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Comment by pilif | Hacker News Reader

Here in Europe, PayPal (which is acting like a bank) had to get a banking license (like any other bank). As far as I know they didn't go bankrupt yet, so it can't be a wholly bad thing.

If I drive a vehicle that acts like a car, I need a drivers license. If I run a service that acts like a bank I need a banking license.

I really don't see a problem here.

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> I really don't see a problem here.

I tend to agree. Surety bonds have been effective for a long time to ensure completion of services in case of fraud or failure on the part of a contractor or service provider. States have been requiring surety bonds for many kinds of licensed professions for years, building contractors being a big one.

They are talking innovation; sure Paypal can get licenses like that, but a startup can't. Most (by far) startups don't have 500k to lock away. And most don't have the money to pay the license fees. So yes, it's an issue as far as innovation of payment services goes; now suddenly you NEED to get millions in investment and that all doesn't go into the product but instead into government crap.

And most startups don't go into banking. Seriously, if you're going into that kind of business you should have that kind of money behind you.

Why is banking (specifically money transfering) different than other kinds of business? Seems to me that money transfer is a particularly easy business for the market to regulate. A failed money transfer is a lot easier to spot than, say, a dangerously defective physical product.

A fraudulent one isn't though.

You're also dealing with especially sensitive data, life ruining data if it gets into the wrong hands.

You realize Google Checkout is often lamented on HN because it doesn't operate in many European countries? It is exactly for these reasons.

Much like copyright laws are abused for business protection, so are regulations. Certainly within the US it would be better to have a federal license framework in order to minimize friction.

What, that Google doesn't have money to put up bonds or buy the necessary expertise? I don't get your point.

More likely it's Yet Another Google Product They Can't Be Bothered To Finish (TM).

It's not about having enough money, but whether it is financially worth it. It's an ROI calculation that involves navigating several regulating bodies with what appears to be minimal payback. It certainly isn't a technical limitation.

If money transfer isn't lucrative, it seems weird to blame regulations for the fact that Google isn't staying involved with it.

If your revolutionary banking startup can't dredge up $500k in the land where Color managed to get away with $41 million, then your banking startup probably isn't such a good idea to begin with.

I'm not saying the idea is totally pointless, but the $500k needed regardless of the scale of the business seems a bit excessive. Maybe there should be a sliding scale, so that if your transaction volume is $10k, you need a bond for $10k, etc, up to a ceiling? That would at least make it possible to start out testing whether it works without dumping a huge amount of cash.

It does scale with transaction volume, but the floor is $500k. But it's explicitly payable via a surety bond, which works like insurance; applicants with good credit history might pay just a few thousand dollars to get one.

There is also a class of money transfer company ("A licensee that engages in receiving money for transmission") that only needs a $250k bond.

Here is the problem: PayPal was born in the US. Among other things, probably because it was easier for them to do business there. PayPal couldn't have been concieved in Europe.

> I really don't see a problem here.

I do: it prevents innovation. People should be allowed to run an unlicensed banking service, and customers should be allowed to accept the risks that go with it (by all means, require customers to sign a form saying they understand it's an unlicensed service and they could lose all their money.)

Well, losing all your customers' money is certainly an innovative way to run a bank.

But does PayPal getting a license mean that their actions towards customers have to change? Or do they just have to pony up some dollar amount to continue screwing their customers in the same way they always have?

I completely agree to this. PayPal somehow has been evading this problem for a decade but finally the government is stepping in to square away this mess. How many horror stories have we heard about PayPal locking up people's accounts for no good reasons?

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