DIY your remittance business

Remittance is a growing industry, and it shows no signs of slowing down. So there is no doubt that it’s a good industry to be a part of. There is more than one way of starting this money transfer business. You can choose to be an agent of a well-established, large money transfer company, you can choose to partner with a PaaS provider or you can do it all on your own, aka DIY. 

This article touches upon the benefits and challenges of launching a remittance business DIY-style. As the name suggests, when you choose to DIY, you will be building all aspects of remittance from scratch - be it technology, your brand, acquiring customers or acquiring license. You will get first-hand experience and knowledge of the industry.

Having said that, starting on your own comes with its own set of challenges. The DIY method can be quite expensive and time-consuming. A hefty sum of that working capital would be spent on acquiring a license and building a sophisticated technology. 

Acquiring and retaining clients is a challenge when you are new in the business- it might take time to build your own contacts and find potential buyers. Similarly you will need to allocate some funds to marketing your products and services. And then there is the cost of running your regular business operations - recruitment, training and payroll costs. 

Let’s delve into a few important variables to take into account before starting: 

License

To start a money transfer business from the US, you must have a US MTL (Money Transfer License). The cross-border remittance industry is regulations and compliance heavy. It is subject to what can be referred as a "spider web" of rules and regulations at the three levels - federal, state, and international levels.

Getting a license in one of the bigger states in the United States, like New York, California, or Texas, might often take a couple of years. If you are starting a business in a particular state, you can begin with applying for a license in a few states before expanding your territory. 

Banking and payment

Once you have a license, you must register for a bank account. Remittance companies need to deposit the funds they collect from their users into a bank account. Unfortunately, not many institutions in the US offer this to money transfer services.

Regulators will often tell you to go get a bank account while bankers will tell you to go get the license first. This industry is complicated to navigate on your own. 

There is quite a bit of de-risking taken in this industry, starting with the MSB-friendly banks after the 9/11 Patriot Act and the major de-risking that occurred after Operation Choke Point was launched back in 2013.

Compliance

In order to meet the requirements of digital monetary licensing, you will need to carry out a full set of compliance activities. You will need a group of compliance professionals to help construct and run know-your-customer, anti-money laundering programs (AML) and other fraud prevention activities.

Since you hold a license and are responsible for keeping it up, you need to make sure to keep your bank account in good standing. There legal fees are involved and lawyers are to be paid to manage a compliance firm; one must be careful about these aspects before running the application.

Technology

You will need to develop sophisticated technology from the ground up to move the funds, onboard users, fund their accounts, carry out compliance checks, and complete last-mile deliveries.

At the same time, you would want the users to have a great experience with your product, so you must develop a genuine rock-solid technology that is user-friendly in web application, a smartphone, or desktop computers. 

Payout

When you have decided what your target market is and know what your remittance corridor is, you will need to find the right partners to set up payout in your destination country. You would have to partner with a licensed entity, MTOs, or you could partner with banks in the destination country. 

To sum up, the money transfer business can be quite a complicated industry to enter on your own. There are however ways in which you can skip the challenges by operating as an Agent in the money transfer arena or you can simply opt to work with a RaaS provider to launch your remittance business.

Contact us to learn more on the different approaches on how you can start your money transfer business.