAnswered Jan 7, 2015

Stripe's pricing is simple. I'm sure the bank's would be simple also, but the process of opening a bank account and then qualifying for card processing may not be that simply.

However, what works really well for the developer and start up community is the quality of their APIs and the multitude of codebase available for various languages, makes it super easy to implement their payment process in your app/web.

Banks usually have horrible APIs. Try calling up a bank like JP Morgan Chase, Citi, Bank of America, etc. and get on the phone trying to get help on their API for merchant acquiring, it is downright painful.

Sometimes, you will come across really weird problems with certain banks, on which there is no way around, etc. Stripe and the likes are much more open and sensitive to the user requirements and are constantly evolving their product offering to include a better, more efficient and flexible payment offering, something the banks are not keeping pace with.

Add to this stellar customer service, and it makes sense to use Stripe.

Your comment on Spain offering fees between 0.5% - 0.8% would most likely be for Spain only. Most of Stripe's customers are US based and would most likely not qualify for acquiring and processing services based out of the US.

What is required to start a business similar to PayPal or Venmo?

Tue, 06 Jan 2015 19:06:08 +0000

Faisal KhanAnswered Jan 6, 2015

PayPal is a wallet operator, that is licensed in all 50 States as a Money Transmitter. To start something similar to PayPal, you would start by applying for Money Transmitter licenses in all the 50 States.

You would then need to choose a bank on the backend to work with who would be handling all your monetary transactions as well as all payments in/out of the PayPal ecosystem.

To understand the mechanics of how PayPal stores its money, you might want to take a look at this:

Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

Which payment gateways provide white-label offerings?

Tue, 06 Jan 2015 18:46:41 +0000

Faisal KhanAnswered Jan 6, 2015

Pay.On, see PAY.ON - Home

How can a foreign worker send just $1 home?

Tue, 06 Jan 2015 18:46:40 +0000

Faisal KhanAnswered Jan 6, 2015

The only viable way to do this today is via a Peer-to-peer transfer payment network, and hope that one is operating in your transfer corridor.

Which method of booking is more trustworthy—online or offline?

Tue, 06 Jan 2015 18:46:38 +0000

Faisal KhanAnswered Jan 6, 2015

Its a mix: Inquire offline, book online, confirm offline!

Can I open a U.S. bank account from a branch of that bank located in my home (non-U.S.) country?

Mon, 05 Jan 2015 19:04:10 +0000

Faisal KhanAnswered Jan 5, 2015

No. Regardless of the US bank and the country you are in, to have a valid US bank account, you would need to be physically present in the US.

What is an effective way to define target customer segments in the payments industry?

Mon, 05 Jan 2015 19:04:09 +0000

Faisal KhanAnswered Jan 5, 2015

Very vast question, i doubt you would find something that is equivalent to a generic descriptor to help you with this.

Below is a generic (rough) model of looking at a payments ecosystem with regards to the target consumer market. No one solution fits all, and not necessarily top-tiers are the most expensive and lower tiers the most cheapest, but this does give some form of semblance.

How does anti–money laundering policy apply to Bitcoin, and what compliance steps must I take?

Mon, 05 Jan 2015 19:04:07 +0000

Faisal KhanAnswered Jan 5, 2015

Bitcoin does not have any AML policy in itself (either in the protocol or in the currency). AML policies would have to be implemented as a rule-set when doing fiat-bitcoin or bitcoin-fiat transactions. You can also implement it within the bitcoin system, but with the wallets being anonymous, it would be a tough challenge to maintain it in a credible manner.

What is the typical pricing range for white-label card issuers?

Mon, 05 Jan 2015 17:57:35 +0000

Faisal KhanAnswered Jan 5, 2015

In UK, give Prepaid Financial Services a try. See: Prepaid Financial Services

Price range for 10,000 commit last time I remember for the US market was US$ 4 (for non-branded) cards.

How does an express (urgent) international wire differ from a standard wire transfer?

Mon, 05 Jan 2015 17:57:34 +0000

Faisal KhanAnswered Jan 5, 2015

Anything Urgent usually means it is pre-funded and is being settled before the normal net-deferred settlement times.

If a regular wire transfer from say US to Thailand takes 1.5 days, it is because the two banks that are processing the wire, are settling with each other.

If the payment in Thailand has to be made before the settlement, then it essentially means that the Bank in Thailand is loaning out the money in advance, before it receives its promised amount from the US.

This loaning out, has a cost associated with it, and hence the premium.

You can learn more about the settlement process from: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Is a Reuters Terminal actually better than Bloomberg for FX, and does that apply to other asset classes too?

Mon, 05 Jan 2015 17:57:32 +0000

Faisal KhanAnswered Jan 5, 2015

Thomson-Reuters has been synonymous with FX.

You think FX markets, you think Reuters. Bloomberg is a great all-rounder terminals, but for FX, Reuters certainly has its finger on the pulse better than anyone else.

Tangentially, Reuters can be thought of the the word "Xerox" or "Kleenex" when we refer to photocopying or tissue.

The advantage that Reuters enjoyed is hardly there any more. Bloomberg now offers everything under the sun that Reuters provides on its Eikon platform, for FX.

How can banks improve customer experience in their call centers?

Mon, 05 Jan 2015 17:57:31 +0000

Faisal KhanAnswered Jan 5, 2015

One of the more recent additions (on an experimental basis) that I have seen is call centers that are connecting directly with social media apps like Twitter, Facebook, etc.

More interactive experiments I have seen include use of Skype and Viber.

The call center telephone should not be the only way a customer should be able to reach out to you.

In addition to the above, it really helps if a help-desk software is used, that is more in-tune with the web, like Zendesk, etc.

Is there an EU-wide KYC provider similar to IDology?

Mon, 05 Jan 2015 17:57:30 +0000

Faisal KhanAnswered Jan 5, 2015

Yes, two that come to mind are:

Global Data Company: https://www.globaldatacompany.com/
GB Group: http://www.gbgplc.com/

With oil under $50 per barrel, when would the broader stock market typically enter a bear market?

Mon, 05 Jan 2015 17:57:28 +0000

Faisal KhanAnswered Jan 5, 2015

Its nearly there... Stocks devices to reverse themselves. Most of the yearly gains would be wiped-out should we have a session or two like today (5th Jan/2015):

How do firms like BillMeLater get away with requesting only the last four digits of an SSN for CIP/Patriot Act compliance?

Mon, 05 Jan 2015 17:57:27 +0000

Faisal KhanAnswered Jan 5, 2015

Because their Anti-Money Laundering (AML) manual allows them to do so. One need not need the entire SSN to verify a person. Plenty of services will very a person based on their name, DOB, Address and last 4 digits of the SSN.

They are not getting away with anything, its just this is the minimum information that is required to very accurately identity and do KYC on a person.

In the ID process, if more information is required of the person, the company has the right to ask for full SSN. In some instances, companies have slabbed policies:

Limit: Under $500/day and under US$ 2,500 per month (just Name, Address, Telephone is required)
Limit: Under US$ 2,500 per day and under US$ 7,500 per month (Name, Address, Telephone, DOB, Last 4 SSN and One Photo ID)
Limit: Under US$ 5,000 per day and under US$ 25,000 per month (Name, Address, Telephone, DOC, Last 4 SSN, 1 Photo ID and 1 Utility Bill copy in your name, reflecting the Address you have listed).

Each company will set its own flexibility criteria. Just to be clear, an SSN is not mandatory provided certain financial limits are not breached.

How do Catholic churches around the world transfer funds to the Vatican?

Mon, 05 Jan 2015 17:57:25 +0000

Faisal KhanAnswered Jan 5, 2015

They have regular bank accounts and they predominantly use the banking channels to send money. In certain jurisdictions outflow of money is prohibited by law.

Why isn’t there a single universal secure authentication method to prove identity to banks and critical websites?

Sun, 04 Jan 2015 19:02:59 +0000

Faisal KhanAnswered Jan 4, 2015

There is very little consensus as to what identity is in the banking world, let alone a consensus for an authentication methodology that would be universal.

The 2FA (Two-Factor Authentication) generally seems to be the legit way to go, however with the cost of tokens taken into account, not everywhere (read: the rest of the world) can implement this.

The mobile phone is the savior in many aspects that it has been able to provide a 2FA methodology, and thanks to the good folks at Google for Google Authenticator, this is being implemented.

However, many security pundits believe, even 2FA is not enough. In many countries I have seen that Internet banking and identity management has been supplemented by a need for a 3rd authentication factor.

2FA is still not implemented in so many banks still, which does inherently pose a problem. Not to mention, social engineering and phishing attacks sometimes render these precautions useless.

The issue is being tackled by many and has forked into multiple solutions. Only time will tell which one will prevail, in so far as I can tell, Google's 2FA solution is pretty robust and easy to implement, but the fear being in many banks, especially with the regulators is the dependency on a 3rd company, based in the US, for all tokenized authorization.

Why are international remittance fees so expensive?

Sun, 04 Jan 2015 18:44:41 +0000

Faisal KhanAnswered Jan 4, 2015

It depends. In certain countries, cost of doing business has gone up. In most, it has gone down.

It all has to do with costs and the market situation of the remittance corridor in question.

If for example someone can charge CAD$ 25 for a CAD$ 100 remittance from Canada to Senegal and people pay (reluctantly?) then it means, that this particular corridor has very little competition and/or traffic.

The benchmark for Remittances is Western Union (whether we like it or not). You are in the hot zone if you can see remittances prices less than Western Union's and equating to roughly 1% to 3% of the value of the transaction.

With more and more regulator clampdown and to mitigate fraud, instant payouts, etc. MSBs now have to hire Compliance Officers, retain strict logs and records of transactions, use technology to connect with various settlement partners, have access to real-time databases for Remitter/Beneficiary checks against blacklists, provide pre-funded accounts in the beneficiary country for instant payouts, licensing costs, etc.

All this costs money. Many akin Money Service Business to being bloodthirsty businesses. That is a very unfortunate and incorrect comparison. Sure, there are some who do charge excessively, and some who will milk you out because of the desperation you are in, or your status (non-banked, etc.) but by and large, money services businesses provide a quality service for the diaspora community worldwide.

However, on the whole, remittance prices have gone down. Not up.

If my U.S. company invoices a German client, must I charge VAT?

Sun, 04 Jan 2015 18:44:40 +0000

Faisal KhanAnswered Jan 4, 2015

No Value Added Tax is applicable within your geographical bounds only. If the product and/or services being sold would be utilized within your geographic region then VAT is applicable, otherwise it is not.

Which mutual funds are considered the best investment options in Pakistan?

Sun, 04 Jan 2015 18:44:38 +0000

Faisal KhanAnswered Jan 4, 2015

Pakistan has a lot of mutual funds that were in the Top 100 Mutual Funds of the world.

Here are some funds you can invest in:

Source: CORRECTED-(OFFICIAL)-42 Asian equity funds among world's top 100 in 2012-Lipper

How many individual banks are there worldwide?

Sun, 04 Jan 2015 17:57:24 +0000

Faisal KhanAnswered Jan 4, 2015

Between 12,000-15,000, one would have to count, but that would be a long exercise.

Here is how I got that number: Faisal Khan's answer to How many bank branches are there in the world?

Where can I find the ISO 8583 message specifications for each card network such as Visa, Mastercard, and STAR?

Sun, 04 Jan 2015 17:57:22 +0000

Faisal KhanAnswered Jan 4, 2015

For VISA, it is the Base II Code format, also known as IPM. You can contact VISAOnline and get it from there. You migth want to ask Brian Roemmele - he might have a copy lying around.

Here is a floating copy, don't know how exact it is: Page on ny.gov

MasterCard: Page on mastercard.com

American Express: Page on americanexpress.com

Do I need FCA registration to issue or distribute prepaid cards?

Sun, 04 Jan 2015 17:57:21 +0000

Faisal KhanAnswered Jan 4, 2015

FCA registration is required only if you issue non-bank cards. Since you're working with an issuing bank, you'd be nothing more than an authorized affiliate for them, so FCA registration is not required.

How can I obtain prepaid cards for distribution?

Sun, 04 Jan 2015 17:57:16 +0000

Faisal KhanAnswered Jan 4, 2015

Similar to this answer (See: Faisal Khan's answer to Can I handle the printing of white-label cards for my business?), you would have to order a significant quantity from your issuer to be in that position.

You might come across an issuer with a sympathetic ear, but don't bank on it.

Issuers typically work with 5,000-10,000 as the minimum quantity that you will commit to. To truly get the added benefit of bespoke white-labeled cards for each user, you'd probably be paying x5 more price on rack-level rates.

Can I handle printing of white-label payment cards for my business?

Sun, 04 Jan 2015 17:57:13 +0000

Faisal KhanAnswered Jan 4, 2015

Not without investing heavily in technology, which would require money, time and domain knowledge.

There are many bureau printing services who would do this for you. Be it bespoke design on each card (which is much more expensive) or your chosen designs on mass-produced cards.

The physical card printing, etc. is handled by the issuing bank and would most likely not be handled by you, unless you are a huge customer and then would might have a say for which particular bureau service to work with.

How does the distribution process for prepaid cards work?

Sun, 04 Jan 2015 17:57:11 +0000

Faisal KhanAnswered Jan 4, 2015

Distribution is usually outsourced. Unless you, yourself own and maintain a distribution network, it is more pragmatic to work with an existing distributor who can then propagate the availability of the card in their network.

Find out which distributor has access to what retail points and geography and work from there.

Needless to say, distribution has many pricing models and depending on the card, and what it offers, you can work out a deal with the distributor and retail point. Some distributors will also do cash management for you.

Is gold a dependable store of value for holding wealth?

Sat, 03 Jan 2015 17:57:10 +0000

Faisal KhanAnswered Jan 3, 2015

Gold is not a reliably way of storing anything but itself. Its long term properties are unique to the metal itself only and not applicable to anything else (like currencies, etc).

Just the last 5-Years of Gold pricing will show that it is not a stable way to keep the value of your currency:

Whilst it does offer a safe guard from total collapse, currencies today are not backed by their gold deposits anymore but more on the the strength of their currency by measuring the various input/output of their economy and the demand for their currency.

What are the similarities and differences between hawala transfers and currency swaps?

Sat, 03 Jan 2015 17:57:08 +0000

Faisal KhanAnswered Jan 3, 2015

Absolutely! The only difference between the two being one is not documented and the other is, but both Hawala and the likes of Currency Swap Settlements, rely on net-off settlements in both countries.

So yes, you're on the mark here.

In banking, what is a “gray screen transaction”?

Sat, 03 Jan 2015 17:57:07 +0000

Faisal KhanAnswered Jan 3, 2015

It is not mandatory that large transactions have to go through SWIFT. If the two banks have a direct (trusted) relationship or one even through a correspondent bank (that is trusted), they can settle with each other directly.

Whilst SWIFT is used a lot, there are method of transacting with each other directly. Unbeknownst to many, SWIFT doesn't actually move funds. Just instructions that all member banks adhere to.

Immigrants & Remittances: Why do people keep sending money back “home” for decades?

Sat, 03 Jan 2015 17:57:05 +0000

Faisal KhanAnswered Jan 3, 2015

Many studies by World Bank and UN Population Division, IOM (International Office for Migration) and many other organizations, etc. have hacked away at this question. The answer is not so simple:

Family bonding in countries outside the developed world are very different.
Migrant parents will keep paying for home maintenance till about 22-24 years on average (from birth to college graduation).
Some will pay even more, because college funds might have been borrowed.
Quite a few will take loans to get their children married and which will require another 4-5 years of more work to pay back the loan.
Loan dependencies are one of the core reasons why these migrant workers continue to work.
The mindset with these working families is that one or two people will work like this (i.e. be a migrant worker) all their lives, until and unless supplemented or replaced by someone else. This is pretty much the norm with migrant worker families in Philippines, India, Bangladesh, Pakistan, Sri Lanka, Nepal, Indonesia, Nigeria, Egypt, etc.

The reason all this sounds and looks very different to you is because of the way things are in different parts of the world. Sometimes you will have a tough time wrapping your mind across the issues and the way things are.

The five Bibles of remittances that do touch upon this subject can be read here: https://fkpost.squarespace.com/c...

For Dubai-based e-commerce in the Middle East, which payment gateway would you recommend?

Sat, 03 Jan 2015 17:57:04 +0000

Faisal KhanAnswered Jan 3, 2015

http://PayFort.com

Is there a card.io-style scanning tool for checks?

Sat, 03 Jan 2015 17:57:02 +0000

Faisal KhanAnswered Jan 3, 2015

What you're looking at is essentially check-truncation. You would need to work with Cam-Scanner Apps and use their SDK/APIs to take the input and populate the fields.

Evernote, CamScanner, Pixter, etc. are just some of the places you can get started.

To understand what is important in the scan, you might want to read up: Faisal Khan's answer to What is involved in Check21's processing services?

What is the least expensive jurisdiction for setting up a commercial bank?

Sat, 03 Jan 2015 17:57:01 +0000

Faisal KhanAnswered Jan 3, 2015

Malta.

Why do startups struggle to obtain merchant accounts?

Fri, 02 Jan 2015 19:13:38 +0000

Faisal KhanAnswered Jan 2, 2015

Merchant Account approval is all the rage these days. Imagine companies that are outside the traditional countries, who are 100% genuine and face the same dilemma you do - getting a merchant account.

The issue is basically that of risk. This is how the acquiring banks and in turn their PSPs (Payment Service Providers) see it. Having experienced this for a lot of our customers it turns out the basic underlying factors are:

Credit History
Operating History
Chargebacks
Credit Risk

All these are perhaps acceptable factors when you have a running business at hand, but when you are a new start-up, it can be a herculean task to try to convince the banks to give you a merchant account. One way to circumvent this is to have a ready-deposit, which the banks, etc. can tap into should chargebacks, etc. occur. The only problem with this is that most CTL system cannot work with a secondary account to tap into and withdraw money into a nostro account pending investigation of a chargeback, this is a manual process.

To the best of my knowledge, no automated system exists for this. This compounds the problem. Startups who are willing to put a deposit against their risk, are turned down, because the systems cannot handle this.

To be fair this is not a government issue. Its not even a financial regulator issue. This is pure actuarial science at work.

To the banks you are not low risk. You are high-risk because of the fact that you have zero operating history with them or anyone else.

The only work around currently for obtaining a merchant account is to work with a 3rd party payment provider, with the downside being that your discount rate shoots up! More rolling reserves, etc.

There are plenty of 3rd party payment providers that will work with you on this. Do try to tap into them. It can be a frustrating experience, filling out detailed forms etc, but in the absence of a merchant account, you have little recourse as far as an alternative is concerned.

What are the pros and cons of working with U.S. financial regulators?

Fri, 02 Jan 2015 17:56:59 +0000

Faisal KhanAnswered Jan 2, 2015

I think one would be hard-pressed to find a single Pro regarding working with US Financial Regulators. You'd have to make something up to come up with one.

On the Cons, there are many. I love the way Jim George summed it up.

Here are my personal observations:

Dealing with them, nothing will work as per your schedule. Expect inordinate amount of delays.
If your contact has a personality clash with you, it can be rough.
They don't have the brightest of vision when it comes to innovative product &/or services development.
They will drown you in paperwork, sometimes needless paperwork, just so they can buy time.
Every now and then they will step out of bounds, and you need to be brave to tell them so.
Rumors - they practically live on rumors.
The entire bunch is a very incestuous bunch. There is a lot of gossiping amongst them, the term they use is "in consultation with other regulators"
They are very preferential as to how they treat their licensees. Some will get a slap on the wrist for a major violation, some will get huge fines for minor violations and some will just look the other way when they ought to be doing their job.
The 3 big influencers are New York, California and Texas. Most States will mimmic what NY, CA and TX are doing.
There are 50 of them. Those are your problems x50
Add Federal Regulators and you get bonus problems.
Sometimes keeping up with their not-so-important emails can be stressing.
Get in their bad books, and it can have detrimental effects on your business and you.

Does Linden Lab need a money-transmitter license for the Linden Dollar economy inside Second Life?

Fri, 02 Jan 2015 17:56:58 +0000

Faisal KhanAnswered Jan 2, 2015

No, Linden Labs does not require a Money Transmitter License for their closed loop virtual currency. The currency can only be used inside of Linden Labs' game Second Life and hence it is considered credits in a closed-loop system, thus not subject to money transmitter licensing (See section 4.5 of the Linden Lab's Second Life Terms of Service).

Another way of looking at it is that Linden Labs is the producer of the credits and does not act as an intermediary, hence no licensing requirements.

What might a future “converged” ecosystem of multiple mobile financial services operators look like?

Fri, 02 Jan 2015 17:56:57 +0000

Faisal KhanAnswered Jan 2, 2015

The converged eco-system would look very simple. Here is some information from Ooredoo who also presented something similar.

The first assumption would be that there is a centralized inter-bank (or should we say inter-mobile financial service provider) switch that is able to settle transactions directly amongst the various players:

The converged platform would then look something like is:

The diagram above clearly shows the B2B Inflows, the Outflows and the external networks that connect to them (Banks, Agents and International Remittances).

Why aren’t banks run as franchised businesses?

Thu, 01 Jan 2015 19:13:03 +0000

Faisal KhanAnswered Jan 1, 2015

Great question. Banks don't franchise primarily because of three reasons:

Financial Regulator: The central banks (and/or the Financial Regulator) currently do not give permission to banks to franchise out their retail operations of a branch completely. The US, UK, Canada I know for sure do not allow it. Banks are however allowed to have points-of-presence where deposits can be made (but non-teller based).
Money Control - Risk: From a risk perspective, a franchisee is high-risk as far as a bank is concerned. There would be enormous amount of trust and work to be done for a retail branch to be adeuately within the operation band as far as risk and compliance is concerned.
Domain Knowledge and Service Quality Issues: Running a retail bank network requires a large amount of domain knowledge for which bankers are trained for. Franchising this out, would mean that the bank would have to keep a continual look out to ensure that a franchisee's HR is up to mark on this, especially with all the laws and regulatory issues. Service levels are another concern. The banks excel in having uniformity of service levels all across. Since this is a tad bit more difficult than frying chicken and the average IQ requirement is higher, it does pose a bit of a problem for the banks.

From an ROI point of view, franchising would make great sense, but only those that are planning to expand branches. Banks can save a decent amount of money for expanding their network via the franchising model however with so much money available to the banks as it is, it is much more convenient for them to invest in this, themselves.

What are the five most commonly used money transfer services aside from PayPal?

Thu, 01 Jan 2015 19:13:01 +0000

Faisal KhanAnswered Jan 1, 2015

Some other notable mentions in the world of money transfer are:

Society for Worldwide Interbank Financial Telecommunication (SWIFT)
Western Union (company)
Moneygram
RIA Financials
Alipay (product)

Is it risky to share my account and routing numbers with an employer?

Thu, 01 Jan 2015 19:12:59 +0000

Faisal KhanAnswered Jan 1, 2015

The ACH system in the US is pretty weak on security, so it can be abused on that front. If your employer is asking this for direct credit of funds to your account, then you can ask them if there is another option as you don't feel comfortable in giving such information out.

Most of my friends in the US, actually have separate bank accounts. For example, one friend has a bank account in small community bank that she uses for such purposes. The name/number of this account is shared at a lot of places for direct deposits. She then moves the money into her Wells Fargo account, and this information she does not give out to anyone.

Granted there are fees for moving money back and forth, but she cites, until there is more security, she's not risking it.

Some employers may not be able to process your payments other than a direct debit, so you may not have much choice.

A good safety is to subscribe to some form of email or text alerts on each and every transactions done on your bank account. Under the US system you have 90 days to ask for a reversal, but sometimes that can be challenged and go to the courts too - but which time it is too late.

In the UK, the security is a little better, believe it or not, you have up 5 years to cancel / challenge the direct debit transaction.

My brother wants private banking services — which UAE bank should he contact?

Thu, 01 Jan 2015 19:12:58 +0000

Faisal KhanAnswered Jan 1, 2015

Barclays Wealth (their version of Private Banking) and HSBC Private Banking are both rock-solid banks to do business with (as far as Private Banking is concerned) in UAE. I'd lean and favor towards HBSC more.

What real-world problems does Bitcoin solve that existing financial systems cannot solve as effectively?

Thu, 01 Jan 2015 18:54:23 +0000

Faisal KhanAnswered Jan 1, 2015

Micro-payments. There are literally 1000s of cases where micro-payments are the need of the hour, but traditional payment instruments of today, make it impossible to pay.

Consider a news portal in India or Pakistan that wants to implement a payment wall for an article and wants to charge Rs. 1 for it. Now One Rupee is so insignificant, that almost everyone will pay for it, analogous example is say paying 2 cents for an article on Wall Street Journal or the New York Times online. You wouldn't even think, but would just pay. However, paying One Rupee is just not possible - until and unless you have a solution like Bitcoin, which makes it very easy to pay such a small minuscule amount.

Traditional online publishers expect us to pay for via subscription, which personally I hate. Why should I pay for a subscription, when online I want to read just one article. I should have the option to pay for it - but as I citied, that option with the current forms of payment is not possible. With Bitcoin, all this can change (as a side note, do read this answer: Quentin Hardy's answer to Why does the New York Times have to charge for digital content on the internet?)

Imagine if on Quora Blogs I write an article that is very helpful to others, and for and if by some methodology for every Upvote, I could earn 1 cent, that would be awesome! With Bitcoin this is very to implement. With the current payment instruments - impossible!

Think blogs, or answers on Stack Exchange, or posts on Quora, etc. Suddenly your content can have a value associated with it - that of Bitcoins. One that is universal across the Internet. Seamless, easy to implement and more importantly one that everyone has access to.

There are many more examples, this one just happens to be my favorite and one that is seemingly all too powerful.

How did firms like Simple and PayPal initially gain trust as places for customers to store their money?

Thu, 01 Jan 2015 18:54:21 +0000

Faisal KhanAnswered Jan 1, 2015

PayPal is a wallet, not a bank. So the money being loaded on to the wallet, is still with the banks that PayPal deals with, just that it is now accessible as an immediate payment onto the PayPal ecosystem. The money at all times is still with PayPal's banks.

Simple (also not a bank), is essentially using Bancorp Bank as their back end. Simple is nothing more than a "branch" that is defined on the core banking software of Bancorp and all the customers within this branch (i.e. Simple customer) are branded using Simple's branding.

In both the incidents, PayPal and Simple, they do not hold the funds themselves but hold it within their partner banks. Movement of money (within their partner banks) is essentially either moving the money within their own ecosystem (in which case the transaction is essentially free to PayPal and Simple) or moving it outside their ecosystem (i.e. outside the network of their partner bank).

The concept is not new, its simple a modified version of how pre-funded or nostro accounts behave (in a very rough sense) where money is aggregated under a separate heading.

In both cases, their account is defined as a Branch (Virtual) on the core banking software of the bank associated. Its a very normal practice for very large user group clients.

If I operate a platform connecting buyers and sellers, can I earn revenue from the credit-card transactions between them?

Thu, 01 Jan 2015 18:54:20 +0000

Faisal KhanAnswered Jan 1, 2015

Yes, this is known as a marketplace, and specialized processors will allow you to process card payments and be able to keep a fees for you separately. Balanced Payments is one such processor that will do this for you.

In the U.S., what regulations apply to businesses that handle, hold, and transfer customer money?

Thu, 01 Jan 2015 17:56:55 +0000

Faisal KhanAnswered Jan 1, 2015

If you hold money and/or transfer money, you're essentially an e-money and a financial intermediary respectively.

You would be classified as a Money Services Business (MSB) and hence the States' money transmitter laws would be applicable to you. Each State has their own set of law, and you would need to register as an MSB with them and obtain the necessary Money Transmitter License.

You would also have to adhere to the BSA (Bank Secrecy Act) law/guidelines and federal guidelines with respect to CFPB (Consumer Finance Protection Bureau) guidelines, especially the Dodd-Frank Act.

You would also need to register with FinCEN (Financial Crimes Enforcement Network).

Each US state has a different name for its DFI/DFS (Department of Financial Institutions / Department for Financial Services / Banking & Finance Commission, Department of Banking, etc.) - inquire from them that you would like to apply for an Money Transmitter License and they will guide you.

Is there a service that works like a virtual wallet where users can deposit and withdraw funds?

Thu, 01 Jan 2015 17:56:54 +0000

Faisal KhanAnswered Jan 1, 2015

Any E-money wallet provider would satisfy that: PayPal, Venmo, Snapcash, Dwolla, etc.

What are the strongest arguments for Satoshi Nakamoto to stay anonymous or to reveal their identity?

Fri, 12 Dec 2014 18:53:53 +0000

Faisal KhanAnswered Dec 12, 2014

How does knowing the author of TCP or HTTP or SMTP make it any different as to how we use their services?

I've never thought before clicking on a URL and wondered "Gee I wonder who made the HTTP protocol".

It really doesn't matter.

I never ever wondered the same with who decided to make money in the US or who thought of the credit card concept. The media has hyped up the identity (or lack thereof) of Satoshi Nakamoto, but it honestly doesn't matter.

The code, the underlying protocol and the apps that are running on top of this code is what matters to most. These have been studied and scrutinized by many and found to be absolutely brilliant and sinister-free code.

One could assume that the person(s) names Satoshi Nakamoto wishes to remain anonymous perhaps first because he might be ridiculed and laughed at (which he was) and later on the possibility and now all probability of the wealth it has created for him.

Could Bitcoin be shut down like Liberty Reserve because of unethical or illegal use?

Fri, 12 Dec 2014 18:53:51 +0000

Faisal KhanAnswered Dec 12, 2014

Bitcoin is a protocol that is running in a distributed peer-to-peer environment, you can't exactly shut it down, unless you can have everyone who runs a bitcoin node to shut down. The currency element just happens to be the very first app that is build on top of the Bitcoin protocol. The currency could fail, but the underlying Bitcoin protocol will still prevail, we could possibly invent something else on this protocol.

You can't really shut down the US Currency Notes, because they are being used for illegal purposes, likewise, I don't believe you can shutdown Bitcoin money on the same argument.

Which companies manufacture banknote recyclers used in cash-accepting ATMs?

Fri, 12 Dec 2014 17:54:46 +0000

Faisal KhanAnswered Dec 12, 2014

You're talking about an RCDM - Recycle Cash Deposit Machine. Almost all manufacturers make it. Diebold, NCR, OKI, GRG, Hitachi, etc.

On our homepage, we tried to clearly communicate the mission of our payment service—how well did we do?

Fri, 12 Dec 2014 17:54:44 +0000

Faisal KhanAnswered Dec 12, 2014

Blunt answer: I pride myself in being able to understand payment systems (companies, products, people) almost immediately when I see them. Despite having a cinema display, I really really has to broaden my browser window just to fit your website.

On my regular window, your text keeps getting cut out. So you might want to look into that.

Too much happening on your page. It says convenient way to paying for online service. With your PayPal Partner Logo on top, isn't PayPal already a convenient way of paying.

Scrolling down, there was too much going on the left, the right and the penny-hour-glass. That is where I lost my interest.

Scale of 1 to 10, with 10 being the best, you were about a 3.

Who are Bitcoin’s main competitors among digital currencies?

Thu, 11 Dec 2014 18:52:40 +0000

Faisal KhanAnswered Dec 11, 2014

Here are all the list of cryptocurrencies: List of cryptocurrencies

As you can see from the market capitalization table, only competitor is LTC (or Litecoin).

As a mention it is also important to note, Ripple has a cryptocurrency called XRP which is worth considering, but it doesn't have any notable circulation at the moment.

What risks could I face if I open a U.S. bank account on behalf of my aunt and uncle?

Thu, 11 Dec 2014 17:54:43 +0000

Faisal KhanAnswered Dec 11, 2014

Very simple. You'd be responsible for any and all activity that happens in your account. I don't think the defense that your Uncle made you open the account would hold up.

You're of legal age, you opened the account. You signed the dotted line. You gave your Uncle/Aunt the credentials to use the account. You're liable.

Allowing someone else to operate your own checking account is also against the banks' TOS.

How would someone set up an insurance agency like Prudential or AIA today?

Thu, 11 Dec 2014 17:54:41 +0000

Faisal KhanAnswered Dec 11, 2014

You would need to apply for an Insurance License in each state. Just like an MSB, the each State regulates Insurance providers, agents, brokers, products, etc.

Some States have a separate department / division for this all together, others have it merged.

Is Bitcoin essentially a new gambling system presenting itself as a payment method?

Thu, 11 Dec 2014 17:54:40 +0000

Faisal KhanAnswered Dec 11, 2014

Where is the gambling aspect of it? Price speculation? That anyone can do with anything. But seriously, specifically where do you see the gambling aspect of it?

Bitcoin in its elementary form is a protocol. An open-ledger, consensus based protocol. It just happens to be the very first application we made on top of this protocol was value transfer.

It could have very well been an app for counting rabbit population, or spotting Yeti, but that wasn't the case.

From a gambling point of view, i.e. pure speculation, there are 100,000s different arenas that would be better suited for gambling than bitcoin.

With the newer RBI guidelines, which major players could realistically pursue setting up a bank?

Wed, 10 Dec 2014 17:54:39 +0000

Faisal KhanAnswered Dec 10, 2014

Reliance Industries (Mukesh Ambani group) is already working hard with financial consultants to get a bank setup. This would certainly compliment their mobile wallet license.

How do KYC requirements differ for an MSB versus a bank?

Tue, 09 Dec 2014 17:54:37 +0000

Faisal KhanAnswered Dec 9, 2014

Pretty much the same. They both in some manner have to look at the PATRIOT Act as well as the BSA (Bank Secrecy Act).

They aren't much different. In some cases, they are relaxed for an MSB (based on the limits defined on the transactions), for example, an MSB may have:

Level 1: Info required: Name, Address, Telephone Number (no photo ID or DOB or SSN). Limit US$ 2,500 per month.
Level 2: Info required: Name, Address, Telephone Number, DOB, SSN and a photo ID. Limit US$ 10,00 per month.
Level 3: Info required - all of level 2 + Address verification (utility Bill, etc.)

Which major tech companies hold MSB licenses, and what do they use them for?

Tue, 09 Dec 2014 17:54:35 +0000

Faisal KhanAnswered Dec 9, 2014

To get a rough semblance of who the big players are with Money Transmitter Licenses, look towards California and New York (2 of the most coveted licenses in US):

California Department of Business Oversight (CA)
Money Transmitters (NY)

To answer your second part, you are asking if they have a right to transfer funds within their products, the short and the long answer is Yes.

As long as the product was designed to behave that way, intra-wallet or intra-bank transfers (within their product/services) is allowed. Commingling of funds is also allowed. However, what is not allowed is to use the funds in any manner, other than their intended purpose. You cannot reposition or reallocate the funds to some other account or products, etc.

The whole idea behind these coveted money transmitter license is that you can run a wide-variety of services, including e-money, or wallet holding.

It is also important to note, some big corporations may be using the license exemption given to federally chartered nationwide banks, so they do not necessarily need a license.

Where can you get a debit card online without maintaining a bank account?

Tue, 09 Dec 2014 17:54:33 +0000

Faisal KhanAnswered Dec 9, 2014

You cannot get a debit card (strictly speaking) without a bank &/or e-wallet account, however, you can get a prepaid debit card. There are 100s of providers.

Depending on which country you're in, you might want to ask around. In the US, there is Amex Serve, GreenDot, Walmart Money Card, Netspend, etc.

How do P2P transfer apps like Square, Venmo, and PayPal work—do they use their own merchant accounts, and can they initiate ACH transfers between accounts on users’ behalf?

Mon, 08 Dec 2014 17:54:32 +0000

Faisal KhanAnswered Dec 8, 2014

All payments are peer-to-peer. The basic axioms of a payment being made is typically there are two peers, one gets the debit and the other gets the credit.

In the payments world, the word peer-to-peer has many different connotations.

To understand how PayPal works, you might want to read up on this answer: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

To understand how a traditional money-transfer works, here is a detailed write up on that: Faisal Khan's answer to How does a remittance money transfer work? What are all the steps and who is involved?

To understand how the wire-transfer element works, here is a write up on that: Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

Lastly, to understand how net deferred settlement occurs, you need to understand how that happens: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

Most of the payment systems follow one of the above approach. The model of say TransferWise or CurrencyFair, who also do peer-to-peer transfers but do not actually exchange any money, is done by netting off the demand & supply in each region.

Consider two countries: UK and Australia

UK: Bob want to send Jane GBP 1,000 to Australia.
Australia: David wants to send GBP 1,000 worth of Australian Dollars to Mark.

This is a perfect example of supply and demand. Wouldn't it be ideal if...

Bob gives Mark the GBP 1,000 when he is assured that
Jane will get money from David (GBP 1,000).

In this case, no money transfers happen internationally. Both parties are replying on an exchange platform (like TransferWise, CurrencyFair, et. al.) to provide liquidity and the ability to pair currency-trades.

When companies like Venmo, PayPal, etc. have monies in their wallet, the peer-to-peer payment (within their ecosystem) is simply an intra-bank movement (see the PayPal write up example quoted above).

How do platforms like E*TRADE connect to multiple stock exchanges?

Mon, 08 Dec 2014 17:54:30 +0000

Faisal KhanAnswered Dec 8, 2014

There are various companies that specialize in providing access to market data feeds and trading connects. Some examples are TNS, Reuters.

They are better known as Bureau Services.

What could happen to Bitcoin if Satoshi Nakamoto’s identity were discovered?

Mon, 08 Dec 2014 17:54:29 +0000

Faisal KhanAnswered Dec 8, 2014

Barring the paparazzi outside his/her home, nothing!

What is the most important thing U.S. tourists should keep in mind when traveling internationally?

Mon, 08 Dec 2014 17:54:27 +0000

Faisal KhanAnswered Dec 8, 2014

Two things immediately come to mind:

Calm the fuck down. No need to be too loud.
No, we don't know how "Back in America..." things are.

What are the main barriers for Skype to enter the remittance market?

Mon, 08 Dec 2014 17:54:26 +0000

Faisal KhanAnswered Dec 8, 2014

Inside story from a colleague who worked very closely on this: When Microsoft purchased, the go-forward plan included a lot of possible directions (or branches) Skype could take. Remittance business was one of them.

The idea of creating a global money transfer service was not something new, and both Skype and Microsoft knew about its potential. However, in the end, it was decided that Skype was a big enough integration and management issue, adding and managing the payments layer on top would be a major distraction.

Then when the co-founders left Skype, the plans were dropped altogether.

Coincidentally, on the list of projects that Microsoft is looking into, one of them under debate (i.e. consideration) by Microsoft CEO Satya Nadella, is payments. Skype is also mentioned in the report.

Payments is a crowded market and they want to be sure of what they get themselves into, if they decide to go ahead.. No decision has been made (else we all would have heard about it). MS wants to get into payments, that would adequately qualify it to play with the big boys in the payments space, but there is a lot of internal debate if they need to enter the payments vertical? SAP hasn't. IBM hasn't. Oracle hasn't.Why Microsoft?

How does a payment system like PayPal function end to end?

Mon, 08 Dec 2014 17:54:24 +0000

Faisal KhanAnswered Dec 8, 2014

I wrote an answer that pretty much is what you're looking for: Faisal Khan's answer to What is a Paypal account? Is it a kind of bank account which is maintained for demand deposits? __ 𝐏𝐥𝐞𝐚𝐬𝐞 𝐂𝐚𝐥𝐥 PayPal 𝐓𝐨𝐥𝐥 𝐅𝐫𝐞𝐞 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 ☏+❶►❽❺❻▁❹❼❺►❷❺❺❺ ☏?

How would U.S. casinos operate if the U.S. became a cashless society?

Mon, 08 Dec 2014 17:54:23 +0000

Faisal KhanAnswered Dec 8, 2014

Betting & Gambling is already going digital. Traditional casinos have a hard time keeping up. If the society is truly cashless, the casinos would invent or reposition the digital form of money and make it glamorous again.

Casinos see a lot of small value cash traffic, that would presumably decline but then again, if you want to gamble/bet, you'd get with the program and play away.

Conformity will come from both sides, the casino operator and the players.

Will financial regulation end up weakening global economic stability?

Mon, 08 Dec 2014 17:54:22 +0000

Faisal KhanAnswered Dec 8, 2014

Contrary to popular belief, financial regulations keep things in check. As much as I hate them (being from the same field), I can tell you, the world is full of crooks, especially when it comes to money.

It is Financial Regulations that mitigate a lot of the risk/fraud. If the markets were unregulated, then we would be looking at a flooded market, where differentiating the good from the bad from the ugly would become a nightmare.

Also, if left unchecked, it then becomes a playground where consumer protection goes out the window. So if you incur a loss, or are a victim of Ponzi scheme or an investment instrument that wasn't what it appeared to be, you're shit out of luck.

Is it normal for USD transfers within the EU to take around four days?

Mon, 08 Dec 2014 17:54:20 +0000

Faisal KhanAnswered Dec 8, 2014

This transaction should have cleared the next day because of SEPA (as everyone has highlighted).

Couple of reasons here why the transaction took 4 days to clear:

Transaction conducted on a weekend, after the time UK banks had posted to SEPA clearing.
The sending bank does not have SEPA arrangements
The SEPA limit for settlement by either the sending or the receiving bank was reach (though this is highly unlikely).
Either the sending or the receiving bank held on to the transfer for purposes of float. In the UK and Europe, you can take an action on a bank for doing so.
The Bank itself does not have a USD desk for payment, and most likely pushed this out to an FX broker for onward settlement in which case, this delay is possible.

Who is the current commissioner of the Georgia Department of Economic Development?

Sun, 07 Dec 2014 17:54:19 +0000

Faisal KhanAnswered Dec 7, 2014

Chris Carr

Ref: Commissioner Chris Carr - Georgia Department of Economic Development

How could Bitcoin-style technology power a global fast peer-to-peer payments system with minimal fees without becoming its own currency?

Sat, 06 Dec 2014 18:46:37 +0000

Faisal KhanAnswered Dec 6, 2014

You could create a peer-to-peer (trading) payment system (with some added trust), the likes of which CurrencyFair or Transferwise are doing. The catch would be traction. You would need a lot of users for the payment network to really take off (look at what Ripple is trying to do - see Ripple) - which is essentially a p2p payment network, on the basis of the question you have asked.

Technology and adaptation is not the issue. The issue is of going to jail. The problem is, financial regulators in each country do not like this, and will try to scuttle the network in play as well as the players.

There are many companies and startups that are actively trying to find a legal method in trying to deploy peer-to-peer payment networks, so that trading and making payments on a global scale comes as easy and cheap as a Skype call.

Have no doubt, the existing banking industry and the financial regulators would not like to see this happen.

There is no doubt, P2P payments will take off, but the owners would be the likes of Bank of America, JP Morgan Chase, etc. rather than some decentralized network (unless of course, Ripple really takes off!)

If bill-pay transactions cost banks money, why do some accounts waive monthly fees only when a minimum number of transactions are completed?

Sat, 06 Dec 2014 18:46:35 +0000

Faisal KhanAnswered Dec 6, 2014

The more automated the process, the more cheaper it is for the bank and the utility company (for example) to process a bill.

Banks make money when money is being moved and/or being transacted with. When you have transactional activity in your account, it means someone, somewhere is earning revenue, at the forefront is always the bank.

Banks will try to incentivise the entire scenario by making sure that you either pay a monthly fee (if you are below a certain threshold of transaction) or waive the fee if you are above it. When you are above the threshold, this implies that the bank is making a decent earning from the transactions you are posting.

Add to this the incentives the bank receives from the bill-pay partner, which may allow the bank to earn a day's worth of float ont he money collected, etc.

Foreign Exchange: Why does CurrencyCloud maintain such a large network of global banking partners?

Sat, 06 Dec 2014 18:46:34 +0000

Faisal KhanAnswered Dec 6, 2014

Presumably to offer settlement in those countries, in their currencies. You can also suddenly have a lot of settlement banks by merely joining a specific network or being associated with a specific payment switch or processor.

How can I find a payment processor in the UK for third-party (brokered) transactions that isn’t PayPal?

Sat, 06 Dec 2014 18:46:32 +0000

Faisal KhanAnswered Dec 6, 2014

Search for 3rd part payment providers or payment service providers in the UK. There are many PSPs in UK/EU who will provide credit card transaction processing for you.

Why don’t people simply borrow large sums from banks and disappear?

Sat, 06 Dec 2014 18:46:31 +0000

Faisal KhanAnswered Dec 6, 2014

Very, very few people are successful in scamming the banks, i.e. taking high-value loans and then defaulting and disappearing.

Banks have become very good at what they do. The process by which you, your credit history and/or business is checked for, has matured over the years and banks are able to do a very good job of finding out exactly how much of a default/flight risk you pose. All risk is usually balanced by a collateral (though this is not always the case).

Big lonas would typically be given out to company (business accounts), not to individuals, and within a business account, there would most likely be multiple signatories.

This does not mean that people haven't tried this. It happens a lot in the developed world and the developing world. Bad loans portfolio exists everywhere. Most of these bad performing loans are due to the bad business practises or bad performance of the company etc. Very few come under the wilful default and intent to cheat / defraud.

Those who do try to fraud the banks with loans they take with no intention of paying them, the banks will spend a large portion of energy and money in ensuring that you are prosecuted to the fullest extent of the law.

How can someone with no credit use a high income to build credit more quickly?

Sat, 06 Dec 2014 18:46:30 +0000

Faisal KhanAnswered Dec 6, 2014

Make sure everything is pinned to your Social Security Number (your apartment, your utilities, your income, etc.) Take a bank credit card or debit card and spend reasonably within your limits. Never go above the due dates or miss out on a payment. Do this for 6 months or so, and then apply for a credit card. Use it, leave a little credit on balance. Make the monthly payments on time and you should be good to go. Your credit history will start accumulating and improve your scores as you chug along.

Is it technically feasible for the RBA to issue AUD using Ripple or Stellar-style technology?

Fri, 05 Dec 2014 17:54:17 +0000

Faisal KhanAnswered Dec 5, 2014

Absolutely. Ripple, Stellar and Hyperledger can do that.

You can go and make your own quantity and currency and manage it.

AML: After HSBC and Citibank, which financial institution might regulators target next for AML or sanctions violations?

Thu, 04 Dec 2014 18:44:37 +0000

Faisal KhanAnswered Dec 4, 2014

If I had to fathom a guess, most likely JP Morgan Chase. Their international (cross-border) transactions are huge, especially correspondent cross-border transactions from a lot many Middle East banks.

Why haven’t startups—or Facebook—leveraged Facebook’s massive user base for money-transfer services?

Thu, 04 Dec 2014 18:44:36 +0000

Faisal KhanAnswered Dec 4, 2014

Payments on the Facebook platform for commercial money transfer services has been the proverbial $64 Million question amongst all those in the payments space.

From what I know of friends in Facebook, is that they are working on the payments space. Actively. None can disclose too much, but let me share some extrapolated understanding.

To provide a little bit of perspective, here is a statement of Facebook's filing with U.S. Securities and Exchange Commission (SEC): (filed for year end (31st December 2012).

From the Government Regulation clause on page 11/12

Various laws and regulations in the United States and abroad, such as the Bank Secrecy Act, the Dodd-Frank Act, the USA PATRIOT Act, and the Credit CARD Act, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. Under these laws and regulations, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers, and sellers or issuers of stored value.

Requirements imposed on financial institutions under these laws include customer identification and verification programs, record retention policies and procedures, and transaction reporting.

To increase flexibility in how our use of Payments may evolve and to mitigate regulatory uncertainty, we have applied through subsidiaries for certain money transmitter licenses in the United States and similar licenses in certain foreign countries, which will generally require us to show compliance with many domestic and foreign laws relating to money transmission, gift cards and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions.

and under the clause: Payment transactions on the Facebook Platform may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with or that could harm our business. (Page 24)

Payment transactions on the Facebook Platform may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with or that could harm our business.

Our users can use the Facebook Platform to purchase virtual and digital goods from our Platform developers using our Payments infrastructure.

Depending on how our Payments product evolves, we may be subject to a variety of laws and regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions.

In some jurisdictions, the application or interpretation of these laws and regulations is not clear. To increase flexibility in how our use of Payments may evolve and to mitigate regulatory uncertainty, we have applied for and received certain money transmitter licenses in the United States and expect to apply for certain regulatory licenses in Europe, which will generally require us to demonstrate compliance with many domestic and foreign laws in these areas.

Our efforts to comply with these laws and regulations could be costly and result in diversion of management time and effort and may still not guarantee compliance. In the event that we are found to be in violation of any such legal or regulatory requirements, we may be subject to monetary fines or other penalties such as a cease and desist order, or we may be required to make product changes, any of which could have an adverse effect on our business and financial results.

In addition, we may be subject to a variety of additional risks as a result of Payments on the Facebook Platform, including:

increased costs and diversion of management time and effort and other resources to deal with bad transactions or customer disputes;
potential fraudulent or otherwise illegal activity by users, developers, employees, or third parties;
restrictions on the investment of consumer funds used to transact Payments; and
additional disclosure and reporting requirements.

Source: FB-12.31.2012-10K

As per my knowledge, a team of 7-8 people are working in understanding the regulatory framework for all countries concerned and they are prioritising which markets to enter first and which one will follow later.

There is an active team looking at compliance, risk, fraud, AML/KYC, etc. for all these countries and territories.

Though I have not followed up recently, Facebook was in the news last year (in Feb/2012) when they cited that they had applied and received money transmitter licenses in 15 states already. Article reference: Facebook Fast-Tracks Its Payments Business

I am sure the number has grown by now (will update this answer in the future once I have more information as to how many more states have granted a money transmitter license to Facebook).

In Russia for example last year it was reported that Facebook is ready to transfer the money of Russians supported "Russian Standard" and "http://Bank24.ru" (the article is in Russian and you can use Google to translate the page): Facebook начнет переводить деньги в России с помощью банков «Русский стандарт» и Банк24.ру - РБК daily

A lot of work is being done to reduce the number of steps it takes to make a payment on Facebook. Last year Steven Musil of CNET (product) wrote an article on this: Facebook launches 'low-friction' mobile payments system

Facebook is now getting more and more comfortable in handling payments on its platform. Though there are restrictions. This is one reason why Facebook will not allow external app developers &/or companies to use its platform for Person-to-Person payments or using the Facebook canvas as it is called to make a payment (in one form of credit) transferable to another app (in another form of credit). See: Facebook Platform Policies and Facebook Developer Payments Terms

It is also important to note, Facebook now has adequate experience with Carrier based billing for its Facebook Credits program.

So with all this happening, where is Facebook heading with payments? There is a debate within Facebook if FB wants to compete with PayPal by offering P2P payments. There has been discussion on how PayPal could somehow natively be embedded within Facebook for P2P payments. There has been much debate if FB should enter into the payments space at all (for purposes of Money Transfers). A lot of well known players have approached Facebook directly (and indirectly) for money transfer services. The primary one being Western Union, who wanted to leverage the 1+ Billion MAU (Monthly Average Users) of Facebook for a possible platform of doing money transfers.

If I were to wage a bet, I would lean towards a Facebook + Western Union partnership. Facebook can easily partner up with anyone to service over 200+ countries & territories, there is no stronger candidate than Western Union.

WU is licensed in almost every conceivable country either directly or via a correspondent banking/MTO partner.

They know the KYC/AML rules of every territory they operate in and could very well integrate their systems with Facebook with a little bit of effort.

For this relationship, FB/WU would have to agree on some preferential pricing. Such a marriage can represent a huge (potential) income stream for Facebook, and they would piggy back on Western Union's licenses in all the territories that WU and FB jointly operate in. Visa/Mastercard cannot offer such an arrangement to FB, neither can any bank (how many banks are operating in 200+ countries & territories).

However, that is just a speculative assessment. In Silicon Valley, opposite decisions do happen. Facebook may decide to go their own route on this, starting with US alone for P2P payments, which in itself would be a big step (they would have to cut-off their relationship with PayPal for this). They can, just like PayPal then extend outwards and start integrating with other countries (Canada, UK, EU, etc.)

Having talked to many people, both within Facebook and outside of it, related to the payments space, the question is most certainly not one of if Facebook will end up doing P2P payments, but a matter of when.

What has surprised a lot of people is the "when" part. Some pundits say its long overdue. Many herald that 2012 was the year of payments for FB, now some say 2013. Some are not sure. This is true for Apple and Amazon too (two other contenders who are seen most likely to enter into the payments space). Does the first mover advantage still remain? Or is everyone holding on their bets to see who comes out first and then re-evaluate their position and strategy and then launch?

Everyone seems to be very tight-lipped on this, and perhaps rightly so. I personally feel, Facebook is under tremendous pressure to launch a P2P system, but they are being very cautious about it, considering the great regulatory framework to which they have to adhere, fraud and risk mitigation AML/KYC controls and then how to handle the money itself? How will one pay and then get paid? It would not surprise me one bit if Facebook launched its own prepaid Debit card (in association with either Visa or Mastercard).

A great article to get more perspective on Payments by the four giants (Facebook (product), Amazon.com (product), Google (company) and Apple (company)) is to read a great article by Farhad Manjoo who wrote an article in Fast Company called: The Great Tech War Of 2012.

Why have cross-border money transfer startups become so popular recently?

Thu, 04 Dec 2014 18:44:34 +0000

Faisal KhanAnswered Dec 4, 2014

Remittances or (cross border) Money Transfer has always been a hot field. It has been steadily growing strong each year (despite the downturn of 2008) and forecast for the next couple of years looks solid.

Traditionally, money transfers were controlled by correspondent banking and large MTOs (think Western Union, etc.)

With the advent of more automation in Banks and payment networks, the ability to have a web (or Internet) based money transfer system today makes a whole lot of sense, versus the traditional agent model (which by the way is still a rock solid model).

New startups in the money transfer vertical are taking advantage of the automated banking and payment networks in the beneficiary countries (think primarily developing countries) and their revenue models are based on the lucrative markups on transactions from developed to the undeveloped world.

For example, if one develops an app/setup for remittances from US to Bangladesh, with a cookie cutter approach, you can then easily sell such services (with slight regional modifications) to countries like India, Pakistan, Nigeria, Egypt, Vietnam, Morocco, etc.

The game changer in my opinion is the Internet access to Banks and Payment Systems in the beneficiary countries that allows such start-ups to do business with special emphasis on the ubiquitous nature of being able to route payments to different mediums and payment instruments.

How could someone potentially grow $1 million into $10 million in under five years?

Thu, 04 Dec 2014 18:44:33 +0000

Faisal KhanAnswered Dec 4, 2014

Invest in emerging market mutual funds. They have for the past years given returns in excess of 20+%

How do governments and financial institutions detect and disrupt terrorist financing networks?

Thu, 04 Dec 2014 17:54:16 +0000

Faisal KhanAnswered Dec 4, 2014

Most of them are selling their cause. Plenty of sympathizers who will gladly contribute donations towards the cause. From place of worship, to membership meets to rallies to individual fund raising efforts. All channels are utilized.

Is it technically feasible for the Reserve Bank of Australia to issue AUD today using a blockchain-based system?

Thu, 04 Dec 2014 17:54:14 +0000

Faisal KhanAnswered Dec 4, 2014

Right now, the Blockchain is tracking only a single asset, i.e. the bitcoin. So it cannot do Australian Dollars.

If the Australian government were to use the blockchain for the issuance of AUD, and assuming the blockchain were only tracking the AUD (as an asset in the distributed open ledger), then the Australian government would not have any control as how and when the AUD are created and released, as it is a mining function.

The Australian government would be better off using a pre-mined open/distributed? ledger system, think Ripple or Stellar, etc.

Does TransferWise build direct banking relationships in each country or rely on backend networks like Earthport?

Wed, 03 Dec 2014 18:43:32 +0000

Faisal KhanAnswered Dec 3, 2014

From the looks of it and what one can read about them, it seems their model primarily works on the Net-Off basis.

Ex:

If $10,000 need to be transferred by a User from UK to Germany, and if there is a need to send US$ 10,000 equivalent of Euros from Germany to UK, Transferwise will take care of both of these users, but using the local payment option. No money is actually transferred.

This I believe is just one of their many ways of doing a transaction.

What are the minimum requirements to open a café in Singapore?

Wed, 03 Dec 2014 18:43:31 +0000

Faisal KhanAnswered Dec 3, 2014

Go to Enterprise One website (the official website operated by the Government of Singapore).

In industries, you can choose Food & Beverage:

Here is the link: Food & Beverage (F&B)

You can then click on the License & Permits tab below and Laws & Regulations to find out more about the requirements for setting up a Cafe in Singapore.

What would you do today if your total savings amounted to only $10,000?

Wed, 03 Dec 2014 18:43:29 +0000

Faisal KhanAnswered Dec 3, 2014

Be somewhat content, that if you were really down on your fortunes, and depending where in the world you are, you have about 4-5 months of living expenditure with you (if not more).

With that in mind, your goal should be to stretch this. Gradually, without adding risk to your investment and/or savings.

Why can’t we have a single government-owned bank for everyone?

Wed, 03 Dec 2014 17:54:13 +0000

Faisal KhanAnswered Dec 3, 2014

Historically and statistically, people have shown that a government ruins just about everything it tries to run &/or manager. This is especially true for money.

The idea has merit, but from a pragmatic point-of-view, it has too much going against it than, for it. A couple of key elements that go against it is:

Government Borrowing from one and only single bank, preferential treatment
Free market (fostering competition), with a monopolistic bank, we become complacent
The Management & Board would become too powerful
Economic blunders by the bank will cost dearly and have a resonating effect on the economy

Why was Bitcoin created in the first place?

Tue, 02 Dec 2014 17:54:11 +0000

Faisal KhanAnswered Dec 2, 2014

In hindsight one can say the following factors probably contributed towards its creation:

Anonymity (from a Payments perspective, not having to share your personal details, etc.)
Global Payment. Pay anyone, anywhere, anytime. 24/7.
Micropayments
Nanopayments - Want to pay 0.0001 cents? Bitcoin can do it.
Consensus Framework - which was missing out on earlier attempts at digital money.
Distributed.
No central authority. Let the enthusiasts run it.
Free.
Create a value-transfer system that rides on the internet packet.
Solve the double-spend problem.
Transparent (open-ledger)
Lower fees (nearly free)
No chargebacks
Accessible to all. No discrimination on country wealth or infrastructure, etc. If you have access to the Internet, you have access to Bitcoins.

Who are the biggest buyers of foreign currency, and what motivates those purchases?

Tue, 02 Dec 2014 17:54:10 +0000

Faisal KhanAnswered Dec 2, 2014

Typically the largest buyers of Forex are banks who need to the currency pair to trade on behalf of their customers. Banks have to provide the ability to open L/Cs, aggregate FX trades for Forex companies who aggregate with them, provide forex liquidity for their own clients, etc.

How was the standard size for credit cards and business cards determined?

Mon, 01 Dec 2014 19:12:56 +0000

Faisal KhanAnswered Dec 1, 2014

There is a lot of rich history behind the business (or visiting) card. The credit card was just the business card juxtaposed to the size of the standard business card, for ease of use in the wallet.

The history of the card, depends where you look. The earliest known record stems from China (circa 15th Century), they became more popular during the Royal Court era of French rule, especially during the time of the French King Louis XIV's reign.

Moo.com has a great infographic on it.

Originally, the cards were visiting cards. To announce oneself to the party you wish to see. Depending upon your stature, nature of visit and importance, the party you wish to see, may or may not see you.

The earliest known visiting cards were the same size as the deck of playing cards. Not much information is available as to how they were reduced to the size of the current business card, though there are many educated guesses. Some say, it was the side-by-side placement on the printing press, some say the pockets in the wallets were the limiting factor, there is some limited indication that the card size was to match the pocket tobacco box to which these cards were held with a rubber band. There have been numerous debates that some of the famous printers of the time who were capitalising on the visiting / business cards, found out that the most apt and affordable size of the printing plate was that of the modern day era business card. The larger the card, the more expensive it was to print.

References/Credit:

Business Card Infographic
Design Inspirations from the History of Business Cards
The History of Business Cards: Four Centuries of Introductions
A Brief History of Business Cards
Business Card History
Visiting card (Wikipedia)
A History of Business Cards

Would it be easy for hackers to create counterfeit bitcoins?

Mon, 01 Dec 2014 17:54:08 +0000

Faisal KhanAnswered Dec 1, 2014

Luke Parker provides a rock-solid explanation. Another analogous way of looking at it, as follows.

The world of digital is based on consensus. This means, everyone. Each and every person in the ecosystem is looking at what you are doing. Even counterfeiting. When you counterfeit, and the fact that everyone is looking at you, what do you think the consensus will be?

The general consensus would be that your money is no good. No one will accept it or entertain it as money and the consensus will ensure of that. So that everyone's ledger will reflect that.

It might not be impossible, but the chances of you fooling the consensus, are zero.

What is the likely future of Bitcoin—will it become mainstream or fade in popularity, and for what reasons?

Wed, 12 Nov 2014 18:53:50 +0000

Faisal KhanAnswered Nov 12, 2014

I think this video by Andreas Antonopoulos on Bitcoin at Disrupt is a great insight on the future of Bitcoin.

As Andreas cites, we have to stop thinking of Bitcoin as a currency, but more as a protocol, that is designed to do much more.

https://www.youtube.com/watch?v=...

Some noteworthy points from this presentation:

Currency is the first app
Other apps for Bitcoin can be Distributed Consensus system...
Distributed (fair) voting
Stock Voting / Ownership
Asset Registration & Notarization
Decentralized Asset Ledger
Bitcoin is programmable money.
Election (Electronically)
Ignore the Price.
Ignore BItcoin the money. Understand Bitcoin the technology/invention.
If this Bitcoin currency doesn't work, we will invent another on on top of it (as is with other Crypto Currencies)
Internet’s biggest advantage is Neutrality. Bitcoin is neutral to the sender and the receiver and the value of the transaction.

So as the speaker sums up very accurately, there are apps that are bound to come and usage of the Bitcoin protocol that we cannot (at present) imagine. Its like the Internet, once TCP/IP was made, could you imagine 15-20 years back what would be coming?

The future is extremely promising.

Money Transfers: How much of Western Union’s remittance profits could Bitcoin potentially capture?

Wed, 12 Nov 2014 18:53:48 +0000

Faisal KhanAnswered Nov 12, 2014

Very little (if at all). The change would be so small, that it would hardly be noticeable at present.

If you were to look at Bitcoin's adoption as a Remittance conduct versus Western Union's growth, I think it is safe to assume that (at present) WU far surpasses the little share that Bitcoin is attempting to eat.

See also: How will Bitcoin change Remittance? Will it?

How might Bitcoin change the remittance industry, if at all?

Wed, 12 Nov 2014 18:53:47 +0000

Faisal KhanAnswered Nov 12, 2014

Bitcoin will not change remittance, bitcoin itself is remittance. Remittance is just nomenclature for cross-border money transfer and that too, specifically tied for migrant workers remitting money.

It will be a while before Bitcoin is widely adopted as a mechanism for conducting remittance transactions. I will cite a couple of reasons for this:

Majority of the migrant remittances are done by folks with little or no education. These are predominantly blue collar workers, and for them to widely adopt a crypto currency in its native form, is a hard sell to say the least.
The beneficiary to whom they are remitting the money, share the same demographics. If you are expecting an impoverished family in Bangladesh or India to embrace Bitcoins as inward remittance (in its current form), that is most likely not going to happen.
The current state of Bitcoin ecosystem makes it very difficult to buy/sell bitcoins on a global level, horizontally speaking. Its not as simple as technologist or enthusiast would like you to believe vis-a-vis the current traditional remitting channels.
Volatility in price with respect to your Buy/Sell fiat currencies.
Cashing out of Bitcoins in Beneficiary countries (not widely available in remote areas, even urban areas)
Licensing. Sooner or later, it will be licensed.

Why should Bitcoin fall under money-laundering regulations?

Wed, 12 Nov 2014 18:53:45 +0000

Faisal KhanAnswered Nov 12, 2014

As a regulator in any country, it becomes their fiduciary duty to ensure that money laundering, etc. is mitigated and anti-money laundering efforts are put into full swing on to financial / payment systems.

There is a vast difference as of what is perceived as money laundering and what money laundering actually is. The definitions varies across country to country, and even the world body on this, cannot agree on a universal definition.

When you have an entity such as Bitcoins, that connect to the traditional fiat currencies to load/off-load coins, then the AML regulator steps into play (as this is their rightful jurisdiction). This also in some ways validates Bitcoin as a legitimate currency/payment system.

What is the best payment processor that earns commission on transactions?

Mon, 10 Nov 2014 18:52:07 +0000

Faisal KhanAnswered Nov 10, 2014

Braintree Marketplace? (See Braintree)

Seems like it will do just what you are asking for.

Has anyone been prosecuted for trading Bitcoin in countries where it’s prohibited?

Mon, 10 Nov 2014 17:53:26 +0000

Faisal KhanAnswered Nov 10, 2014

I've been following Bangladesh closely, no convictions so far.

I want to build a subscription-based online store where users can pay via PayPal, cards, and Bitcoin—what no-code (ideally free) WordPress plugins or other tools can I use?

Mon, 10 Nov 2014 17:53:23 +0000

Faisal KhanAnswered Nov 10, 2014

WooCommerce by WooThemes. Absolutely free. For recurring billing, there are paid plug-ins. No coding required. Rock solid plug-in. 100s of Themes now support WooCommerce.

http://www.woothemes.com/woocomm...

Why do central banks publicly disclose foreign exchange reserves instead of keeping speculators uncertain?

Mon, 10 Nov 2014 17:53:21 +0000

Faisal KhanAnswered Nov 10, 2014

Transparency reduces speculation as everyone is privy to the same information. Having said that, the reason Central Banks disclose everything on their books (including Forex) is because the CB reporting for data & statistics is what literally keeps the economy churning.

The data is used both domestically and internationally; for example it js used for setting up the official forex rates, etc. It is used to benchmark so many aspects of a country's health. Think of central bank reporting analogous to not only just taking the blood pressure and temperature of a patient, but a thorough examination including blood tests.

Those who are interested in the country, then refer to this data periodically to set their policies accordingly.

By showing the strength of your forex reserves, you can demonstrate a wide variety of metrics. Some crude ones are you ability to keep functioning with respect to international payments, or how long can you support the oil import bill, or what your current account deficit looks like, or how migrants remittances are fueling the economy.

Speculators have very little to speculate with, if the data is open for all.

What is a good credit card for frequent international travelers?

Sun, 09 Nov 2014 18:51:25 +0000

Faisal KhanAnswered Nov 9, 2014

American Express and two different bank issued VISA/Mastercard. Many a times you will come across a hotel or retailer where your VISA/Mastercard will for some odd reason not run, best to have an alternative card.

What is your view on Dwolla as a payments platform?

Sun, 09 Nov 2014 17:53:20 +0000

Faisal KhanAnswered Nov 9, 2014

Dwolla is doing everything right!

They are one of the very few companies I have great admiration and respect for.

First of all, you have to love Ben Milne the CEO of Dwolla. Here is a guy who does not mince words. Period. He kind of reminds me of the young and goal driven Oracle CEO Larry Ellison (business person)
The model Dwolla is pursuing is the way to go - flat fees.
RTGS (Real-time Gross Settlement) is the need of the hour in the US. Dwolla is pursuing that.
Dwolla believes in a transaction framework where by costs are fixed, you don't even think twice about using it. Bingo!
Did I mention Flat Fees?
From World Bank to IFC to G20, all have been pursuing the flat-fees model for payments. Dwolla has already implemented that.
Dwolla is not waiting for other the Government &/or other players to come forward and solve the problem of the antiquated ACH system. They are doing it. Its live. Today.
Traditional Banks who rely heavy on ACH know Dwolla has got it right.
They are a serious threat to the $37 Trillion a year ACH framework. May not look like it now, but mark my words.
The Chinese proverb Journey of a thousand miles begins with the first step is what Dwolla is doing. Signing one bank/credit-union at a time to their FiSync solution.
Transactions under $10 - Free. Take my money already!
Other players scoff at Dwolla and their flat-fees model, but just ask the users of Dwolla, they love it.
Ben Milne does not give a fuck about the others!

What is the IBFT fee charged by Pakistani banks?

Sun, 09 Nov 2014 17:53:19 +0000

Faisal KhanAnswered Nov 9, 2014

There are three models:

Rs. 0 - Subsidized (i.e. free, the bank pays for it, to retain you as a client)
Rs. 50 - This is what most banks charge.
Rs. 100 or 0.05% whichever is higher.

Is it realistically possible to enforce an outright Bitcoin ban?

Sun, 09 Nov 2014 17:53:17 +0000

Faisal KhanAnswered Nov 9, 2014

Not the underlying protocol/technology in itself. However any trading (buying, selling, swapping, etc.) of Bitcoins using the Fiat currency can be banned and thus usage of this be enforced.

It would require access to your account level transactions and this could be a huge issue for any agency tasked with enforcing the ban.

In theory it is possible to enforce it, however the numbers don't work in favor of enforcer.

What unique advantage made PayPal so successful in its early days?

Sat, 08 Nov 2014 18:50:47 +0000

Faisal KhanAnswered Nov 8, 2014

From an outsiders perspective, here is what (in my opinion) was unique about them when they were starting out:

Payment by email. The email was the common denominator for payments and also served as the unique identifier (this was especially true, because to find the unique identifier worldwide, email was it!) Obvious yes, but brilliant at the time to grasp it!
Account Association: PayPal was not trying to sell you their own currency or coins, they simply juxtaposed of what you were already used to, your bank account & credit card.
Not having to Share - Security: You did not have to share your bank account / credit card information with vendors/merchants whom you did not trust. Just share them with PayPal and that was it. No one at the time had thought of this. Everyone was busy implementing credit-card acceptance forms on their websites.
Verification: The small-value deposit was just brilliant. It was never used before to verify a bank account (to the best of my knowledge). Then using the user's own credit card to make that deposit. Again, brilliant, the transaction essentially became a Zero-sum game for PayPal. Then using the same transaction on the credit card to verify the card itself, again - brilliant!
Simplicity: Go through the registration and verification process once, and then pay each other seamlessly! No one at the time offered this.
Grow with the Web: PayPal grew with the web. As the Internet got more and more mainstream, so did payments and PayPal was considered (and in some circumstances) still considered the de facto standard of paying when it comes to the Internet.

Like I cited, everyone was busy trying to get their online credit acceptance approved by the few payment service providers at the time, PayPal was busy enabling payments for all.

How can an international money-transfer business effectively use Ripple?

Sat, 08 Nov 2014 18:50:46 +0000

Faisal KhanAnswered Nov 8, 2014

Ripple (payment network) is slated (in my opinion) to gain traction for financial transactions.

Two things are important for it to be useful for remittances:

Gateways in the Sending & Receiving countries (the more the merrier)
Market Makers to ensure there is enough liquidity.

Once these two issues have been solved (or populated), then its just a matter of driving traffic and users to use Ripple for cross-border transactions.

How far behind is Singapore’s telecom infrastructure compared with countries that have more advanced systems?

Sat, 08 Nov 2014 18:50:45 +0000

Faisal KhanAnswered Nov 8, 2014

You're kidding right? You do know Singapore probably has one of the world's most advance telecommunication infrastructure. Just like Qantas excel and is known for its amazing safety record and maintenance on its aircrafts, SingTel is the same.

Singapore's telecommunication infrastructure is on of the most advanced in the world. Others have to play catch up.

How is the maximum number of virtual machines a computer can run determined?

Sat, 08 Nov 2014 18:50:43 +0000

Faisal KhanAnswered Nov 8, 2014

Nope. You can run as many as you want. They each would require some CPU power and some memory. For example if you have a Quad Core 3GHz processor you can divide it as 4 processor (physical) x 1GHz x 3 = 12 Virtual Machines of 1GHz processors. If you halve this processing lower you have 24 virtual machines. Remember your slicing must be cognizant of the OS requirement to run successfully.

If I sell Bitcoin online on a recurring basis (for example using PayPal or Stripe), do I need to register as a money services business?

Sat, 08 Nov 2014 17:53:16 +0000

Faisal KhanAnswered Nov 8, 2014

Insofar as I can tell, the UK has not yet started licensing Bitcoin businesses, i.e. if you are selling Bitcoins for Fiat, you do not need to be licensed (yet!). You may require licensing if you are coming under the umbrella of the Payment Institution license clauses, but from the looks of it - the answer seems no.

FCA (Financial Conduct Authority) is the correct body to go to for advice regarding all matters pertaining to licensing. They are the ones who actually tell you if you need to be licensed or not.

FCA's website is Home - Financial Conduct Authority

You might also want to query through Project Innovate at FCA. Project Innovate is...

Through our Innovation Hub we want new and established businesses, which can include both regulated and non-regulated businesses, to be able to introduce innovative financial products and services to the market.

Source: Innovator businesses: Project Innovate (Home Page for Project Innovate).

With regards to HMRC, they are responsible for taxation on the sales. The HMRC ruling was given in March of this year and its announcement page can be accessed here: Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies

The ruling itself can be read at: Revenue and Customs Brief 9 (2014): Bitcoin and other cryptocurrencies

In short, the UK government has taken a wait-and-see approach. So you ought to be alright. Needless to say, write to them. Clearly! People cannot assume your backstory. Please do not take your frustration out on the email. FCA is a very helpful body.

What are PayPal’s main strategic objectives?

Sat, 08 Nov 2014 17:53:14 +0000

Faisal KhanAnswered Nov 8, 2014

Summary (tl;dr)

To become dual entity: PayPal is already a Licensed Money Transmitter and it will eventually become Licensed Bank in the coming years (with Federal Charter as issued by the OCC - Office of the Comptroller of the Currency).

The Long Read...

This is a great question and a tough one to answer without any insider information. I'll give it a shot nonetheless!

One of the questions most frequently asked is What is PayPal? not so much for the wallet angle, but the company on the whole.

Is it a payment systems operator?
It is a payment network?
Is it a bank?
Is it a payment service provider?
Is it a payment gateway?
Is it an issuer?
Is it a Payments Facilitator?
Is it a Depository Institution?
Is it an FX Broker?
Is it a Credit issuing Institution?
Is it a Money Transfer Company?
Is it a Money Services Business?
Is it a Financial Services Company?

The simple answer is - it is everything listed above. PayPal's operations are huge. This comes from its progressive growth and its association with Ebay.

Some key points regarding PayPal today:

PayPal operates in many territories & countries (202 at last count). It has a 47 US Money Transmitter Licenses and also for District of Columbia, Puerto Rico and US Virgin Islands (See PayPal State Licenses).

PayPal Europe S.à r.l. & Cie, S.C.A., is a Luxembourg bank licensed by the Commission de surveillance du secteur financier (Source: Luxembourg for Business - Proud to promote ICT)
PayPal has the equivalent of a European Payments Institution license (that is what the Luxembourg bank license allows it to do)
PayPal is a licensed in Australia as a Restricted Authorized Deposit Taking Institution (See: List of Authorised Deposit-taking Institutions)
It has procured the necessary licensure in all the other countries and territories it is operating in. Barring the money-transfer giants like Western Union and MoneyGram and the Card Schemes (VISA, MasterCard), PayPal is the only other institution that has amassed all MSB license and/or a valid operating business license in the places it is doing business.

The five change factors that PayPal is going after are:

eCommerce
Choice
Mobile Commerce
New Form Factors
The Digital Wallet.

The key drivers for the future for PayPal hinges on many factors, but the important ones are:

Flexibility
Integration with Point-of-Sales
Reach

PayPal it seems is doing a bit of everything. In some instances the bit of everything may be small in scale (volume/value) when compared to other incumbents, in some instances, PayPal is the incumbent.

My bet is PayPal will aim at acquiring a Bank, possibly a credit union, etc. and then turn it around and obtain Federal Charter from OCC for nationwide banking.

Banking provides PayPal with access to deposits and utilization of money, that otherwise it cannot touch/invest, due to the current money transmission laws. If you are looking at a parallel example, look no further than GreenDot. Many people may not realize, but GreenDot is both a Bank and a Money Transmitter License holder. (See disclaimer statement screenshot on Greendot website).

Here is a snapshot on one of the States where GreenDot does have a Money Transmitter License (Texas):

Each has its advantages. For example a Federal Banking license by OCC, exempts the bank from obtaining Money Transmitter Licenses. The funds/money (or unused credit) under the Banking Umbrella can be utilized and invest further, a restriction that does not apply to banks but does apply to money transmitter license holders (like PayPal has at present).

Before I conclude, in the paragraphs ahead, it is very interesting to note, that Ebay does not have any money transmitter licenses.

Search for Ebay in Texas for MSB Licenses yields nothing...

Same scenario in California, where Ebay does not have an MSB.

The Independent PayPal

The independent PayPal would definitely seek to become a Bank in the US. It is sitting on access to approximately US$ 20 Billion in unused credit (last quarterly filing by Ebay, numbers specific to PayPal (Source: Note 8 - Commitment & Contingencies - eBay Inc. - Quarterly Report)

Also from the SEC filing, the following paragraphs are of prime importance - it very clearly outlines what areas of business PayPal is (via reference to the threats it perceives from the market):

PayPal
The markets for PayPal’s products and services are intensely competitive and are subject to rapid technological change, including but not limited to: mobile payments, electronic funds transfer networks allowing Internet access, cross-border access to payment networks, creation of new payment networks and new technologies for enabling merchants, both online and offline, to process payments more simply. In addition, the payments industry is rapidly changing, highly innovative and increasingly subject to regulatory scrutiny, which may negatively affect the competitive landscape. PayPal faces competition and potential competition from existing online, mobile and offline payment methods, including, among others:

providers of traditional payment methods, particularly credit and debit cards, checks, money orders and Automated Clearing House transactions (these providers are primarily well-established banks);
providers of “digital wallets” which offer customers the ability to pay online and/or on mobile devices, including with mobile applications, through a variety of payment methods, including Visa’s Online Shopping Made Easier by Visa Checkout | Visa USA, MasterCard’s MasterPass, American Express’s Serve, Google Wallet and the Merchant Customer Exchange (MCX) initiative supported by Walmart, Target and other major U.S. retailers;
providers of mobile payments solutions that use Visa, American Express and Mastercard's tokenized card data approaches and Near Fields Communication (NFC) functionality, such as Apple's mobile Apple Pay, and Google's Android solution, that uses Host Based Card Emulation (HCE) functionality to eliminate the need for a physical NFC card in the device;
payment-card processors that offer their services to merchants, including Chase Paymentech, First Data, Bank of America Merchant Services, Elavon, Vantiv, WorldPay, Barclays Merchant Services, Global Payments, Inc., Stripe and Balanced, and payment gateways, including CyberSource and Home - Authorize.Net (both owned by Visa), SimplifyCommerce by MasterCard and First Data;
Amazon Payments, which offers merchants the ability to accept payment card- and bank-funded payments from Amazon’s base of online and mobile customers on the merchant’s own website. Amazon has recently launched a new payment service for online merchants under the name Log in and Pay with Amazon;
providers of "person-to-person" payments, that facilitate individuals sending money with an email address, such as Facebook messaging payments;
providers of mobile payments, including Softcard in the U.S., Buyster in France, Mpass in Germany, Paym in the U.K., Boku and Crandy, many of which are owned by or supported by major mobile carriers; and
providers of card readers for mobile devices and of other new point of sale and multi-channel technologies, including Square (which has also begun to offer a marketplace service to sellers), Chase Paymentech, Bank of America, AT&T (in association with Vantiv), Capital One, Shopify, iZettle, WorldPay, Payleven, Groupon, SumUp and others.

PayPal also faces competition and potential competition from:

money remitters such as MoneyGram, Western Union, Global Payments, Inc., Xoom and Euronet;
bill payment services, including CheckFree, a subsidiary of Fiserv;
services that provide online merchants the ability to offer their customers the option of paying for purchases from their bank account or paying on credit, including Western Union’s WU Pay, Dwolla, Acculynk, TeleCheck (a subsidiary of First Data), iDEAL in the Netherlands, Klarna in several European countries with announced plans to enter the U.S. market, Sofortueberweisung (which recently merged with Klarna) in Germany, PayLib in France and the MyBank pan-European initiative;
issuers of stored value targeted at online payments, including NetSpend, Green Dot, PayNearMe, UKash and Qiwi in Russia;
other international online payment-services providers such as AliPay, the PayU group of companies (owned by Naspers), PagSeguro and Bcash (owned by Naspers);
other providers of online account-based payments, such as Skrill, ClickandBuy (owned by Deutsche Telekom), Barclays Pingit in the U.K., Kwixo in France and Paymate and Visa PayClick in Australia;
payment services targeting users of social networks and online gaming, often through billing to the consumer’s mobile phone account, including PlaySpan (owned by Visa), Boku, Bango and Payfone;
payment services enabling banks to offer their online banking customers the ability to send and receive payments through their bank account, including PopMoney from Fiserv, which has a collaboration agreement with Visa, and ClearXchange (a joint venture among Wells Fargo, Bank of America and JP Morgan Chase);
online shopping services that provide special offers linked to a specific payment provider, such as Visa’s RightCliq, MasterCard MarketPlace, TrialPay and Tapjoy;
services such as Coinbase and Bitpay that help merchants accept and manage virtual currencies such as Bitcoin; and
cash.

Some of these competitors have longer operating histories, significantly greater financial, technical, marketing, customer service and other resources, greater brand recognition or a larger base of customers than PayPal, and may be also be able to leverage other affiliated businesses for competitive advantage or to attempt to prohibit or prevent competition from PayPal. PayPal’s competitors may be able to innovate and respond to new or emerging technologies and changes in customer requirements faster and more effectively than PayPal. Some of these competitors may also be subject to less burdensome licensing, anti-money laundering, counter-terrorist financing and other regulatory requirements than PayPal, which is subject to additional regulations based on, among other factors, its licensure as a bank in Luxembourg. They may devote greater resources to the development, promotion and sale of products and services than PayPal, and they may offer lower prices. For example, Google previously has offered free payments processing on transactions in amounts proportionate to certain advertising spending with Google. We also expect new entrants to offer competitive products and services. In addition, some merchants provide such services to themselves. Competing services tied to established banks and other financial institutions may offer greater liquidity and engender greater consumer confidence in the safety and efficacy of their services than PayPal. In addition, in certain countries, such as Germany, Netherlands and Australia, electronic funds transfer is a leading method of payment for both online and offline transactions. In the U.K., the Payments Council has announced that mobile payments between bank accounts will be broadly available beginning in 2014. As in the U.S., established banks and other financial institutions that do not currently offer online payments could quickly and easily develop such a service.

The principal competitive factors for PayPal include the following:

ability to attract, retain and engage both buyers and sellers with relatively low marketing expense;
ability to show that sellers will achieve incremental sales by offering PayPal;
security of transactions and the ability for buyers to use PayPal without sharing their financial information with the seller;
low fees and simplicity of fee structure;
ability to develop services across multiple commerce channels, including mobile payments and payments at the retail point of sale;
trust in PayPal’s dispute resolution and buyer and seller protection programs;
customer service; and
brand recognition.

With respect to our online and mobile competition, additional competitive factors include:

website and mobile platform and application onboarding, ease-of-use and accessibility;
system reliability;
data security;
ease and quality of integration into third-party mobile applications; and
quality of developer tools such as our application programming interfaces and software development kits.

Some of PayPal’s competitors, such as Wells Fargo, First Data, American Express, WorldPay (The Royal Bank of Scotland) and Synchrony Financial (formerly, GE Capital Retail Bank), also provide processing services to PayPal. If PayPal were to seek to expand the financial products that it offers, either alone or through a commercial alliance or an acquisition, these processing relationships could be negatively affected, or these competitors and other processors could make it more difficult for PayPal to deliver its services.

Source: Page 81/82: eBay Inc. - Quarterly Report

Conclusion

PayPal is not a singular product or services company anymore. It is a global player, with vested payments and banking related services interest in multiple areas. From wallets, to bitcoins, to money-transfer services, to banking to issuing, to acquiring, etc. PayPal is doing all these things in one form or the other.

In order for PayPal to compete in the global marketplace of financial services for payments, acquiring, issuance and processing, it needs to cement itself in its primary market as an established bank, and this is the path (in my opinion) that PayPal will most likely follow.

PayPal's cost of financial management via the current banking partners it has is quite high, not to mention the banks are also privy to the deep transaction analytics of payments that are being processed through them. PayPal would like to take this away from the banks, who also are in some way, shape or form, becoming competitors.

If PayPal is able to acquire a license (which would take about two years), they would position themselves much better from lower costs of processing and escrowing the transactions on behalf of their customers as well as be able to compete head-on with what PayPal has most correctly identified their true threats, i.e. the very banks PayPal is working with.

Source for MSB Searches:

California: California Department of Business Oversight
Texas: Texas Department of Banking

How do ATMs and internet/mobile banking systems enable bill payments and mobile top-ups for telecom providers?

Sat, 08 Nov 2014 17:53:13 +0000

Faisal KhanAnswered Nov 8, 2014

This is done through the financial middleware solutions that are typically installed in a bank. The middleware solution is essentially a channel management controller that allows for a bank to address present and upcoming electronic Banking and/or payment initiatives.

The flow of the layers within such a middleware can vary, but it is typically goes something like this:

The very top layer is the access layer, from which a client engages, and the very bottom layer is the connection layer that connects to various channels (for example, in your Question's case, it would be the Telco Billing & Payments API).

The authorization and confirmation of funds would be taken from the Bank Host, and checked against the HSM (if required). Once confirmed, it will be routed through and pushed to the Telco API for loading of funds.

Both the Telco and the Bank maintain ledgers to do net deferred settlement on agreed intervals.

Do the British Virgin Islands use an ACH system?

Thu, 06 Nov 2014 18:46:28 +0000

Faisal KhanAnswered Nov 6, 2014

Essentially Yes.

Source:

World Payments Guide
World Payments Guide

At what exchange rates are international wire transfers executed?

Thu, 06 Nov 2014 18:46:27 +0000

Faisal KhanAnswered Nov 6, 2014

It all depends. Typically for a wire transfer from one currency into another, the recipient country/bank would determine the exchange rate. This rate (with a bit of a safety attached to it), would then be quoted to you by the sending bank.

This is usually the case. In some instances, the exchange rate is simply not quoted to you, because the transfer was a US Dollar to US Dollar transfer, but the settlement was one where the conversion occurs, and in this case, the bank will then assign the exchange rate.

From US, any transfers done overseas, the Dodd-Frank Act (Section 1073) applies, which basically states that full-disclosure must be made prior to the transfer for remittances, including end (net) charges and exchange rate. There is debate if this applies to commercial transfers or large remittance transfers.

A Wire Transfer in itself does not have any exchange rate component into it. A wire transfer itself is a single currency movement. It is either before or after the wire transfer has been done that the exchange and conversion happens.

What does a startup CTO actually do and own responsibility for?

Thu, 06 Nov 2014 17:53:11 +0000

Faisal KhanAnswered Nov 6, 2014

Varies from start-up to start-up, but from what I have seen, the person is the Head of Technology.

They are technically inclined/proficient.

They are tasked to do product / service development (from a technical point of view, and oversee it as well). This could mean hands on coding (if required), technical integration, systems integration, server/network management, etc.

A CTO is to whom a CEO usually goes to and informs him/her what needs to be done to get clients or go to market, and the CTO then knows what needs to be done at the back-office to execute that strategy.

CTOs keep the engines running.

In payments, what does the term “rails” mean?

Wed, 05 Nov 2014 17:53:10 +0000

Faisal KhanAnswered Nov 5, 2014

In the payments world when we cite Rails we are referring to the technology and network stack. Another way of thinking about it is, encapsulating payment information and using the VISA network or rails to transport the encapsulated information.

So when we says VISA rails, we are implying the payment is being facilitated by the VISA network, much alike the railways' rail network.

Which RBI rules and regulations does PayPal have to follow?

Wed, 05 Nov 2014 17:53:08 +0000

Faisal KhanAnswered Nov 5, 2014

Pranav Zota pretty much nails it. The wallet regulation is covered by the Payment & Settlement Act of 2007 and a few clauses from the Payment and Settlement Systems Regulations 2008.

What are virtual credit cards?

Wed, 05 Nov 2014 17:53:07 +0000

Faisal KhanAnswered Nov 5, 2014

Regular credit cards, except no plastic. A Virtual Credit Card, comes from VCT (Virtual Card Technology) and is essentially the same information you put up on a web-form online for payment - that is what a Virtual Credit Card is.

It's the Card Type (Visa, MasterCard, etc.)
Card Holder's Name
Issue Date
Expiry Date
CVV Code
Card Number
And is associated to your Billing Address

Virtual Cards can be one-time issued, or time-limited. Virtual cards are derived from CNP Data (Card Not Present) idea.

How can a money-transfer startup scale and enter additional countries?

Tue, 04 Nov 2014 18:44:31 +0000

Faisal KhanAnswered Nov 4, 2014

You can do this in many ways (depending on how much time and money you have on your hands):

You can start writing to the specific department that deals with Inward Remittances in each Central Bank of the country you are interested working with. Ask them to provide you with working banks to tie-up with. The downside is, you may end up with a bank, MSB, etc. that may not be an ideal partner.
You can visit various Money Transfer related conferences / trade shows in the region
You can write to the Commercial Counsellor at the Embassy in your country, for the country you want to work in.
You can hire/work with specialised companies who do this for a living, provide remittance tie-ups and handle the entire process as a turn-key project.
You can write to the financial regulator and obtain a list of all qualified (read: licensed) MSBs, Banks, etc. who are authorised to handle incoming foreign exchange money transfers. The downside is the list itself (who do you trust? who is a big player? who is the right player).
You can start by advertising on Google in the country of interest

Why is PayPal classified as a stored-value facility in Singapore if it doesn’t require approval from the Monetary Authority of Singapore?

Tue, 04 Nov 2014 17:53:05 +0000

Faisal KhanAnswered Nov 4, 2014

In Singapore, the MAS (Monetary Authority of Singapore) has given an exemption to SVF (Stored Value Facility) from the Payment Systems (Oversight) Act when the stored value outstanding are under a certain threshold. Currently that bar is set at $30 Million. MAS approval is required for the operator when the SVF exceeds the $30 Million mark, and hence changing its status from SVF to WA-SVF (Widely Accepted Stored Value Facility).

If you're under the limit, you are not required to get approval.

How can retailers who import goods from China compete with sellers based in China?

Mon, 03 Nov 2014 18:43:27 +0000

Faisal KhanAnswered Nov 3, 2014

Those who sell directly from China, do so on a wholesale level, i.e. they mostly do not offer individual (or small quantities). It just does not make any fiscal sense for them to do so, as shipping and handling cost for say a pair of jeans you may order from China, despite its savings, will be enormous and not worth the buy.

People who import from China, do so in volume and usually prefer the cheapest methodology for shipping, i.e. via Ship, verses air-freight.

The per unit cost of importers is a whole lot more cheaper and hence the merchantability is more attractive.

Which companies provide ACH payment services?

Mon, 03 Nov 2014 17:53:04 +0000

Faisal KhanAnswered Nov 3, 2014

Not sure if this is the answer you are looking for. There isn't anything that I know of, that is referred to ACH-to-ACH or back-to-back ACH.

An ACH function can initiate a singular function. Either an ACH debit, or an ACH credit. You cannot have an ACH debit and then ACH credit to another account, using the same ACH file submission. For this you would need to hack the ACH file submission process as follows:

Day: 1 ACH Pull Request
Day: 2 ACH Funds Debited (here you get the confirmation of funds being available)
Day: 3 ACH Funds Credited --- this is where you initiate the secondary ACH Request

Day 1: ACH Push Request
Day 2: ACH Funds Debited from your Account
Day 3: ACH Funds Credited to your destined Account.

In simpler words, you would have to overlap files, which is usually not a good idea if you encounter a 4-day settlement process or an NSF or reversal call. It has cascaded effects.

Your best option is to have 2 ACH transactions that do not overlap. In between you want to do a check to ensure the funds are available before you submit the second file.

In the U.S., which common payment, wire, banking, card, or check problems should technology realistically eliminate within a year?

Mon, 03 Nov 2014 17:53:03 +0000

Faisal KhanAnswered Nov 3, 2014

Checks are definitely something people are using less and less. Though they would not be eliminated all together, their usage is on a steep decline. Businesses even now prefer to use ACH or other electronic means of payments.

Many small and medium businesses still rely on checks, but that too is changing. Asking everyone to go electronic when it comes to payments, does take its time.

ACH would be another candidate, but because of the inertia involved, I don't think it will be 1 year or even 5 years before ACH is eliminated and replaced with a real-time payment system.

What is payment card aggregation and how does the model operate?

Sat, 01 Nov 2014 19:12:55 +0000

Faisal KhanAnswered Nov 1, 2014

Payment card aggregation are essentially PSPs who process payments for merchants who otherwise don't have the traditional acquiring relation with the card issuer. Such traditional acquiring methods are the face-to-face (physical) card acceptance, Mail Order/Telephone Order, etc.

The original card aggregation method consisted of e-commerce payments only, now with the ever expanding horizon of what an e-payment is, card issuers have expanded that definition to include all other methods of accepting card payments (beyond the traditional website platform). Think Square like devices.

With a large enough model, payment aggregators can get better wholesale acquiring rates from card issuers. How risk models are defined on the baseline rules and funds disbursement, that is left to the payment aggregator to do so, so they can have more risk and financial control. A good example of a payment aggregator would be Braintree (company).

It would be noteworthy to mention, that payment aggregators can work with multiple acquirers to be able to offer the whole spectrum of card (and bank) payment solutions to their merchants.

Their method is simple enough. Wholesale pricing model, that is then individually retailed to merchants (with ease of access, compliance, risk management, support, integration, etc.)

However, this must not be confused with micro-payments which in itself is a whole different set of challenges that each PSP/Acquirer is trying to address.

Virtual Currency: What is the connection between Second Life’s currency and Bitcoin?

Sun, 12 Oct 2014 18:53:44 +0000

Faisal KhanAnswered Oct 12, 2014

Both are Virtual (for the Internet).

If you are specifically speaking about Linden Dollars and Bitcoins, there are then considerable differences. Linden Dollars are a closed loop currency that can be used only in Second Life. Bitcoins on the other hand are not. Linden Dollars are not capped by any supply limits.

If you are referring to the similarity of Second Life and Bitcoins, I'm not sure what that would be except both these entities are based on the Internet, with the latter being a protocol and one of the first application adoption of it being currency.

Who is responsible for creating money within a country, and how frequently does this occur?

Sun, 12 Oct 2014 18:53:42 +0000

Faisal KhanAnswered Oct 12, 2014

Its mostly the Central Banks. Government may or may not have a say in this (depending on which country in question we are talking about). Companies don't have any say in the creation of money directly as a policy. Maybe via lobbying (and that is a stretch too).

Universally, governments borrow money from the Central Banks. If the borrowing demand increases, then to ensure adequate money supply, the Central Bank will have to create more money and inject it into the existing money supply, thereby reducing the buying power of the prevailing currency.

Which altcoin is best suited for sending remittances to family back home?

Sun, 12 Oct 2014 17:51:59 +0000

Faisal KhanAnswered Oct 12, 2014

You can pretty much use any altcoin to send money across borders. That is really not the issue. The problem you will face is loading/off-loading of funds from the Altcoin.

Sender: For a person to send money, they would need to find an easy (read: economical) way to buy altcoins.

Receiver: For a person to receive the money, they would need to find a smooth way of cashing out from altcoins to the native fiat.

It is the problem on the latter that is more of an issue than there are solutions for.

What are the best categories of online payment methods for businesses or consumers?

Sun, 12 Oct 2014 17:51:57 +0000

Faisal KhanAnswered Oct 12, 2014

Quite frankly, if you're okay with a payment method that prevents fraud 80% of the time, this means you are looking at a 20% fraud rate. That rate is simply unheard of in the industry and is a killer rate.

You should be on the lookout for payment systems where the fraud rate can be controlled down to 1% to 2% (at best). Most companies strive to keep their fraud rates under 1% else they will most likely get a warning from their processor/bank, etc.

Fraud will be ever-present. It cannot go down to zero, even in the physical world, with all the ID checks, in-person reviews, etc. fraud still happens and will continue to happen. For there-in lies a criminal in bed, starring at the ceiling thinking how to fraud the system. How to make a quick buck. The imaginative powers of such a person cannot be match. He/she will dwell on this problem for weeks --- finding a way to penetrate through the rulesets. The payment systems world tries to keep up with this pace.

Depending on where you are in the world, each payment system has its own pros and cons. So there isn't one answer per se.

Fraud & Risk mitigation is what a lot of payment system invest in and continually keep tinkering with it - so as to minimize risk.

Such fraud and risk mitigation techniques are implemented by the payment system and the merchant themselves. You need to figure out how it is you can reduce fraud on the products/services you are selling without cart abandonment.

How can someone transfer money from Nigeria to Pakistan?

Sun, 12 Oct 2014 17:51:55 +0000

Faisal KhanAnswered Oct 12, 2014

Bank transfers work well, in the event you do not want to go that route, Western Union and MoneyGram serve equally well.

Who moved 195,000 BTC (about $147M at the time) on November 22, 2013?

Sat, 11 Oct 2014 18:52:38 +0000

Faisal KhanAnswered Oct 11, 2014

You'll probably never know (that's how Bitcoin in itself was designed to be). Most likely guess, someone taking a serious position in Bitcoins, think a consortium of private investors, etc. (perhaps even a ballsy bank).

If you were to launch a payments startup one year from now, what kind of business would you build?

Sat, 11 Oct 2014 18:52:37 +0000

Faisal KhanAnswered Oct 11, 2014

Personally, for myself, the most lucrative market is in the developing world, where margins are decent and innovation is welcomed (though not always).

A great area to start in would be a localized (e)Wallet. A card with which you can connect numerous financial instruments (bank accounts, mobile, credit/debit) and then build a network & switch around this idea that the eWallet can be used everywhere (physically, electronically, online/offline, mobile, etc.) This is a system that has perimterised itself from the large Schemes (like Visa, Mastercard, etc.) and/or other large interbank networks costly payment system operators.

The whole point is to have something that is bank and mobile carrier agnostic. Build a product that touches all facets of society at the grassroots level and you could possibly have a winner.

Whilst the backend is complicated, the concept is simple, a card you can buy anywhere just like the phone card, and then you immediately have access to a whole wealth of services, POS, ATM, Bank, Mobile, P2P Payments, Bill Payment, Remittance Payouts, Loading/Off-loading of cash at every possible store, etc.

I know of 3 countries where such an attempt is being sketched on the drawing board. I hope something like this takes off, because the market can sure use it.

What is the best way to transition from investment banking into the tech industry?

Sat, 11 Oct 2014 17:51:53 +0000

Faisal KhanAnswered Oct 11, 2014

Join a fintech startup.

I make about $700/month profit after four years—what should I do next to grow?

Fri, 10 Oct 2014 17:51:52 +0000

Faisal KhanAnswered Oct 10, 2014

Aim to double it and sustain it....

Is there a directory of small investment businesses in Pakistan, and who are they?

Thu, 09 Oct 2014 17:51:50 +0000

Faisal KhanAnswered Oct 9, 2014

You may want to check with SMEDA - they might have it.

Small and Medium Enterprises Development Authority

Has anyone tried launching prepaid shopping cards in Pakistan that work across multiple online stores?

Thu, 09 Oct 2014 17:51:48 +0000

Faisal KhanAnswered Oct 9, 2014

Yes, and many have been stopped. Open-loop store-value cards cannot be sold at retail locations without a license from State Bank of Pakistan.

Since ACH and card payments can be reversed or charged back, is there any electronic payment method in the U.S. that is truly irreversible?

Thu, 09 Oct 2014 17:51:47 +0000

Faisal KhanAnswered Oct 9, 2014

An irrevocable payment guarantee / bond being cashed out is a one-way transaction. Cannot be reversed.

What are good resources for learning Bitcoin, and why are they recommended?

Thu, 09 Oct 2014 17:51:45 +0000

Faisal KhanAnswered Oct 9, 2014

Honestly... YouTube!

Tons of resources there.

bitcoin andreas antonopoulos - YouTube

Why don’t Pakistani online businesses accept Bitcoin payments?

Thu, 09 Oct 2014 17:51:43 +0000

Faisal KhanAnswered Oct 9, 2014

Assuming they do, so how do you solve the following issue:

Where will your Buyers get/obtain Bitcoins from easily to spend on a local business?
How will the business that has just accepted Bitcoins, cash them out to local Rupees? Who is proving the liquidity for USD-Rs? with an average size split of 2.0% on FX, this will result in probably a 5% transaction cost.

See where the problem lies...

What is the difference between a pay-through account and a correspondent account?

Wed, 08 Oct 2014 18:50:42 +0000

Faisal KhanAnswered Oct 8, 2014

Pay-through is a direct association between two banks, without the need of going through an intermediary.

Correspondent account is the intermediary account that connects the two banks to make a connection.

See this answer for a more detailed understanding of a wire transfer: Faisal Khan's answer to What exactly happens when a wire transfer is made? How does the money travel from the sender's account to the recipient's account? How much time does each step take? What regulatory measures are in place, if any?

What distinguishes banking products from banking services?

Wed, 08 Oct 2014 18:50:40 +0000

Faisal KhanAnswered Oct 8, 2014

Banking services use banking products and/or products and services of other banks.

Which companies provide reputable high-risk merchant accounts?

Wed, 08 Oct 2014 18:50:39 +0000

Faisal KhanAnswered Oct 8, 2014

Honestly, very difficult to answer straight away. The thing about high-risk payment service providers (PSPs) is that so many of them are operating masked as PSPs when in actuality they are just resellers and/or affiliates.

Each high-risk PSP operates in a few vertical niches (think adult sites, gambling, games, offshore, etc.) If you are associated with a specific industry (say gambling) your best bet is to browse through the gambling forums and see what the industry pundits are recommending. Any or all recommendations you will get on Quora would be generic and/or those with one might be affiliated with.

Online Payments: How can NGOs in India accept donations from abroad?

Wed, 08 Oct 2014 18:50:37 +0000

Faisal KhanAnswered Oct 8, 2014

You can always use one of the Indian online payment gateways. They might even lower their fees for the NGO in view of their CSR.

Refer to the following answer for a list of Indian Payment Gateways: Faisal Khan's answer to Are there any Payment Service Providers (PSP) in India? What will be required for one to become a PSP in India?

If you sell B2B services on credit without established terms, is it reasonable to request a formal 12-month cash flow projection?

Wed, 08 Oct 2014 17:51:42 +0000

Faisal KhanAnswered Oct 8, 2014

If you're extending credit, you have all the right to ask for revenue projections for the next 12 months (for example). By extending credit you are underwriting risk for them, you need to know of their financial health and their ability to pay you back. So, it is very okay to ask for projections.

What would happen if everyone’s bank balance globally increased by $1 million USD instantly—would this be beneficial, dangerous, or both?

Wed, 08 Oct 2014 17:51:40 +0000

Faisal KhanAnswered Oct 8, 2014

It essentially does nothing, since you've increased wealth all around by the same amount (assuming that everyone those who are banked and unbanked have access to this new US$ 1 Million).

During the volatile period, hyper-inflation would set in, as the price of products, services, commodities, etc. are not reflective of the increase in wealth.

Things would eventually stabilize (dampen out), and the can of coke would probably go from $0.45 to $45 (*shrugs* - who knows?)

There would be a massive buying spree, and shopkeepers and manufacturers would scramble to readjust their pricing.

One would expect the net effect to be zero over time.

In the U.S., are credit cards essentially necessary to live a normal life compared with debit cards or cash?

Wed, 08 Oct 2014 17:51:38 +0000

Faisal KhanAnswered Oct 8, 2014

Not really. I know a lot of people who have absolutely shunned credit cards, and live in the US only on cheques and cash, though buying online, etc. can be difficult.

Most people have resorted to adding a debit card for such purposes. Credit cards are not necessary, but debit cards can ease the difficulties.

Having said this millions of people in the US live without have access to banking.

Which U.S. bank is best for a startup offering money transmission services like PayPal?

Mon, 06 Oct 2014 17:51:36 +0000

Faisal KhanAnswered Oct 6, 2014

Not clear if you already have a money transmitter license?

In the event you do, finding a bank to work with you is going to be tough, once you declare you are a money transmitter. However, if you do find one, then all you need to do is to find an ACH processor for yourself to push payments out. If you're looking at pulling payments, then this is going to be tough, especially since you're an MSB.

If you don't have an MSB license and are looking at a bank to provide you with one (for MTL coverage), then your only option is to work with nationwide chartered banks, as they are exempt from money transmitter licenses.

In either case, you will be hard pressed to find a banking relationship. For ACH, there would be transaction limits placed and they would slowly ramp up your transactions volume over the period. For ACH Pull, high-volume processors have a tough time.

If we don’t hold U.S. MSB coverage across most states or an EU EMI license, which partner company is best to work with to offer a digital wallet or micropayments solution?

Mon, 06 Oct 2014 17:51:35 +0000

Faisal KhanAnswered Oct 6, 2014

This is no easy feat.

In both the cases, either in US or Europe you would need someone with a Money Transmitter Licenses or PI license respectively (more on this later)

You would also most likely need access to banking services. No MSB/PI will provide you access to their banking relationships. Commingling of funds (with other clients) is not allowed, so the MSB/PI will most likely ask you to procure a bank account for yourself and the MSB/PI. This may seem trivial, but the very minute you make the declaration that you are a money transmitter, all bets are off, and most banks will refuse to do business with you.

This is a prevalent issue in many countries (US, UK, Canada, parts of Europe, and now in Australia), etc. --- finding a bank to work with you, is going to be next to impossible.

Coming to the MSB/PI part, you cannot just partner up with a company and obtain (or rent/lease) their licenses. This would not be permitted nor would you get an approval fro the State regulator when you are being on-boarded as an Agent.

The MSB/PI you work with, must fundamentally connect in a very strong sense to your business and business model. The two entities you and the license holder have to be literally inseparable as a business, for the State Regulator to grant you Agent status.

This means, you will have to find an MSB/PI that provides the core functionality of what you are trying to achieve. There isn't a specific company per se you can walk up to - that would indicate the company is open to leasing its licenses for business.

Your best option is to talk and mingle around to find out what names prop up and how to connect with them so that they will listen to your case.

Before this, you must thoroughly work your banking circle to find out a bank that would allow you to manage a bank account with sub-accounts and would provide you with some real-time API and/or service to move money amongst the accounts, etc.

Does the size or scale of a business impact whether it is considered a money transmitter?

Mon, 06 Oct 2014 17:51:33 +0000

Faisal KhanAnswered Oct 6, 2014

Answering with respect to the points listed in your Question details:

(1). Grey area, but yes, you're leaning towards a money transmitter. Provided you do more of these transactions as a business and exceed a specific aggregate US Dollar value (say US$ 10,000 per month), then you're pretty much a money transmitter, as this would be escrow service and a marketplace combined. For which money transmitter license is required. Why? Because you're touching the money!

(2) See answer above. Yes.

(3). Yes, and if you are involving Credit/Debit cards to process payments, you are now also an aggregator (i.e. a Payments Facilitator) and would need to register as such in all territories from where you are picking up merchants (read: sellers).

(4). AirBnB is sourcing clients from across state lines and hence would need to be a money transmitter (which they are). A small business can probably get away with, because the regulators are extremely busy, and may/may-not go after you. You'd probably be fined or get a cease & desist notice.

When you're talking large amount of Dollar volume, the regulator does wake up!

A real-estate agent is licensed for their work, except the money moved does not touch them (i.e. the realtor) it is a transaction between the buyer and the seller directly, or between their financial institutions. The realtor gets a cut due to the listing contract they have with the seller.

------------------
Original Answer:
No they are not, unless they are somehow engaged in money transmission activities.

What does a stronger U.S. dollar mean for the economy?

Mon, 06 Oct 2014 17:51:31 +0000

Faisal KhanAnswered Oct 6, 2014

*Imports will be cheaper, and would most likely rise (you can now buy more on a per Dollar basis).

Exports will likely suffer and possibly decline, as your products are now more expensive for other countries to import.

*assumption being you are talking about the US.

How could Facebook payments influence global remittances for businesses?

Mon, 06 Oct 2014 17:51:30 +0000

Faisal KhanAnswered Oct 6, 2014

Remittances are increasing, with or without Messenger Payments. The more players who enter the field, to be able to provide effortless (read: legal, frictionless payments) the more transactions you would see from it.

Facebook's Messenger Payments would not immediately send ripples in the remittance space, but it would be noticed. Remittances (in my opinion) would only be offered for limited number of countries.

See also: Faisal Khan's answer to What is David Marcus' game plan for Facebook and Messenger as far as Payments are concerned?

How do commercial banks insure archived or offsite-stored records and documents, and what insurance policies do they use?

Mon, 06 Oct 2014 17:51:28 +0000

Faisal KhanAnswered Oct 6, 2014

Commercial banks have a regulatory requirement to store records for a minimum of 7 years, in some cases/countries it is 10 years.

The digital archiving is not an issue. Banks have plenty of back-up locations to where they ship or backup their data. Multiple geographies, (never twice in the same city), etc.

The physical records are stored in offsite record storage facilities. These are purpose built facilities to archive records on a long-term basis. Iron Mountain for example is one of the many companies that specializes in this.

In less developed countries, off-site record storage is an issue. They simply pack 100s/1000s of documents in crates or suitcase or trunks and store them. These are prone to water and fire damage and many times are victim to the climatic conditions surrounding them.

With the cost of storage decreasing, many have opted to digitally archive their physical documents as an added insurance. In some countries, the courts and/or regulators do accept the digital archive as a substitute, whilst in many other countries, the courts and/or the regulators may not accept it.

The insurance is to have multiple copies of the same record in preferably 3 locations.

How frequently do hackers attempt to access online bank accounts, and what is the average number of daily attempts per account?

Sun, 05 Oct 2014 18:45:25 +0000

Faisal KhanAnswered Oct 5, 2014

So from South Asia / ME / South East Asia perspective, the attempts are numerous.

In the recent months, phishing attempts have skyrocketed due to the fact that Internet (or Online) banking is catching up to this part of the world.

Most of the banks are secure with 2FA (Two Factor Authentication) so even if credentials are compromised (via phishing), you would still need the 2FA time limited token to do the transaction, which the hacker would not have.

However, there are still a large number of banks that do not have the 2FA in place (for various reasons) and they are discovering the pain of not having one, the hard way (i.e. customer accounts being hacked, etc.)

From a pure hacking / intrusion point of view, I can tell you the number is small. Most of the decent sized banks have their networks audited, scanned, and monitored on a 24/7 basis. They also employ companies like TrustWave, etc. to do periodic penetration testing, vulnerability assessments, etc.

Most of my company's clients have 2FA and perimeter threat protection on. They get SQL injections and/or XSS (Cross Site Scripting) requests in a bunch, perhaps one or twice a month, which are very easily thwarted by the external perimeter protection gear. We log everything in detail, so I can tell you with some surety, that the number of attempts are low. perhaps 1 in 3 weeks. But when that 1 attack does happen, we will see anywhere from 20-200 attempts being done from the offending IP (usually the hacker is running some scripts, so hence the sudden surge).

Despite all this, there are still quite a few banking institutions that have not beefed up their infrastructure to the level it should be. For example some of the smaller banks in South Asia or SE Asia, cannot afford services offered by companies like TrustWave, etc. so they are pretty exposed. Another huge issue is code change. Once a code change is done, it must be implemented on the UAT platform, and stress tested from a security point of view, and then it goes out into production environment, where it then again must be tested. Most banks skip both the parts, citing minor code changes. This is exactly the kind of loopholes the hackers are trying to exploit.

Is launching a small ISO payment-gateway reseller business a good opportunity in a smaller European market?

Sun, 05 Oct 2014 18:45:22 +0000

Faisal KhanAnswered Oct 5, 2014

It depends. Since Eastern Europe is right next door to Europe (Central), the question you have to ask yourself is what value-add do you bring to the table?

I would assume, getting an online merchant account shouldn't be that difficult for the businesses in Eastern Europe. Do you have the e-commerce statistics for your economy? What is the market size? etc.

You could very well be a small PSP, but if there are not enough customers processing enough money through your system, you'd run out of luck pretty soon.

Whilst developing countries or for that matter Eastern European countries may seem highly attractive for a PSP, it turns out, most of the businesses already have alternative arrangements for online processing or the market is simply not big enough.

Your best bet would be to research the market in detail, do a decent sized survey (think 150-200 business across the board), and then decide if becoming a PSP in your country is worth it.

Where can I obtain detailed data on incoming remittances to countries such as India, Pakistan, and Bangladesh?

Sat, 04 Oct 2014 18:44:30 +0000

Faisal KhanAnswered Oct 4, 2014

For Bangladesh, you can get it directly from Bangladesh Bank's website (which is the central bank of Bangladesh): Page on Bb (see the box on the right hand side which will give breakdown of remittances - Country-Wise Inward Remittances).

For Pakistan, you can get it from State Bank of Pakistan's website: Economic Data (scroll down to external sector):

Home Remittances (Excel Version) - Page on Sbp
Home Remittances (Archive) - Page on Sbp
Home Remittances (Seasonally Adjusted) - State Bank of Pakistan

India's central bank, Reserve Bank of India does not publish this data, however, here are figures from our intelligence archive for 2010.

What trends will shape the future of worker remittances from the Middle East to India, Pakistan, Bangladesh, Vietnam, and the Philippines?

Sat, 04 Oct 2014 18:44:28 +0000

Faisal KhanAnswered Oct 4, 2014

For the immediate 5-7 years, the future is bright. There is no denying that. Remittances from Middle East will keep increasing at the rate of 12% to 18% per year (depending which country and which remittance corridor you are referring to).

However, long term plans might differ. Today, countries like India, Pakistan, Bangladesh, Philippines that rely on remittances to run a large portion of their economies, should be worried. Almost every Middle East country is on a path to employ more localised labor workforce rather than the temporary (imported) labor. Saudi Arabia for example, has a very large scale "Saudization" plan in effect, to reverse the flow of labor in 10-12 years. The Saudis see the flow of $30 Billion out of the country as a drain on their economy, whilst at the same time 8 million jobs are occupied by non-Saudis (it is a very valid argument that Saudis do not have the labor class right now to take these jobs, nor the vocational training in place for the natives to work in such fields). But this is changing. Slow it maybe, but the trend is slowly reversing, and speed up in the coming years.

The Saudis are not the only one cognisant of this issue. UAE, Kuwait, Qatar and Bahrain are on a path to develo their cities (just like the massive development that took place in Hong Kong and Singapore) and then have these labourers expelled (for lack of a better word).

They just need to have their workforce trained more, their key projects finished and then they can put more stringent labor visa quotas on each immigrant country to mitigate the flow much needed foreign exchange out of their economies.

These 8-9 Million labourers in Saudi Arabia for example contribute very little towards the Saudi economy, (estimates range from 10%-16% fo their work pay) hence they do not do much in terms of being a strong economic spend force as far as the Saudis are concerned.

Ten years ago, such thoughts were just that - thoughts. Today, they are no more thoughts. They are ever so slowly being ingrained into national objectives, national policies, practical projects and laws to see to it that long term 10-15 years growth prospects for these Arab nations are with their citizens and not imported labor.

As such, migrant labor providing countries like India, Pakistan, Bangladesh, etc. are looking at ways to reduce their reliance on the Remittances from Middle East alone, and look at other markets that they can develop (like UK/EU, North America, Aus/NZ, etc.)

If I’m a licensed MSB outside the U.S., can I legally operate an online service offering transfers from the U.S. to my country?

Sat, 04 Oct 2014 18:44:27 +0000

Faisal KhanAnswered Oct 4, 2014

It all depends on how you have structured yourself and how you are soliciting business from the US for purposes of Money Transfer.

You will have to register as an MSB with FinCEN (even if you are physically based out of the US). Under the new rules, this is now applicable to all MSBs engaged in money transfer business to/from the US.

Ref: FIN-2012-A001 (Foreign Located Money Service Businesses)

If you are soliciting business from the US, you most likely will come under the definition of a Money Service Business (See FinCEN's definition of an MSB: Money Services Business). Another important rule worth reading is the FinCEN Proposes Rule Relating to Money Services Businesses - International Law Office.

The MSB Registration page of FinCEN can be seen here: Money Services Business (MSB) Registration

There are exceptions to the registration - which can be seen here: Definition: Exceptions

In addition to this, you will be required to have a Money Transmitter License as per the various US states and their State Regulatory Authority/Agency for moving of money across state lines for money transmitter purposes. Currently 45 US States require this license.

The law is now very clear, if you are onboarding (soliciting) an American client, you would need a money transmitter license coverage or the licenses themselves.

If you have a system that is 100% entirely outside the US, and is open to all countries (for payments) and the processing of this money is done outside the US, and you do not market and/or actively solicit business from the US, then a money transmitter license is not required. But because you will be soliciting business from the US, chances are each state would like you to get an MT license.

One way around this is to tie up with a licensed MSB / MT and assign them as an agent. The easiest way is to associate yourself with a US bank (though this may be difficult to do, if you do not have enough transaction volume).

Another is to look at companies that can provide you such services (Money Transmitter license association) as well as MSB, but they would most likely add to the cost of doing business and for state side processing, they would like to get into the action.

In short, there is no "hack" for this or a go-around. Either you get yourself an MSB license and an MT license for each state, or you associate yourself with someone who already has it.

Remittances: How are AML/KYC responsibilities divided for online transfers from the U.S. to foreign countries?

Sat, 04 Oct 2014 18:44:26 +0000

Faisal KhanAnswered Oct 4, 2014

AML-KYC is the responsibility of both the parties.

From the US (Remitting side) your US based MSB is responsible for doing the AML and KYC checks (amongst others, think: OFAC, SAR, CTR, etc.)

On the receiving side (Beneficiary country) you would be responsible for doing the AML/KYC checks based on your own country's laws as laid out by your financial regulator.

Ideally, both transactions should do a swap check as well, to ensure the money transfer transaction does not have to be reversed unnecessarily.

This means:

Remitting Side
Will do a check on the Sender as well as the Beneficiary

Receiving Side
Will do a check on the Sender as well as the Beneficiary

Both these checks should happen prior to the transaction being executed.

Money Transfers: Can a Western Union transfer sent to one country be picked up in another?

Sat, 04 Oct 2014 18:44:24 +0000

Faisal KhanAnswered Oct 4, 2014

Yes you can, provided your identification papers match up. This is very common. Western Union excels at this, when people who are travelling abroad, lose their money or need more money, one can send them money. They receive the money whilst abroad using their passport or related identification. Western Union's system does not discriminate as to where you are.

Online Payments: Is it acceptable to use a friend’s U.S. bank account to receive funds for my startup?

Sat, 04 Oct 2014 18:44:23 +0000

Faisal KhanAnswered Oct 4, 2014

Robert Oswald pretty much nailed it. In addition to must also thing about the tax consequences your friend will have to face, reporting that additional income to IRS.

If you're looking for Stripe like payments from South Asia (even Pakistan), just wait 2 months more and it is being launched.

Why aren’t transit cards accepted for general-purpose payments?

Fri, 03 Oct 2014 18:43:26 +0000

Faisal KhanAnswered Oct 3, 2014

I believe, when you make a card that can be used in other business locales, the card essentially becomes a Store Value Card, in which case, you need an MSB (Money Service Business) license in the US.

See the definition of what an MSB is (point # 3): Money Services Business and the definition of Store Value Card can be seen here: Stored-Value Cards and Other Prepaid Products

Does PayPal sometimes hold users’ funds without clear justification?

Fri, 03 Oct 2014 18:43:24 +0000

Faisal KhanAnswered Oct 3, 2014

PayPal does not close account for no reasons. Your fears are not unwarranted, PayPal has been known in many cases to freeze or lockout accounts without any advance warning. Even this is done with a reason. Your account could have triggered some anti0money laundering rule, or some fraud detection ruleset, etc. There can be so many reasons.

However, PayPal is trying desperately to change this. With David Marcus as the new CEO, he is trying to instill a culture within PayPal that caters to such queries.

PayPal does not necessarily like pissing its clients, but it is something that the clients do (in most cases) that requires the account to be locked and a review of the account be done.

For example, and I am merely speculating here, the PayPal account used for the Conference may never have seen so much money come in, in such a short time. The account does not know you are having a conference, but the internal fraud and anti-money laundering systems, will trigger quite a few things: Velocity check triggers will go up for sure (which is an anti-money laundering check) and the PayPal account would definitely be frozen until a further manual review.

So this is normal. Users also have to be cognisant of what you can and cannot do with your PayPal account. People blindly accept the terms and conditions, but if this were your bank and you were sitting face to face, I bet you would read through the document you are about to sign, once at least. With the online acceptance of terms and conditions, people just don't read through. If nothing else, read about the Acceptable Usage Policy of the product.

They are able to get away with it, because it is their product for which you signed up. They have certain rules and regulations to go by, and they prefer that you abide by them. Any, out of the ordinary movement, and PayPal will exercise the right to block/freeze funds or suspend the account all together.

Does every dollar that exists digitally also have a corresponding physical form somewhere?

Fri, 03 Oct 2014 17:51:24 +0000

Faisal KhanAnswered Oct 3, 2014

No. That would be considered double-issuance. Its either/or, Digital issuance or Physical issuance.

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