Facebook holds money transmitter licenses in at least 15 states, according to an analysis by American Banker.
In it’s filing for an initial public offering, Facebook said it applied for certain money transmitter licenses and planned to apply for more in the U.S. It did not state that it had already acquired any licenses, though some of its licenses had been issued as early as August 2011. This means the company is further along in its payments business than most people knew.
States require companies that accept and transmit currency to have money transmitter licenses, though laws vary across the nation. Generally, businesses that handle money orders, currency exchanges and stored value — funds that are kept, retrieved and transferred electronically — are regulated in this way. Companies like Amazon, Google and PayPal, for example, are licensed money transmitters.
According to online listings discovered by American Banker, Facebook has licenses in Arkansas, Delaware, Georgia, Idaho, Iowa, Kansas, Kentucky, Missouri, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Texas and Washington. The company could have additional licenses that are not available online.
Facebook generated $557 million, or 15 percent of its revenue, last year from payments. Users can buy Facebook Credits to spend on virtual goods and digital media within apps. Game developers are required to use Credits for transactions, of which Facebook takes a 30 percent cut. Many expect the social network to push the use of Credits elsewhere on the platform, including third-party sites. As such, the company needs to ensure compliance with money services laws.
The company wrote in its S-1 filing:
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.
Whether Facebook has plans to turn Credits into a wider payment system or is simply being cautious is unknown, but the fact that the company already has licenses in at least 15 states means that it has made progress toward this effort.