Mapping the product to the rules
Fintech regulation follows the activity rather than the label. Holding or moving customer funds can require money transmitter licenses on a state-by-state basis, along with federal registration with FinCEN as a money services business and anti-money laundering obligations. Offering loans can trigger state lending licenses, interest rate limits, and consumer disclosure rules. Virtual currency activity involving New York may require a license from the Department of Financial Services, which runs its own regime for that business. Investment features, such as fractional shares or yield products, may raise securities questions. The first task is describing the money flow precisely, because small design choices can move a product into or out of a regulated category.
Bank partnerships and a shifting federal picture
Many fintechs reach customers through a partner bank, which holds the deposits or originates the loans while the fintech runs the customer experience. Regulators have scrutinized these arrangements, and partner banks now often require detailed compliance programs, recordkeeping, and reconciliation of customer funds from the companies they work with. Federal policy has also been moving, including a federal framework for payment stablecoins whose effective date and implementing rules are set out in stages, and changes in how agencies approach consumer finance and crypto. Because those changes are ongoing, current status should be checked before relying on any summary, including this one.
Preparing for a launch or an examination
Before launch, we map the product against the licenses and registrations it may require, identify where a bank partnership or an exemption might apply, and outline the policies regulators and partners will expect to see. For companies already operating, we review whether the business has grown into activities its licenses do not cover, which happens more often than founders expect. Bring a plain description of how money moves through your product, the agreements with any bank or processor, your current licenses, and the states where your customers are located.
