Starting Your Fintech: Key Considerations for Success

Launching a fintech startup requires careful planning and strategic decision-making. Here are key recommendations from industry expert Ivan Aleksandrov, Chief Strategy Officer at Advapay, to guide you through the process.

Before getting started, it’s important to emphasise that your fintech’s roadmap and organisational structure are guided by your target client base and the services you intend to offer—or intentionally exclude. These decisions will shape your choice of jurisdiction, fund flow design, and partner selection. So, let’s get started

Client Base and Advertising

The choice of licensing jurisdiction is heavily influenced by how you plan to attract end customers. If you intend to use broad advertising channels, you must obtain a license in your customers’ jurisdiction. For example, if your clients are based in the European Union, you must secure authorisation as a payment institution (PI) or electronic money institution (EMI) from one of the EEA regulators. Alternatively, you can operate under an agency arrangement with a licensed entity that offers BaaS or embedded finance services.

However, if you expect clients to reach you organically—through events, partnerships, word-of-mouth, web searches, or other channels that adhere to the principle of reverse solicitation, and you do not actively seek customers in specific jurisdictions—you may have greater flexibility in selecting a jurisdiction. In this case, other factors can guide your decision.

This approach aligns with international regulatory practices. In most cases, you can onboard clients from other jurisdictions if they find your services without targeted marketing efforts. Provided they reached out independently, regulators in these clients’ countries are generally less likely to make claims against your operations, as this follows the reverse solicitation principle.

Prestige of the Jurisdiction and Banking Relationships

If you plan to advertise widely and openly—using channels like Google Ads and targeting specific countries—you must obtain a license in each relevant jurisdiction. However, if you rely on reverse solicitation, other factors, such as the prestige of the jurisdiction, take precedence when selecting a location for licensing.

Jurisdiction prestige is particularly crucial when establishing segregated bank accounts to hold and manage clients’ funds. Typically, more prestigious jurisdictions present greater challenges in obtaining a license, which can add credibility.

For example, European jurisdictions are generally regarded as more reputable than Canada. Although Canada has a strong business reputation, banks recognise that obtaining a Money Services Business (MSB) registration in Canada is considerably easier than securing authorisation in the EU. Factors like a country’s global standing, judicial maturity, low corruption levels, exclusion from FATF grey lists, and lack of involvement in money laundering scandals also contribute to its credibility. Thus, payment licenses from offshore zones may have lower credibility and can create difficulties in establishing banking relationships.

If you plan to use European banking infrastructure, securing a license in a country with a developed regulatory framework and strong reputation is essential.

Requirements for Personnel

Jurisdictions vary in terms of the required number of employees, their roles, and local presence at the time of license application and at the start of operations. For example, in the UK and EU countries, holding a license typically requires a minimum of 5-10 employees, most or all being local residents with relevant experience. Jurisdictions like Canada or New Zealand may have lower personnel requirements. In contrast, countries like Australia and Bahrain offer a more balanced approach, requiring a reasonable number of employees for the specific business model along with a suitable level of local presence.

Cost of Obtaining a License and its Maintenance

When selecting the right jurisdiction for your fintech company, it’s essential to consider the costs of obtaining and maintaining a license. The initial expenses can vary significantly depending on the jurisdiction and include fees for legal support, consultants, necessary personnel, and software. Additionally, ongoing maintenance costs—such as regulatory reporting, compliance, and personnel management—should also be factored into your decision.

Likelihood and Timeframe of Approval

A primary consideration when applying for a license is the expected timeframe for approval. This timeline varies by country; some jurisdictions have lengthy processes that could delay your launch. For instance, obtaining a license in the Netherlands may take up to 12 months after submitting all required documents—relatively quick compared to other EU countries, where it may sometimes take two or even three years.

In contrast, registering an MSB company in Canada is often faster, typically taking just three months (although this ease of registration can result in lower prestige with banks).

Therefore, it’s wise to confirm current timelines in the target country before applying. Relying less on official estimates and more on feedback from market players, practising lawyers, and consultants can provide more accurate insights.

The likelihood of approval is another crucial factor. In some countries, meeting stringent formal requirements generally results in a license or registration. However, in regions like the EU and the UK, fulfilling formal conditions alone may not guarantee approval. Regulators in these areas assess not only a company’s compliance with requirements but also their perception of its potential value in the market. If a company does not present a convincing case, it may face a high risk of refusal. Therefore, it’s important to recognise that the likelihood of rejection can be substantial in these regions.

Payments Flow

Designing and organising the flow of funds is fundamental to your business’s success. The structure of this flow affects your financial model and influences your choice of partners.
In the payments sector, business challenges can often be addressed in multiple ways, each with varying costs, speeds, and complexities. For example, there are several approaches to organising international money transfers:

  • Traditional SWIFT transfers
  • Opening correspondent accounts in both the sending and receiving countries and holding cash balances in the receiving country for instant payouts
  • Using crypto for remittances as an intermediate store of value
  • Netting (matching) counter flows of money — from country A to country B, and from B to A
  • Leveraging third-party payment rails.

No single method works universally across all corridors and currency pairs. Depending on client types and the specific sending and receiving countries, you’ll often need a combination of these methods or choose the most suitable channel based on current conditions.

This means thorough planning of the flow of funds is essential. You need to identify your clients, define the required payment types, and specify the countries involved in these payments. This careful planning will help you optimize the flow of funds and select the most effective options for your business needs.

Main Principles

No fintech operates in isolation; it’s naturally integrated into the broader payment ecosystem, making the selection of banking and payment partners essential. Your choice of partners will be shaped by your flow of funds and the license you hold. At the same time, selecting the right partners is critical to your business’s success.

Above all, never rely on a single partner, no matter how ideal they may seem. Business approaches or compliance policies can change, and rates may increase unexpectedly. You need multiple backup partners ready to activate to avoid being left stranded. Diversifying banking partnerships is essential to mitigate risks associated with regulatory shifts or pricing fluctuations.

It’s also crucial to find partners who can not only support your business but also process payments for your specific client base, including handling transactions from the countries your clients are paying from and into. We recommend maintaining open and transparent communication with potential partners to confirm their compatibility with your clients’ needs. Providing examples of potential clients and sample transactions can help pre-empt future complications.

Tariffs

When selecting banking partners, understanding tariffs and fees is essential. In developing a financial model, it’s important to recognize that there are no standard tariffs—rates can vary significantly depending on the circumstances. When working with partners to open accounts, remember that tariffs for new companies often differ from those for established businesses.

Banks evaluate the risks and potential profitability of working with startups. If your company operates in a high-risk industry or lacks substantial transaction volume, you may face higher initial costs, stricter compliance controls, and potentially limited-service options.

It’s essential to strike a balance: don’t be discouraged if you don’t receive your desired rate initially, and be proactive in discussing opportunities for rate improvements once certain transaction volumes are reached.

There are several key principles of business planning that will enable you to assess budget and resources accurately and avoid mistakes.

Step-by-step Development

The fintech market is highly competitive, and success depends on gradual, progressive development. You can’t expect to secure favourable rates and services right away based solely on having a unique concept. Prepare for a step-by-step growth process.

For instance, if a client in the crypto industry needs dollar transactions and individual IBANs for their customers, it’s important to recognize the complexity of this requirement. The company should realistically understand that obtaining these services from the start is challenging.

Diversification

Diversification is critical. If possible, obtain licenses in multiple jurisdictions and seek agency status with a reputable licensed company. For banking partnerships, diversification is not optional—having multiple partners is a critical necessity.

Maintaining multiple options protects your business against unexpected changes. Concentrating all resources with a single partner puts your services and business continuity at risk.

Thorough planning of the flow of funds

Careful planning of the flow of funds is essential. This involves selecting the right partners, identifying the timing of payments to these partners, and assessing the associated costs. Additionally, it’s important to evaluate whether your strategy aligns with current market conditions.

Operating expenses

Budgeting is essential for managing payment service costs and expenses related to IT infrastructure, AML compliance, and necessary personnel. Remember that compliance costs and other operating expenses will increase as your business scales, so it’s important to factor this into your budget. Additionally, IT-related expenses—such as hosting, software development, and other technological needs—should be carefully planned for.

Customer Acquisition Costs

Many startups underestimate the costs associated with customer acquisition and the level of competition. This is especially relevant for low-risk companies targeting a broad audience and intending to reach customers through widespread marketing channels.

It’s crucial to understand that customer acquisition cost encompasses not only the average cost of initial registration but also the conversion rate to active users. Grasping these dynamics and accurately forecasting these costs is vital. Marketing channels can be expensive, so thorough market research is necessary to ensure realistic budgeting.

While companies focused on high-risk customers may have higher service prices that cover customer acquisition costs with a significant margin, fintechs targeting a wide audience must pay close attention to the ratio of earnings per customer-to-customer acquisition cost.

Conclusion

The fintech space has become increasingly competitive in recent years; however, there is still room for new players, business models, and products. While focusing on creating a great product that meets audience needs, along with creative marketing and an original concept, it’s essential not to overlook infrastructure, compliance, and business planning considerations.

By following our expert recommendations, you can effectively navigate the challenges of launching a fintech startup, laying a strong foundation for growth and sustainability. If you have any questions about your project, feel free to schedule a call with our expert.

Advapay at stake:

How can Advapay can assist you in launching your fintech business?

• Assistance in EMI/PI licencing in the EEA/UK
• Registration of MSB company in Canada
• Delivery of a comprehensive Core banking system encompassing back-office and white-label applications for end-users
• Assistance in payment infrastructure development
• BaaS-solutions in collaboration with our partners – EEA/UK licenced EMIs and PIs

What is RPAA Regulation, Key Changes and how Does It Affect Existing and New MSBs and PSPs

The new Retail Payment Activities Act (RPAA) Regulation is designed to enhance operational transparency, prevent financial fraud, and strengthen the Canadian fintech market in alignment with international standards. In this article we discuss what is RPAA regulation, the key changes and how does it affect existing MSBs and PSPs and new players.

As the retail payments sector continues to grow and innovate, the RPAA’s final regulations offer a framework that supports this progress while safeguarding the interests of all stakeholders involved. For PSPs operating in Canada, remaining informed and compliant with these regulations is crucial for maintaining trust and stability in the payments ecosystem.

Ensure compliance with Advapay and receive expert guidance for your MSB registration to meet RPAA requirements. We provide full support to meet all requirements before the November 15, 2024, deadline, ensuring you’re ready for the new regulations effective September 8, 2025. Our legal, technical, and business expertise will streamline your registration process, ensuring compliance and avoiding disruptions.

Key Functions Under the RPAA

The RPAA covers several key functions, including managing accounts for electronic fund transfers (EFTs), holding funds, initiating transfers, and providing clearing or settlement services.

Who is considered a PSP Under the new RPAA Regulation?

If your business is providing any one of the five payment functions such as

  • providing/maintaining payment accounts.
  • holding funds.
  • initiating EFTs.
  • authorising/transmitting/receiving EFT instructions and
  • providing clearing/settling services,

you are likely considered a payment service provider (PSP).

Key dates

November 1, 2024: Registration opens for payment service providers (PSPs).

November 15, 2024: Registration for existing PSPs and money services businesses (MSBs) closes.

November 1, 2024 – September 7, 2025: Transition period for compliance with the new regulations.

Join us at the online webinar “Registration of Existing MSBs with the Bank of Canada under RPAA Regulations“:

Who Needs to Register with the Bank of Canada?

To determine if registration is required, entities should follow the Bank of Canada’s four-step application test. If your organisation is not exempt from the Retail Payments Activities Act (RPAA), engages in one or more of the five specified payment functions related to electronic funds transfers (EFTs), and operates or provides services in Canada, registration is mandatory.

What Changes for Existing MSBs?

For companies with overlapping activities between PSPs and MSBs, dual registration with the Bank of Canada (BOC) and FINTRAC may be required. Existing MSBs should submit their registration applications between November 1, 2024, and November 15, 2024, to continue their retail payment activities without interruption.

What Changes for Existing PSPs?

Starting November 1, 2024, all Payment Service Providers (PSPs) in Canada must register with the Bank of Canada under the new Retail Payment Activities Act (RPAA). If existing PSPs and MSBs miss the 15-day registration window, they must cease all retail payment activities until their application is approved.

Consult with our expert to ensure you're prepared for the RPAA regulations

Key Changes in the Retail Payment Activities Act (RPAA)

The Retail Payment Activities Act (RPAA) marks a significant regulatory milestone in Canada’s evolving payments landscape. Enacted to oversee payment service providers (PSPs) and their activities, the RPAA aims to enhance the retail payments ecosystem’s safety, security, and efficiency. Since its introduction, the RPAA has undergone several revisions, particularly in its final regulations. These revisions have introduced key changes to balance regulatory oversight with operational flexibility for PSPs. Here are the key changes in the RPAA and their implications for payment service providers and the broader financial ecosystem.

1. Incident Restoration System Testing

One of the most notable changes in the final RPAA regulations is the requirements surrounding incident restoration and system testing. Originally, the draft regulations required that PSPs could only resume operations after fully verifying the integrity and confidentiality of all systems, data, and information. Additionally, PSPs had to ensure that retail payment activities could continue without any reduction, deterioration, or breakdown.

RPAA Key Change:

  • Previous Requirement: PSPs were required to ensure full restoration and integrity of systems before resuming operations. This included a mandatory review of their post-incident risk management and incident response frameworks.
  • Current Change: The final regulations have relaxed this stringent requirement, allowing PSPs to resume normal operations while continuing efforts to restore systems. The mandate for an automatic review of the risk management and incident response framework after every incident has been removed.

Implications: This change provides PSPs with greater flexibility in managing incidents. It acknowledges the practical challenges PSPs face during system disruptions, where the immediate resumption of operations is often crucial. By allowing operations to continue while restoration efforts are underway, PSPs can better manage customer expectations and minimise service disruptions while focusing on broader risk management processes.

2. Changes to Personal Information Location Requirements

Managing personal and financial information is a critical aspect of the RPAA, particularly concerning where such data is stored or processed. The draft regulations required PSPs to submit a new registration application to the Bank of Canada if they or their third-party service providers changed the jurisdiction where personal or financial information was stored or processed.

RPAA Key Change:

  • Previous Requirement: If the jurisdiction of data storage or processing changed, PSPs were required to submit a new registration application.
  • Current Change: The final regulations have removed the requirement for a new registration application. However, PSPs must still provide the Bank of Canada with 60 days’ notice of any such changes.

Implications: This revision significantly reduces the administrative burden on PSPs, especially those working with third-party service providers that may relocate their data storage or processing operations.

3. Safeguarding of Funds (SOF) Account Changes

The safeguarding of end-user funds is a fundamental aspect of the RPAA, ensuring protection in insolvency or other operational risks. Initially, the regulations required any changes to SOF accounts to trigger a review of the SOF framework.

RPAA Key Change:

  • Previous Requirement: Any modification to SOF accounts would automatically prompt a review of the safeguarding framework.
  • Current Change: The final regulations introduce a materiality threshold, meaning only changes likely to significantly impact the safeguarding of end-user funds will require a review.

Implications: This change adopts a more practical approach to fund safeguarding by focusing regulatory scrutiny on changes that truly matter. It reduces unnecessary reviews, allowing PSPs to concentrate on maintaining the integrity of the SOF framework when there is a genuine risk to end-user funds.

4. Risk Management System Testing Adjustments

Risk management is a critical focus under the RPAA. The draft regulations initially mandated triennial (every three years) testing of the risk management framework to ensure its robustness and effectiveness.

RPAA Key Change:

  • Previous Requirement: PSPs were required to conduct testing of their risk management framework every three years.
  • Current Change: The final regulations now require PSPs to develop a testing methodology that defines the frequency and scope of testing rather than adhering to a fixed triennial schedule.

Implications: This change allows PSPs to tailor their risk management testing to their specific operational needs and risk profiles. It allows them to focus on more frequent testing in high-risk areas or less frequently in areas with minimal risks.

5. SOF Insolvency Reviews

Insolvency protection is a critical component of the RPAA, ensuring that end-user funds remain safeguarded even if a PSP becomes insolvent. Initially, the regulations required PSPs to evaluate their insolvency protections annually.

RPAA Key Change:

  • Previous Requirement: Annual reviews of insolvency protections were mandatory to ensure that end-user funds would be recoverable.
  • Current Change: The final regulations have removed the annual review requirement, mandating action only when it is determined that end-user funds would not have been recoverable in an insolvency proceeding.

Implications: By removing the annual review requirement, the regulations shift the focus to targeted action when actual risks are identified. This change reduces the compliance burden on PSPs while ensuring end-user funds’ protection. PSPs can now allocate resources more efficiently, concentrating on addressing real risks rather than fulfilling a blanket annual requirement.

6. Independent Audit Frequency

Independent audits are essential for maintaining the integrity and transparency of a PSP’s operations. Initially, the RPAA required these audits to be conducted every two years.

RPAA Key Change:

  • Previous Requirement: Independent audits were mandated every two years.
  • Current Change: The final regulations have extended the audit frequency to every three years.

Implications: This change reduces the frequency of independent audits, alleviating some associated costs for PSPs. While audits remain crucial for ensuring compliance and operational integrity, the extended timeline still provides rigorous oversight, allowing PSPs more time to address and implement audit findings.

7. Application Information on End-User Funds

Accurate reporting on end-user funds is crucial for transparency and risk management. The draft regulations initially required PSPs to provide information with a 24-month lookback period.

RPAA Key Change:

  • Previous Requirement: Reporting on end-user funds required a 24-month historical review.
  • Current Change: The final regulations have reduced this lookback period to 12 months.

Implications: This adjustment streamlines the reporting process, reducing the historical data that PSPs must gather and analyse. As a result, reports are likely to be more relevant and reflective of recent trends, enhancing the accuracy of risk assessments and regulatory compliance.

8. Introduction of Net-New Obligations

While many of the changes in the RPAA focus on easing existing requirements, the final regulations also introduce several new obligations that PSPs must now adhere to:

  • SOF Framework Approval: PSPs must have their board of directors (if applicable) approve the SOF framework annually. Additionally, a senior officer must approve the results of the SOF framework review. This change ensures senior management is directly involved in safeguarding funds and enhancing accountability.
  • Annual Report Contents: The final regulations require PSPs to include any identified insolvency risks from the prior year in their annual reports. This requirement, along with adjustments to the prescribed information about end-user funds and transfers, increases the transparency and comprehensiveness of annual reporting.
  • Change Notice Requirements: When a change notice requirement is triggered, PSPs must now include an assessment of the impact on end-user fund safeguarding. They must also provide a summary of documentation reflecting changes in the risk management and incident response framework. This new obligation ensures that the Bank of Canada is fully informed about any material changes that could affect the security of end-user funds.

National Security Requirements

The Retail Payment Activities Act (RPAA) grants the Minister of Finance significant authority to address potential national security risks that Payment Service Providers (PSPs) pose. This includes the power to take decisive actions, such as refusing PSP applications, revoking existing registrations, and imposing specific conditions or undertakings on PSPs. Additionally, the Minister can issue national security orders directing a PSP to undertake specific actions or refrain from certain activities deemed risky to national security.

Penalties for Violating Requirements

The RPAA equips the Bank of Canada with various enforcement tools to address non-compliance with the Act. These tools include:

  • Compliance Agreements: The Bank can enter into agreements with PSPs to ensure adherence to the Act’s requirements.
  • Notices of Violation (NOV): The Bank can issue NOVs to PSPs, which may or may not include an administrative monetary penalty (AMP). Only specific, designated violations would trigger an NOV and a corresponding AMP.
  • NOVs with AMP and Compliance Agreement Offers: The Bank can combine an NOV with an AMP and propose a compliance agreement as a resolution.
  • Compliance Orders: The Bank can issue direct orders to enforce compliance with the Act.
  • Court Orders: The Bank can seek court enforcement to compel compliance.
  • Registration Refusal or Revocation: The Bank can refuse to register a PSP or revoke an existing registration if the PSP is found in violation of the Act.

If a PSP fails to comply with the terms of a compliance agreement after receiving an NOV, the Bank will issue a Notice of Default, imposing an additional penalty on the PSP. According to the Regulations, penalties for violations are categorised as “serious” or “very serious,” with fines ranging from $1 million for each serious violation to $10 million for each very serious violation.

How Advapay can assist you:

Ensure compliance with Advapay Canada and get expert assistance with your MSB’s RPAA registration. We provide full support to meet all requirements before the November 15, 2024, deadline, ensuring you’re ready for the new regulations effective September 8, 2025. Our legal, technical, and business expertise will streamline your registration process, ensuring compliance and avoiding disruptions.

We provide:

  • Registration with Bank of Canada for new and existing PSPs
  • ⁠Development of documents and frameworks to comply with RPAA regulations.
  • ⁠Opening of Safeguarding accounts

Read about full version of Retail Payment Activities Regulations, published by Canada Gazette.

The Latest Features of our Macrobank’s Core Banking Back-Office Application

Welcome to an exploration of the newest features within Macrobank’s Core Banking Back-Office Application. As technology continues to evolve, so does our commitment to providing cutting-edge solutions for the banking sector. Read about the latest enhancements designed to streamline operations, enhance efficiency, and elevate user experience.

1️⃣ Widget Management: Personalize Your Feed

* Add, remove, reorder, and resize widgets on the Overview page
* Choose between table and chart views for added widgets
* Edit widget grids to tailor fields to your needs

2️⃣Transfers & Conversions: Simplifying Fund Movements

* Nostro Transfer: Move funds between own correspondent accounts seamlessly
* Nostro Currency Exchange: Perform currency conversions between own correspondent accounts
* Transfer Duplication: Copy existing transfers to create new ones with pre-populated fields
* Attach documents to SEPA and SWIFT transfers for enhanced transparency

3️⃣ The Reconciliation Report: Ensure Accuracy in Balances

Compare balances in correspondent accounts and customer accounts effortlessly

4️⃣ Event History: Track Activities with Ease

Access event and document history for transactions, customer applications, and management activities

5️⃣ Session Log: Monitor User Activity

Get detailed login information for all users, including session activity and platform used

Read more about features of our core banking system Macrobank and watch video.

Advapay at stake:

How can Advapay can assist you in launching your fintech business?

• Assistance in EMI/PI licencing in the EEA/UK
• Registration of MSB company in Canada
• Delivery of a comprehensive Core banking system encompassing back-office and white-label applications for end-users
• Assistance in payment infrastructure development
• BaaS-solutions in collaboration with our partners – EEA/UK licenced EMIs and PIs

Fast Launch of your Fintech Project with MSB  – advantages, business cases, and recommendations

Canadian MSBs are gaining popularity. Emerging fintech businesses exploring the sector are keen to understand MSB options. This article delves into the advantages and limitations, providing examples of companies where MSBs are a fitting choice.

The broader range of services

MSBs offer more services, including crypto activities restricted within EEA-UK EMI/PI licenses and crowdfunding.

Canadian MSBs must fulfil specific obligations mandated by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). They can offer one or more of the following services to the public:

  1. Foreign exchange dealing.
  2. Remitting or transmitting funds.
  3. Issuing or redeeming money orders or similar negotiable instruments.
  4. Dealing with virtual currency (custody of crypto funds requires separate permission from the Securities Commission).
  5. Crowdfunding platform services.
  6. Payment services.

Streamlined MSB Registration Process with Reduced Time and Formalities

MSB excels in its prompt licensing process, surpassing other jurisdictions, including EEA-UK. MSB document preparation usually takes less than a month, and applications are typically reviewed within one or two months. This rapid turnaround often appeals to fintech start-ups keen to go live quickly, particularly compared to the potentially lengthy process in EEA countries, which can extend up to 1.5 years.

The registration process involves several stages, with the applicant justifying eligibility to become an MSB. Unlike European regulators, who meticulously navigate the licensing process, leading to many companies not obtaining a license, the Canadian regulatory approach is less formal. It typically requires the applicant to meet the requirements outlined by FINTRAC, Canada’s financial intelligence unit, and anti-money laundering and anti-terrorist financing supervisor.

Register an MSB company and start your fintech business

Less investments for initial capital and the management team

Initial capital requirements

Canadian MSBs do not have minimum capital requirements, providing opportunities for companies with smaller budgets to start their payment or fintech business without facing high barriers.

Less expenses for the management team

For an MSB license, you need at least one director and a compliance officer during the registration stage. While there are no residency requirements for both roles, the compliance officer should have experience in the Canadian MSB industry or relevant education.

In contrast, when submitting documents in an EEA country, the company must hire at least 2-3 local employees. Ireland’s regulator requires hiring at least nine local employees.

Optimal Fit for Varied Clientele and Geographic Requirements

Serving clients in other regions

Canadian MSBs can offer services within Canada, which is their registered location. Additionally, these companies can engage clients from other jurisdictions if the customers initiate contact, aligning with reverse solicitation. This happens when customers from different countries independently seek financial services without the financial institution actively trying to attract them.

MSBs face no restrictions in providing services to customers who naturally discover their website, app, or customers have been acquired through channels that do not trigger licensing obligations in jurisdictions where such clients reside. The Canadian regulatory environment is more lenient in dealing with clients outside Canada.

When deciding on a license jurisdiction, carefully assess your client portfolio and marketing strategy to meet your business requirements:

  • If your plan involves operating in the EEA and actively advertising services there, Canada may not be a suitable option, and you should consider one of the EEA countries.
  • On the contrary, Canada might be a more suitable choice if your strategy involves working with clients through partners or acquaintances.

Covering different industries

MSBs demonstrate versatility in catering to diverse client bases across various industries, extending their services even to high-risk clients. This includes industries such as pharmaceuticals, adult entertainment, and others categorised as high-risk by EEA regulators, facing challenges in obtaining licenses within the EEA-UK region. This flexibility allows them to navigate challenges in obtaining licenses within the EEA-UK region, providing financial services to clients perceived as high risk by traditional regulatory frameworks.

Launching Payment Infrastructure and Operations for MSB Companies

Regrettably, many companies registering MSB entities overlook the challenges of opening accounts for these businesses. After successful registration, owners often face significant hurdles in the account-opening process. We recommend exclusively contacting professional firms offering comprehensive services beyond mere registration. Our Canada-based team specialises in providing one-stop-shop services, addressing the entire spectrum of needs for MSB companies.

Launching payment infrastructure for Canadian MSBs presents unique challenges compared to their European counterparts. With a market size of approximately 40 million people, mainstream banks often hesitate to collaborate due to the straightforward registration process and passive regulatory stance. As a result, Canadian MSBs often partner with small local banks and credit unions.

Local financial institutions, however, are often inadequately automated and lack the developed API infrastructure customary for European fintech companies. Furthermore, the absence of direct access to SEPA (Single Euro Payments Area) and limited options for providers offering euro-denominated current accounts add complexity to the infrastructure development process. In light of these challenges, creating a truly expansive international payment service becomes intricate for MSBs.

To overcome these hurdles, we offer our clients the option of opening correspondent accounts in different jurisdictions to cover major markets and currencies. Canadian MSB registration is widely recognised as equivalent to a European EMI license. Therefore, well-prepared financial businesses from Canada can access global banking. Depending on a specific MSB’s needs, our team assists with client funds accounts in Canada, the U.S., Europe, the U.K., and Asia. Contact us to learn more about how we can assist you.

Regulatory Compliance

Fulfilling compliance obligations is crucial for running an MSB in Canada. Despite the more relaxed regulatory landscape compared to European jurisdictions, having a robust compliance program is vital. The cornerstone of every compliance program is a set of comprehensive policies that must satisfy Canada’s regulatory body and align with global best practices to gain acceptance from banking partners. Therefore, these documents must be professionally written and tailored to the specific services that an MSB provides.

A compliance officer develops and implements policies, ensuring adherence to FINTRAC’s regulatory requirements, including reporting. However, hiring a full-time, high-paying employee may not be the smartest investment for a growing company. Reach out to learn how clients can benefit from outsourced compliance services with highly experienced officers.

Examples: Businesses Excelling with the MSB Option

  1. Africa-based and Asia-based start-ups offering remittance services and multicurrency e-wallets.
  2. Payment service providers working with high-risk industries.
  3. Non-custodial crypto exchanges.
  4. Neobanks serving freelancers and digital nomads.
  5. Companies targeting Canadian clients that need access to local payment rails.

Key Advantages in Comparison to EEA-UK-Licensed Companies:

  1. Expanded Range of Services, including crypto activities restricted within EEA-UK licenses.
  2. Prompt License Acquisition in less time compared to various jurisdictions, including EEA-UK.
  3. Diverse Client Base Portfolio spanning industries, geographical locations and risk levels.
  4. Lower Initial Investments are required for initiation.

Are you looking to kickstart your fintech venture quickly? Reach out to us! The MSB company option might be the perfect fit for your fintech project. We offer a one-stop solution, covering everything from company registration to essential services like setting up bank accounts, building payment infrastructure and delivering Core Banking software. Contact our team, and let’s schedule a call to delve into your project.

Register to watch our latest on-demand webinars covering Payment and Crypto Business in Malta, MSB registration in Canada, and SRO membership in Switzerland.

Secured By miniOrange