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?
- Build/assemble your own car from scratch and make it into a taxi?
- Go to a dealership and buy a car and use that as a taxi?
- 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.
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This page was last updated on February 5, 2024.
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