Start a Remittance Business: What is required?
Setting up a money transmitter (remittance) business from scratch is no easy feat. Other than the obvious, there are many moving parts to the business that many would-be-founders are oblivious to.
To highlight a few areas. This is not a comprehensive list. It is provided here to give you some semblance of the various facets of the industry.
- Money Transfer License (in multiple geographies)
- Correspondent Tie-up Agreements
- Due diligence
- Anti-Money Laundering
- Counter Terrorist Financing
- KYC – Know Your Customer
- KYB – Know Your Business
- CIP – Customer Identification Program
- Surety Bonds
- IT Systems and Security
- Screening (real-time and batch)
- Understanding compliance requirements in multiple geographies
- Transaction Management System
- Transaction Monitoring System
- MSB Friendly Banks
- Access to Banking (this is a really tough one)
- Segregated named accounts
- Safeguarding accounts.
- Payment Processing (ACH, Debit Cards, etc.)
- Internal staff training on AML/CTF
- Fraud & Chargebacks
- Settlement Accounts
- SWIFT Access
- Human Resources, etc.
Elements of Starting a Remittance Business
- Research the market and your competition: It’s essential to make sure there is a demand for your services in your area, and to understand what other companies in your space are offering. You should research the market to understand the size and growth potential of the industry, as well as the competition you will face. This will help you to identify potential customers and determine how to differentiate your business from competitors.
- Choose a business structure: Decide on the legal structure of your business, such as a sole proprietorship, partnership, or corporation. Each type of business structure has its own advantages and disadvantages, and the right choice for you will depend on your specific circumstances and goals. For example, a sole proprietorship may be a good choice if you are the only owner and want to keep things simple, while a corporation may be better if you have multiple owners and want to protect your personal assets.
- Obtain necessary licenses and permits: Different countries and states have different regulations for money transfer businesses. Determine what licenses and permits you need to operate legally in your area. This may include a money transmitter license, a business license, and other permits and approvals. You may also need to register with government agencies such as the Financial Crimes Enforcement Network (FinCEN) in the United States.
- Choose a money transfer software: Many software options can help you process transactions and manage your business. Research and compare different options to find the best fit your needs. Consider factors such as the software’s features and functionality, ease of use, cost, and any additional support or training offered.
- Set up a bank account: Not the easiest thing in the world to get, but you’ll need a business bank account to deposit and withdraw money from your business. Choose a bank that offers the services you need and has favorable terms, such as low fees and good customer service.
- Determine your pricing and fees: Consider factors such as the cost of doing business, market demand, and competition when setting your prices and fees. You’ll want to strike a balance between charging enough to cover your costs and make a profit, while still being competitive in the market.
- Market your business: Promote your services to potential customers through advertising, social media, and networking. Consider using targeted advertising to reach specific demographics or using referral programs to encourage current customers to bring in new business.
- Stay up to date with compliance and regulations: Probably the toughest of all. Ensure you follow all relevant laws and regulations and keep track of any updates or changes. This may include regularly reviewing and updating your policies and procedures and training your employees on compliance issues.
This page was last updated on June 5, 2023.