Finding MSB-Friendly Banking
The difference between a bankable MSB and an unbankable one is rarely compliance or quality. It is usually fit. A well-run domestic money transmitter that fits a bank's risk model will find banking easily. An equally well-run but geographically dispersed money transmitter that does not fit the bank's model will struggle. The question is not whether you are good enough. The question is whether you fit what the bank actually wants to serve.
I spent six months helping a money transmitter get banking in 2016. The company was licensed in eight states, had clean compliance, and was operating profitably. But it could not get a primary banking relationship. The company had been rejected by fourteen banks. I eventually figured out why: the company's business model involved moving money between Southeast Asian diaspora communities in the United States and their home countries. The banks being approached were national banks that were actively exiting the immigration-adjacent money services space because of reputational risk and regulatory scrutiny.
Once I understood the actual constraint, the solution became clear. The company needed a community bank in an area with a large Southeast Asian population. We approached three such banks. All three had serious conversations. One ultimately approved the company. That bank was not more lenient or less rigorous than the national banks. It simply had a business model, customer base, and regulatory appetite that aligned with serving the company's market.
This chapter is about systematically finding the banks that can actually serve you, and then building the relationship and maintaining it long-term.
Categories of Banks That Serve MSBs
Banks that serve money transmitters fall into several broad categories, and understanding these categories helps you target your approach. The categories are not clean—there are many edge cases—but they describe the general landscape.
Large national banks have largely exited serving MSBs through de-risking. There are exceptions—some large banks maintain specialized payment services divisions that will serve properly licensed MSBs under strict conditions—but as a rule, approaching a large national bank with an MSB application is a waste of time. These banks have decided that the compliance overhead, regulatory risk, and reputational risk are not justified by the revenue they would generate from an MSB account. This is true of banks like Bank of America, Wells Fargo, JPMorgan Chase, and Citibank. Some regional versions of these banks (like Chase's relationship banking division) may be more flexible, but the main institution is generally closed to MSB applications.
Regional banks are the category with the most variation. Some regional banks have explicitly decided to serve payment services companies, including MSBs. Other regional banks will serve MSBs if they meet very specific criteria. Still other regional banks have de-risked and will not serve MSBs at all. The best way to figure out a regional bank's appetite is direct inquiry and consultation with banking relationships specialists. A bank that serves MSBs successfully will usually be willing to say so. A bank that does not want to serve MSBs will indicate that, either explicitly or through repeated rejections.
Community banks—institutions with less than $5 billion in assets, usually serving a specific geographic region—are often the most MSB-friendly. These banks have lower regulatory scrutiny, more flexibility in setting their risk appetite, and often a stronger interest in serving businesses in their communities. A money transmitter that serves a specific geographic area and operates from within that area has a good chance of finding community banking support. This is not always the case—some community banks have also de-risked—but it is a better bet than approaching large national banks.
Credit unions operate under a different regulatory framework than banks and sometimes have greater flexibility in serving MSBs. Credit unions are cooperative institutions owned by their members, and they sometimes have less reputational risk from serving payment services companies. However, credit unions also have limits on their ability to serve non-member businesses, and they typically require that business owners be members of the credit union before the credit union will serve the business. Credit union service is often possible if you have a personal connection to the institution or if you can become a member and build a relationship.
Fintech-friendly banks and online banks emerged in the 2010s and represented a different approach to banking. These institutions understood that traditional banking underserved startup and fintech businesses, and they positioned themselves as alternatives. Many of these banks—including Evolve Bank, Lineage Bank, and others—became go-to sources for fintech and payments businesses, including MSBs. However, many fintech-friendly banks themselves got into trouble with regulators or with their own investors, and several exited the market. Do not assume that a fintech-friendly bank will still be serving MSBs today. Verify their current appetite.
International banks with US operations sometimes serve MSBs, particularly if the MSB operates international corridors that align with the bank's existing geographic footprint. A bank with strong operations in Latin America might be more comfortable serving a money transmitter that moves money to Latin America than a bank with no international footprint. This is because the bank already has infrastructure, customer relationships, and regulatory relationships in that geography.
Banks with payment services divisions are sometimes willing to serve MSBs through those divisions. A bank's main retail and commercial divisions may have exited MSBs, but the bank's payment services or merchant services division might still serve them. This is not always easy to find—it requires digging into a bank's organizational structure—but it is possible.
Community Banks vs. Regional Banks vs. Large Banks
The practical differences between these categories matter for how you approach banking.
Community banks usually move slower but are more flexible. A community bank's decision-making process for a new account might take six to twelve weeks. The bank will want to understand you, meet you, and evaluate you in the context of its local market. But once the bank approves you, the relationship is often more stable, less subject to sudden de-risking decisions, and more willing to work with you on problem-solving.
Regional banks move faster but have more rigid criteria. A regional bank might give you a decision on an account application in two to four weeks. But the bank is applying standardized criteria to a larger customer base, and if you do not fit those criteria, you are unlikely to get approval. Regional banks are also more subject to de-risking decisions made at the corporate level, which means a regional bank that serves MSBs today might exit that segment next year if corporate decides to de-risk.
Large banks almost never move on MSB applications anymore. The institutions have de-risked, and the de-risking decision is usually final. Do not spend substantial time trying to get a large bank account. It is almost certainly a waste of effort.
In terms of pricing and service, large banks used to offer lower fees because of their scale, but this is no longer the case. MSB-friendly banks often charge higher fees than large banks (because they have smaller scale and higher compliance costs), but because large banks are not serving MSBs anymore, you do not have a pricing comparison available.
The Role of Credit Unions
Credit unions can be a useful banking option, particularly for MSBs that are embedded in specific communities or regions. Credit unions do not face the same de-risking pressures as banks (because they are not regulated by the OCC and are subject to less intense federal supervision), and many credit unions have an explicit mission to serve small businesses and underserved markets.
However, credit unions come with specific constraints. Most credit unions will only serve businesses whose owner-members are members of the credit union. This means you need to become a personal member of the credit union before you can establish business banking with the credit union. This is usually straightforward—you can open a personal account by living in the credit union's geographic area or by joining the credit union's sponsor organization—but it does add a step.
Credit unions also have lower transaction limits than banks, and they sometimes have less sophisticated infrastructure for handling business banking. An MSB moving significant transaction volumes might exceed a credit union's capacity. But for an MSB operating in a specific geographic area with moderate transaction volumes, credit unions can be a solid option.
Credit unions are also less subject to sudden de-risking decisions because they are not under the same regulatory pressure. A credit union that approves an MSB account is unlikely to suddenly terminate it, because the credit union's regulatory environment is more stable.
What Makes a Bank "MSB-Friendly"
An MSB-friendly bank has three characteristics. First, it has explicit appetite for payment services businesses. The bank has made a conscious decision that it will serve properly licensed money transmitters, and it has built compliance infrastructure to do so. Second, the bank has actually served MSBs in the past and has positive experience. A bank that has served ten MSBs over five years has learned how to monitor them, how to work with them operationally, and how to manage the regulatory relationship. A bank serving MSBs for the first time is much less likely to be smooth. Third, the bank's profit model supports serving MSBs. The bank is willing to charge fees that reflect the compliance overhead, and the bank expects that accounts will generate sufficient activity to justify the relationship.
An MSB-friendly bank does not necessarily charge lower fees. In fact, many MSB-friendly banks charge higher fees than banks that do not serve MSBs, because the compliance overhead is real and the banks need to price for it. But an MSB-friendly bank will be transparent about fees, will not shift them retroactively, and will not use de-risking as an excuse to exit the relationship.
The Onboarding Process From the Bank's Perspective
Banks that serve MSBs have onboarding processes that vary significantly, but they follow a general pattern.
The first stage is intake and qualification. The bank asks you to fill out an application that covers your company's basic information, your ownership and management, your licensing status, and your proposed transaction profiles. The bank uses this application to determine whether you are even worth spending time on. Some banks might reject you at this stage because you do not have licenses, or you have licenses in states the bank does not serve, or your business model is outside the bank's risk appetite. Most banks that are genuinely interested will move forward to the next stage.
The second stage is compliance due diligence. The bank's compliance team digs into your company's structure, your compliance framework, your SOPs, your training, your audit reports, and your transaction monitoring. The bank wants to understand what controls you have in place and whether those controls actually work. The bank might also conduct KYC (Know Your Customer) diligence on your company's owners and key management, verifying that you are not on watch lists or sanctions lists.
The third stage is operational due diligence. The bank wants to understand your actual operations. How do you move money? What platforms do you use? What are your settlement cycles? What is your customer acquisition process? What is your customer onboarding process? The bank is trying to understand whether you have thought through operational details and whether your operations are sound.
The fourth stage is transaction due diligence. The bank models your expected transaction patterns based on your stated business model, and it wants you to confirm those patterns. What is your expected monthly transaction volume? What is the average transaction size? What are the geographies involved? What are the customer types? The bank is building a profile of what "normal" transactions should look like for your company, and it will later use that profile to spot anomalies.
The fifth stage is pricing and terms negotiation. The bank and you agree on pricing, minimum balances, transaction limits, and other terms. This is where the economics of the relationship get finalized.
The sixth stage is funding and setup. You open the account, fund it, and begin using it. The bank conducts final testing and verification that everything works as expected.
Throughout this process, the bank is assessing risk and asking itself: Can we monitor this company? Will the cost of monitoring justify the revenue? What is our downside if this company fails or gets into compliance trouble?
Documentation Packages That Win Banking Relationships
The documentation you provide to a bank during the onboarding process matters. A strong documentation package can accelerate your approval and improve your terms. A weak package can slow down the process or result in rejection.
A winning documentation package includes the following elements.
First, business formation documents that demonstrate you are a legitimate legal entity. Provide your articles of incorporation or articles of organization, your bylaws or operating agreement, and a certificate of good standing from your state of incorporation.
Second, licensing documentation. Provide copies of all your active money transmitter licenses, along with proof that you are in compliance with all licensing requirements. If you have received any compliance or examination reports from state regulators, include those, because they demonstrate that you have been tested and passed.
Third, ownership and management documentation. Provide detailed biographical information on all owners (including beneficial owners), all board members, and all key officers. Include their professional backgrounds, relevant financial services experience, and verification that they are not on any sanctions or watch lists. If you can, provide reference letters from previous employers or other financial services companies that can attest to their competence.
Fourth, compliance framework documentation. This is critical. Provide your anti-money laundering program, your sanctions compliance procedures, your customer identification program, your suspicious activity reporting procedures, and your transaction monitoring policies. Provide evidence that you conduct training, that you maintain documentation, and that you are actually monitoring transactions. If you have received an independent audit or examination of your compliance program, include that.
Fifth, operational documentation. Provide your SOPs covering customer onboarding, customer updates, transaction processing, settlement, and exception handling. Provide documentation of your platforms and technology infrastructure. Provide evidence of any third-party services you use (like payment processors or KYC vendors) and documentation of those vendors' capabilities.
Sixth, financial documentation. Provide your most recent tax returns, your current financial statements (balance sheet, income statement, cash flow statement), and your financial projections for the next twelve to twenty-four months. The bank wants to know you are financially sound and solvent.
Seventh, organizational structure documentation. If you have subsidiary companies, affiliated companies, or agent relationships, provide documentation of those structures and how they fit into your overall organization.
Eighth, transaction samples. Provide a sample of your recent transactions showing transaction types, sizes, destinations, and customer types. The bank will use this to verify that your actual transactions match your stated business model.
Banks will ask for this information anyway during their due diligence, but if you provide it proactively and comprehensively in your initial application package, you accelerate the process and demonstrate that you are organized and serious.
Pricing and Fee Structures for MSB Accounts
Banks that serve MSBs charge in several ways, and it is important to understand the fee structures before you commit to a banking relationship.
Monthly account maintenance fees are standard. These typically range from $300 to $1,500 per month depending on the bank and the complexity of your account. The bank is charging you for the compliance overhead of maintaining the account.
Transaction fees vary depending on the transaction type. Domestic ACH transactions might cost $0.25 to $1.00 per transaction. Domestic wires might cost $15 to $50 per transaction. International wires cost more—$50 to $200 per wire depending on the destination. Some banks charge per-transaction fees. Some charge a percentage of transaction volume. Some charge both.
Setup fees for new accounts range from $0 to $5,000. Some banks charge nothing to acquire a new account, betting on the long-term relationship revenue. Other banks charge significant setup fees to recoup the cost of their onboarding process.
Minimum balance requirements vary from $0 to $500,000. A bank might require you to maintain a minimum operating balance in your account at all times. This is, in effect, a loan to the bank, and the bank is not paying you interest on it. Some banks are flexible on minimum balances. Others require them consistently.
Pricing for ancillary services—like ACH origination, wire origination, ACH returns, wire reversals—are often negotiable. If you know your transaction mix and you can provide volume projections, you can sometimes negotiate lower per-transaction fees in exchange for committed volume.
Several strategies can help you optimize your fee structure. First, shop around. Different banks price differently, and you might find one bank willing to charge 20 percent less than another. Second, negotiate volume commitments. If you can commit to minimum monthly transaction volumes, banks will often reduce per-transaction fees. Third, consolidate relationships. If you bank with one institution and they offer multiple products (checking, savings, credit, payment processing), you might get better pricing on the overall relationship. Fourth, be prepared to escalate within the bank. A front-line relationship manager might have limited authority to discount fees, but a senior banker might have more flexibility.
However, do not negotiate so hard that you damage the relationship. A bank that prices MSB accounts conservatively (to cover its compliance costs) is preferable to a bank that prices aggressively and then exits the segment because the economics do not work. You are buying stability and longevity as much as you are buying low fees.
Managing the Banking Relationship Long-Term
A banking relationship requires active management. Many MSBs get banking and then assume it is solved forever. This is a mistake. Banks are under continuous pressure from regulators and from their own risk management, and an MSB account is always at risk of review, re-evaluation, or de-risking.
Active relationship management involves several components. First, maintain regular contact with your bank. At minimum, you should have quarterly calls with your relationship manager to review transaction volumes, discuss any changes in your business, and ensure that your business profile matches what the bank expects. If your business changes—you add new geographies, you change customer profiles, you shift your transaction mix—tell your bank proactively. Surprises lead to problems.
Second, provide your bank with regular updates on your compliance framework. If you enhance your compliance program, update your SOPs, conduct a new audit, or improve your transaction monitoring, let your bank know. Your bank is betting on your compliance being adequate, and improvements to your compliance reduce the bank's risk.
Third, respond promptly to any inquiries or requests from your bank. If your bank asks for transaction documentation, provide it quickly. If your bank asks for explanations of anomalies, provide thorough explanations. If your bank asks for enhanced monitoring on specific customer segments, implement that monitoring. A bank that sees you as responsive and cooperative is less likely to de-risk than a bank that sees you as evasive or difficult.
Fourth, manage your transaction profile carefully. If your bank expects your transactions to be concentrated in certain geographies or customer types, keep your transactions aligned with that expectation. If you want to add new geographies or customer segments, discuss it with your bank first and get agreement before you start moving transactions through those channels.
Fifth, be aware of your financial condition and make sure your bank is aware of it. If your company is stressed financially, your bank will find out eventually. It is better to tell the bank directly and discuss how you are addressing the problem than to have the bank discover it during regular monitoring and wonder why you did not disclose it.
Sixth, if your bank undergoes management changes, compliance changes, or strategic changes, pay attention. When a new compliance officer takes over, proactively reach out and introduce yourself. When your bank announces de-risking in a particular sector, assess whether you are in that sector and whether you need to move banking. A banking relationship is stable, but not infinitely stable, and you need to stay alert to changes in your bank's posture.
What to Do When Your Bank Exits You
Despite all your efforts, your bank might exit you. A bank might decide to exit all payment services customers, or it might exit you specifically based on transaction monitoring concerns, financial concerns, or business strategy.
When a bank informs you that it is closing your account, the first thing you do is get clarity on the timeline. Banks typically give sixty to ninety days notice, but verify the actual timeline. The timeline you are given is the time you have to move all your operations to a new bank.
Second, find out the bank's stated reason for the exit. The bank might say it is exiting all payment services customers, in which case this is not personal. Or the bank might cite specific concerns about your compliance, your customer base, or your transactions. Understanding the reason matters because it tells you what you need to fix before you approach your next bank.
Third, start shopping for new banking immediately. Do not wait until your exit window is almost closed. Approach multiple banks in parallel. Banks take time to make decisions, and you need to have at least one alternative lined up before your current bank's notice period ends.
Fourth, prepare a comprehensive package of documentation explaining your company, your compliance framework, and the transaction monitoring concerns (if any) that led to the exit. Be proactive about disclosing the exit to your new bank. A new bank will find out eventually that your previous bank exited you, and it is much better to disclose this yourself than to have the bank discover it in the course of its due diligence.
Fifth, if the previous bank's reasons were specific—for example, concerns about transactions to a particular geography—address those concerns directly before you approach new banks. If you had transactions to Iran and your bank exited you because of sanctions concerns, strengthen your sanctions compliance procedures before you tell a new bank about this history.
Sixth, make sure that your business operations do not stop during the transition. Plan your settlement processes, your customer communications, and your operational timelines so that the transition from one bank to another is seamless. This often requires having multiple banks briefly in parallel, which is expensive but necessary.
One nuance: if your exit reason was compliance-related, consider whether you need to address the compliance issue before you move to a new bank. If you simply move the same compliance problem to a new bank without fixing it, the new bank will discover the problem and exit you as well. But if you fix the compliance issue before transitioning, you approach the new bank from a much stronger position.
Building Redundancy: Multiple Banking Relationships
A sophisticated MSB maintains multiple banking relationships, not because all are primary, but because this creates operational resilience. If your primary bank exits, you still have at least one alternative operational bank and can transition with minimal disruption.
The economics of maintaining multiple banking relationships are not attractive. You pay multiple monthly fees, you manage multiple platforms, you implement multiple compliance relationships. But the cost of losing your primary bank and having to rush to find a new one is higher. A company that maintains a secondary banking relationship as an operational backup pays that insurance premium for the peace of mind.
How many banking relationships do you need? For a company of moderate size and stable geography, two relationships (one primary, one secondary) are reasonable. One is backup. For a company with high transaction volumes, geographic diversity, or high-risk customer profiles, three or more might make sense. The first bank is primary. The second is a full backup. The third is often a specialized provider (like a bank that focuses on international corridors) that handles specific transaction types.
Building and maintaining multiple relationships involves some complexity. You need to ensure that your compliance program is consistent across all banks. You need to make sure that your transaction monitoring works similarly across banks. You need to ensure that customer settlement is coordinated. But the infrastructure you build for one bank relationship can largely be replicated for additional banks.
International Banking for US-Licensed MSBs
A US-licensed MSB might want to maintain banking relationships in other countries to facilitate cross-border payments, international settlement, or currency exchange. This is increasingly complex because correspondent banking (the mechanism by which US banks move money internationally) is under stress, and many foreign banks are also de-risking from US money transmitters.
An MSB with international operations typically needs correspondent accounts in key corridors. A correspondent account is an account that one bank maintains with another bank to facilitate settlement of transfers. An MSB that sends money to Mexico needs a correspondent account at a Mexican bank. An MSB that sends money to the Philippines needs a correspondent account at a Philippine bank.
Correspondent accounts are becoming harder to obtain. Foreign banks are increasingly reluctant to take deposits from US money transmitters because of regulatory risk and compliance overhead. Many foreign banks have exited correspondent relationships with US banks entirely, citing regulatory pressure.
For US-licensed MSBs, international banking usually works through one of three models. First, the MSB maintains relationships with foreign money transmitter networks (like Western Union, MoneyGram, or regional networks) and settles through those networks rather than maintaining direct correspondent accounts. Second, the MSB uses a US-based payment processor or fintech platform that has established correspondent relationships in key corridors. The processor fronts the risk, and the MSB moves money through the processor. Third, the MSB establishes joint venture or partnership arrangements with local money transmitters in key markets and moves money through those partnerships rather than through direct correspondent accounts.
Each approach has tradeoffs. Established networks are stable but expensive. Payment processors are flexible but add layers of risk and operational dependencies. Local partnerships are efficient but require relationship management and sometimes capital investment.
Banking for Crypto-Adjacent MSBs
An MSB that handles cryptocurrency, stablecoins, or token-based payments faces additional banking headwinds. Many banks have de-risked from crypto entirely, regardless of regulatory status. This is because crypto carries reputational risk, undefined regulatory status, and unknown fraud risk.
A money transmitter that touches cryptocurrency should expect to spend more time finding banking, should expect to pay higher fees, and should expect more intensive compliance and monitoring requirements. The bank will want to understand your crypto risk management, your custody arrangements, your AML/KYC procedures for crypto transactions, and your stablecoin or token redemption procedures.
Banking for crypto-adjacent MSBs often means using specialized crypto-friendly banks, which themselves have higher operational risk because they are newer, smaller, and subject to rapid regulatory changes. A company banking a crypto MSB should maintain multiple banking relationships and should monitor the stability of those banks carefully.