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Are you sure you Do the requisite legwork
The Georgia MALPB Act presents a compelling
want to be a bank? opportunity to cut operational costs; recover revenue
previously lost to upstream processors and sponsor
banks; and provide your merchants, agents and value-
added partners a significant cost advantage. That is no
small carrot in today's commoditized, disrupted payments
sphere. So let's examine what you need to do, in practice,
before you request an application.
Applications for MALPB charters are proffered only after a
company meets with the Georgia Banking Department and
is prequalified to begin the application process. Approval
is solely dependent on the Department's discretion. It is
vital to understand how the act applies to your company
before you walk in the door. By appreciating both the legal
aspects of the act and the way your business practices will
change as an MALPB, you can make an informed decision
about whether applying to be an MALPB makes sense for
you.
Each ISO and acquirer faces distinct considerations. Setup
and distribution processes that one company may have
to revise may not be of concern for another. In addition,
By Cynthia Bailey while the act is specific in some areas, such as to the
The Idea People number of employees a company must have in the state
of Georgia dedicated to merchant acquiring and the
ollowing up on Troutman Sanders LLP's excel- various types and amounts of capital each MALPB must
lent article outlining the legal aspects of Georgia's maintain, it leaves room for interpretation in others, often
Merchant Acquirer Limited Purpose Bank Act, I defaulting to the verbiage, "will be determined under the
F will present some operational and practical mat- sole discretion of the Banking Department." Thus, there is
ters organizations wishing to apply for MALPB status in no single "playbook" with steps for all to apply.
the state of Georgia need to consider.
Certain generalities apply across the board
The article referenced was written by attorneys Tyler
B. Dempsey and Brendan J. Thomas and published in The MALPB Act was passed in December 2013 and, as of
The Green Sheet March 24, 2014. Understanding the legal this writing, the first charter has yet to be issued. This
requirements of MALPB is a great place to start. All who presents a challenge and an opportunity. With all new
aspire to swim in the banking pool should seek the advice laws there is typically more oversight initially applied to
of an experienced payment attorney (which I am not). companies acting under them, which can be onerous for
Reporting requirements, limitations, standards and capital independent, privately held businesses that have always
levels must be met and maintained – many of which may set their own standards and processes.
be different from those your company faces today.
Also, since MALPB is new and without practical
Significant oversight will be given all MALPBs; precedence, the companies qualified early will enjoy "first
consequences for noncompliance will be considerable. impression" benefits. Akin to when Congress passes a law
The process of seeking the Georgia Banking Department's that is then interpreted by the courts, new MALPBs may
blessing to eliminate your sponsor bank and work directly shape the very way the act is effectively applied in the
with the card networks will revolutionize the way you do future.
business. Not just for you, but for your employees, partner
and affinity relationships, and risk management and best For forward-thinking organizations, this is an awesome
practice processes. It will also affect your ability to offer chance to influence change in the industry and shape the
new products and services and enter into new channel environment in which they will be conducting business.
partner relationships. ISOs, long treated as the "stepchildren" of payments, now
have the chance to define the ground rules instead of
While cutting out the middleman may sound like a having to adapt to sponsor banks with different priorities.
godsend, you must first consider many practical, everyday
issues, not the least of which involves carrying liability for In addition, before requesting a MALPB application from
risk. the Georgia Banking Department, all organizations need
to conduct an internal assessment, or due diligence, of
32
Are you sure you Do the requisite legwork
The Georgia MALPB Act presents a compelling
want to be a bank? opportunity to cut operational costs; recover revenue
previously lost to upstream processors and sponsor
banks; and provide your merchants, agents and value-
added partners a significant cost advantage. That is no
small carrot in today's commoditized, disrupted payments
sphere. So let's examine what you need to do, in practice,
before you request an application.
Applications for MALPB charters are proffered only after a
company meets with the Georgia Banking Department and
is prequalified to begin the application process. Approval
is solely dependent on the Department's discretion. It is
vital to understand how the act applies to your company
before you walk in the door. By appreciating both the legal
aspects of the act and the way your business practices will
change as an MALPB, you can make an informed decision
about whether applying to be an MALPB makes sense for
you.
Each ISO and acquirer faces distinct considerations. Setup
and distribution processes that one company may have
to revise may not be of concern for another. In addition,
By Cynthia Bailey while the act is specific in some areas, such as to the
The Idea People number of employees a company must have in the state
of Georgia dedicated to merchant acquiring and the
ollowing up on Troutman Sanders LLP's excel- various types and amounts of capital each MALPB must
lent article outlining the legal aspects of Georgia's maintain, it leaves room for interpretation in others, often
Merchant Acquirer Limited Purpose Bank Act, I defaulting to the verbiage, "will be determined under the
F will present some operational and practical mat- sole discretion of the Banking Department." Thus, there is
ters organizations wishing to apply for MALPB status in no single "playbook" with steps for all to apply.
the state of Georgia need to consider.
Certain generalities apply across the board
The article referenced was written by attorneys Tyler
B. Dempsey and Brendan J. Thomas and published in The MALPB Act was passed in December 2013 and, as of
The Green Sheet March 24, 2014. Understanding the legal this writing, the first charter has yet to be issued. This
requirements of MALPB is a great place to start. All who presents a challenge and an opportunity. With all new
aspire to swim in the banking pool should seek the advice laws there is typically more oversight initially applied to
of an experienced payment attorney (which I am not). companies acting under them, which can be onerous for
Reporting requirements, limitations, standards and capital independent, privately held businesses that have always
levels must be met and maintained – many of which may set their own standards and processes.
be different from those your company faces today.
Also, since MALPB is new and without practical
Significant oversight will be given all MALPBs; precedence, the companies qualified early will enjoy "first
consequences for noncompliance will be considerable. impression" benefits. Akin to when Congress passes a law
The process of seeking the Georgia Banking Department's that is then interpreted by the courts, new MALPBs may
blessing to eliminate your sponsor bank and work directly shape the very way the act is effectively applied in the
with the card networks will revolutionize the way you do future.
business. Not just for you, but for your employees, partner
and affinity relationships, and risk management and best For forward-thinking organizations, this is an awesome
practice processes. It will also affect your ability to offer chance to influence change in the industry and shape the
new products and services and enter into new channel environment in which they will be conducting business.
partner relationships. ISOs, long treated as the "stepchildren" of payments, now
have the chance to define the ground rules instead of
While cutting out the middleman may sound like a having to adapt to sponsor banks with different priorities.
godsend, you must first consider many practical, everyday
issues, not the least of which involves carrying liability for In addition, before requesting a MALPB application from
risk. the Georgia Banking Department, all organizations need
to conduct an internal assessment, or due diligence, of
32
