What is Remittance-as-a-Service (RaaS)?

What is Remittance-as-a-Service (or RaaS), and what does this service bring you? This is an extremely important option for you to consider, especially if you are starting or setting up a company that would like to work in the money transfer space.

Setting up a cross-border payments company is no easy feat. The most challenging part, other than learning about the nuances of the business itself, are issues like:

  • Money Transfer License (in multiple geographies)
  • Pre-funding
  • Correspondent Tie-up Agreements
  • Due diligence
  • Compliance
  • Anti-Money Laundering
  • Counter Terrorist Financing
  • KYC – Know Your Customer
  • KYB – Know Your Business
  • CIP – Customer Identification Program
  • Reporting
  • Auditing
  • Surety Bonds
  • IT Systems and Security
  • Screening (real-time and batch)
  • Understanding compliance requirements in multiple geographies
  • Transaction Management System
  • Transaction Monitoring System
  • Risk Assessment
  • MSB Friendly Banks
  • Access to Banking (this is a 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.

All of the above costs money! Capital. Dollars. Money that is in limited supply. So how does Remittance-as-a-Service help?

The whole idea behind RaaS is to enable would-be entrepreneurs, startups, and incumbents to be able to take advantage of this being offered as a service and not have to manage all of the tasks listed above.

Best of it is to think of it as a white-label service or a ‘lease’ service. An even easier example is to look at Gmail. You could setup your mail server, and you would need to do a lot of the heavy lifting, get a physical hardware server, OS, e-mailing software, security, hardening, internet connection (redundant), IPs, networking gear, cooling, data center, personnel, routing, spam filtering services, fine-tuning, etc. or just pay a few dollars a month, per mailbox and get this service from Google.

RaaS is no different. For a few dollars per month (relatively) speaking, you get all the services of a remittances company available under your brand.

To give you another analogy. Let’s assume you are in the US and want to start a taxi service. So, now you decided you need a taxi in each state (one taxi = one money transmitter license. Having said this, which of the following three options would you choose?

  1. Build/assemble your own car from scratch and make it into a taxi?
  2. Go to a dealership and buy a car and use that as a taxi?
  3. Go to the dealership and lease a car and use that as a taxi?

Chances are, you would opt for Option # 3. Well, congratulations, you’ve just chosen the X-as-a-Service model.

Earlier I wrote a paper (PDF) that compared, in the United States, the money transmitter license cost to that of a money transmitter license lease.

This page was last updated on February 5, 2024.

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