FAQs for Remittance-as-a-Service
These are the most commonly asked questions on the Remittance-as-a-Service offering.
How long does it take to be up and running?
The always is, it depends. But on an average you can be up and running in 4-5 weeks if all of your information, technology and monetary factors are ready. Most clients are up and running in 6-8 weeks.
Is there a discount for startups?
The principal license holders are in this for business. The prices provided to you are approximate. In some instances, depending on your business plan, etc. you might get a discount. But all this is determined after you’ve gone through the evaluation, and the service provider has had a chance to talk to you. Haggling in this business, especially those who are constantly asking for discounts, is looked down upon.
For a “freshly founded” startup, does that mean that we can only qualify for the max rate and work our way down to the Average or Low? If not, Is there any information that can be shared in the initial stages to help determine what we can qualify for?
You get down to the average if you are doing between $1MM to $5MM per month. Anything above that, and you would qualify for the lowest rate. But all this depends on your 90 days consistent output and the provider that works with you. That is pretty much the only qualification criteria. As a start up you will not qualify for average, or low.
Do we get the interbank (mid-market rate)?
The solution provider does NOT care if the rate is Mid-Market, etc. as they make their money on the volume. You have to understand two possible scenarios, and for each scenario, remember, the FX rate is quoted by the Beneficiary country’s bank. (a) The Solution provider may already have an established relationship with a correspondent Money Transfer Operator or a Bank in the Beneficiary country. Whatever rate they quote, would be provided to you. There is no vagueness in this. It is 100% transparent. You, may or may-not like this rate. (b) You may want the solution provider to work with an alternative provider, with whom the solution provider may not have a relationship with. Once the relationship is established (between 1-3 months), then you can benefit from the rate. Mid-market rate or the interbank rate is in many cases usually not available, as for that to happen, transaction volume needs to be high. Startups rarely qualify for something like that. Think daily transaction volume starting at $25 Million or higher. There is no way to assess that pre-hand. However, once you are introduced to a provider, then you can assess these rates & numbers to your liking. Can this rate be the mid-market rate? Sure, it can be, but it varies from country to country.
Why do I have to put up the pre-funding money?
Pre-funding money is always put up by the entity that is generating (or originating) the transaction. In this case, the solution provider is generating the transaction, but they are doing so, for you, on your behalf, as you want to be in this business. As that is the case, you will have to front the pre-funding money. No solution provider is going to put up their own capital for you to benefit from. If you were to get your own licenses, you would have to put up this money? So, same scenario here.
How will I compete with others in the market?
Almost every solution provider that we work with, is cognizant of the market prices. It would be meaningless if the rates provided to you were not in line with what the market demands. The wholesale rate provided to you, are very price competitive. Enough for you to make money on top, whatever margin you wish to secure. There is nothing in the process that would make you sign up and only later you find out you are in a contract with really bad rates with which you cannot compete. The negotiation and rate transparency between you and the solution provider will be direct. It is up to you to determine if what the rates being provided to you, is something you would like to sign a contract on.
Do I have to use their technology? Can I not use my own?
You will have to use their API or web (if you don’t have a web service ready). Everything is provided for by the solution provider, so that they manage the compliance, payment processing & settlement, transaction management, ID/KYC, etc. You simply have to use their API and develop your UI/UX on top of it.
Who is responsible for anti-money laundering? Know your customer? compliance?
The solution provider is. That is the beauty of this setup. You are not legally responsible for any such issues like AML, CFT, PF, KYC, KYCC, CIP, Compliance. All the 3-letter acronyms you can throw at it, the service provider is responsible for it. You are not responsible for such areas.
Is an API provided for?
Yes, an API is provided for you to do your own development on. Your app will be powered by the service provider’s API.
What does the ‘introducer’ fees include?
The introducer fees are more than just finding a licensed financial institution for you to work with. It typically involves a few hours or pre-screening work and then an equal amount of work goes into talking with financial institutions who will sponsor you for your business case. Once the introduction is being made, you will have direct access to the LFI (licensed financial institution) to conduct various activities like sign a non-disclosure agreement with them, perform due diligence (both ways), look at the legal drafts of the contracts you will be signing, share your transaction set, flow of funds, have a look at the API (for tech integration) and negotiate & discuss your term sheet.
How many beneficiary countries can I have?
First time RaaS customers are restricted to five countries. Later on, as they become more acclimatized to the market and the comfort level is attained, you can request more beneficiary countries to be added. There may/may-not be a charge for this, depending on your service provider?
How much commission would you charge me for finding me a service provider for this remittance-as-a-service?
You can see my rates here: Money Transfer Operator License Coverage Consulting Fees.
How much does the Remittance-as-a-Service (RaaS) cost?
The answer is, it depends. Here are broad ranges and the charges you would be expected to pay: Money Transmitter License Coverage Financials.
How much money would I need to start this RaaS business?
I cannot answer that. However, I can tell you that you would need to have approximately US$ 75,000 to enter into the business (this includes limited pre-funding), but does not include my consulting fees.
Barring your referral fees, realistically what is the most minimum amount I can start money transfer business with?
This is a tough question, it depends which provider will work with you. Barring my fees (of US$ 20,000) this is what you typically should prepare for: (i) Reserve Requirement: US$ 10,000 (minimum) (ii) Pre-funding Amount: US$ 15,000 (minimum), (iii) One-time Setup Fees: US$ 15,000 (minimum), and (iv) Monthly Fees: US$ 2,000/month (minimum). If we take these amounts, then you’re looking at an ABSOLUTE minimum of US$ 65,000 (I would round it off to US$ 75,000). This is INSANELY low price to get start under your own brand in the United States.
In Remittance-as-a-Service (RaaS), If I understood you correctly, I will just simply give you our branding (LOGO) and we will be good to go?
Pretty much. That is correct. That is the minimalist approach. You give logo, and you simply market the website you have. For example, your company is called ABCMoneyTransfer.com – then you market this website. The license holder will run and maintain this website for you. As you learn the business more, you can then opt to go on your own.
Is there a special type of company we need to form in to be able to do Remittance-as-a-Service?
There is no restriction. As per the video (if you saw them), you will be treated as an ISO (Independent Sales Organization). You will not be getting a license in your name. You would essentially be ‘renting’ a license that someone already has and they would be the program manager for your company’s product/service. There is no restriction on the ‘type’ of company you might have. An LLC is as good as an Inc. It is important to note, you are not operating as a money transfer company. The PLH (Principal License Holder) is. They have the licenses. What they are essentially doing is running the program, under their licenses, for YOUR brand.
Can my company be incorporated outside the United States for example, even though the RaaS we want is from the US?
You can be incorporated anywhere in the world. You don’t necessarily have to be incorporated in the geography from where you are seeking license umbrella coverage. Though it helps to make things a lot easier if you are incorporated in the same country, but it is not mandatory.
What happens under a RaaS program when you want to use a specific provider in the beneficiary country?
There are two options you can exercise: Option A: The PLH (Principal License Holder) may already have an existing relationship with a settlement & payout partner in the beneficiary country, so which bring us to two further cases: (i). You like their rates/network, and decide to carry on, or, (ii). You do not like their rates/network and decide not to carry on with their existing provider and ask them to reconsider to option (B). Which brings us to Option B: You can request the PLH to establish a new correspondent tie-up with the preferred partner you would like them to work with in the beneficiary country. Please ensure this during the time of your negotiation with the partner. PLH reserves all rights not to enter into an agreement, however, in most cases they oblige if you have a solid case.