To understand Remittance-as-a-Service (or Money Transfer-as-a-Service) perhaps it is better if we revisit a tangential example. In the business world, there is a concept, known as Software-as-a-Service (or SaaS). Instead of buying the software, installing it, investing in the relevant infrastructure to maintain it and the people to administer it, it is easier to ‘rent’ this service. One of the best known example is the email service. Prior to Yahoo! Mail, Hotmail or GMail, if you wanted an email service, you had to invest in servers, software, networking gearing, internet connectivity, power, UPS, etc. to be able to host and run your mail server. Today, you simply subscribe or rent your mail service. Companies like Microsoft, Google, GoDaddy, Apple, and others provide this service to you. All you need is your credit card and you’re good to live.
Email is obviously a much simpler example. The more complex the environment, the more difficult it becomes to find a solution provider that it is to offer the service as a SaaS based model. Add complex regulatory frameworks as in the banking & payments world, along with the prerequisites to get licensed, etc. the service offering becomes more rare.
Another way of looking at this example is as follows: If you were to start a taxi service in some large city, and you would need a fleet of 50 cars, which one of the following would you choose:
(a). Designing & building from scratch your own 50 cars.
(b). Buying 50 cars from a dealership
(c). Leasing 50 cars from a dealership.
If you have any business (read: financial) acumen, you would opt for option C, as that is the best way of approaching the business. You can easily rent these 50 cars for a year and see how your business works out. If it expands and you see it makes better sense to lease more cars, you will lease them. Perhaps your accountant might tell you that it is more economical to buy the cars rather than lease them. And if demands goes through the roof, it might be a good idea to look into designing and building your own taxi cab from scratch (think about the Black UK cab).
In the unlikely event the business does not take off, it is easier to get off a lease after one year rather than option A or B. It also requires less capital.
Remittance-as-a-Service is option C. You are essentially renting (or leasing) the licenses and the accompanying infrastructure / services.
So what exactly is remittance-as-a-service?
In 2013, Faisal Khan coined the phrase “Remittance-as-a-Service” or RaaS. The whole goal was to provide a one-window, turnkey solution to the whole money transfer business, by offering under a single package remittance-as-a-service.
Remittance-as-a-Service is the ability for a would-be money transfer startup to be able to offer remittance services, under their own brand name to their clients. The RaaS offering includes:
- Access to banking
- Money transfer licenses (both federal and state, where applicable)
- Compliance (Anti-Money Laundering, Counter Financing of Terrorism and Counter Proliferation of Finance)
- Customer Identity Program (KYC – Know Your Customer)
- Technology stack (including provisioning of APIs)
- Regulatory filing of transactions and reporting
- Payment processing
- Transaction settlement
All this is offered under a white-labeled program, which is affordable and extremely cost effective. Simply put, remittance-as-a-service allows you to go to market earlier at a fraction of the cost.
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This page was last updated on December 8, 2020.