3 ways to launch remittance business in the US
The remittance sector has experienced rapid expansion in recent years and it is expected that worldwide remittance flows would increase by an estimated USD 930 billion by 2026.
The growth in the remittance sector has been driven by factors such as increased international migration from industrialized nations and the expansion of the global economy overall. The cost of digital technology may have intensified these effects. In the recessionary year of 2020, remittances proved to be quite resilient, which is why they are a significant source of international financing for developing and underdeveloped countries.
So, how do you start your remittance business in the US? This article caters to explain three very different approaches that one can opt to start a remittance business. Each of the approaches poses a varied set of benefits and challenges that must be closely looked upon. So, let's dive in!
Do It Yourself (DIY)
This is one of the finest approaches to learning how to start a remittance business. Having said that, building an entire remittance business from scratch can be quite expensive and time-consuming as starting a money transfer business on your own requires hefty working capital funding.
You would be spending on getting a Money Transmitter License (MTL), finding a software solution partner, managing your day-to-day operations, attracting and keeping customers, and advertising your offerings. Some key factors that need to be considered before you jump into DIY(ing) your money transfer business are:
- Banking and Payment
Be an Agent
The second way to enter the remittance service industry is as an agent for established MSBs or FIs, such as Western Union or MoneyGram. The advantage is that the entity you choose will have taken care of all the licensing and regulatory processing. However, the major drawback here is that you are constrained because you don't have a brand.
There are two ways you can start your remittance business as an agent:
- Brick and Mortar
- Digital Money Transfer
Partner with a RaaS provider
Working with a RaaS provider will allow you to acquire customers the way you want while building your own customer experience and service. The provider will help you meet all stringent regulatory requirements as well as run a fully compliant operation.
RaaS providers will typically handle banking and payment services, which are quite challenging and expensive. After Operation Choke Point in 2013 and the DRC intervention, it is now very difficult, but not impossible, for money transfer providers to open a bank account. RaaS providers will offer integrated solutions for you to manage your FX and payouts while you can focus on acquiring more customers.
Out of the other two options aforementioned, collaborating with a RaaS provider to implement remittance services is arguably the most efficient, affordable, and quickest option.
Find out more about how you can launch your remittance service and diversify your offerings in less time. Get in touch with our team.