Things to consider before starting your remittance business
It is important to understand what you're getting into before you start anything. It is important to remember that money transfer is a very compliance- heavy business. No matter where you are, operating one involves abiding by the rules that have been placed to ensure the smooth functioning of the money transfer operations from start to end.
No matter how large the industry is, if you don't have a specific problem you're trying to solve in mind, it will be hard to succeed in your mission.
Get familiar with the industry
It’s important to ask yourself some important questions- who is your target market - if everyone is your target market, you certainly need to perform some additional research. How are you going to outperform the incumbent? What are your core principles and mission? And then you get accustomed with the remittance lingo
The remittance industry uses jargon just like any other industry. Some of the abbreviations used are KYC, MTO, MSB, SAR, RTP, CIP etc. Similarly, you will need to know what a correspondent bank is, what an MTL license is, and what an agent means. You ought to be able to decipher the industry's terminology and comprehend what it means and why it is used. Figure out what they mean and why they exist.
Regulatory and compliance requirements
Starting a remittance business entails acquiring licenses and complying with regulations, which aren't particularly thrilling or exciting, but even the best company in the world has some level of complexity.
If you are looking to start a remittance business in the US, you must apply for a money transfer license in all 50 US states if you plan to offer your solution to everyone in the US. Once you have your license, you need to go get the bank account for the deposits. You will need a payment processing partner to let your end user fund accounts via ACH or Cards. . And then you will need to build a compliance program for KYC, and AML, and finally, find a licensed partner in the beneficiary country where you can payout the transactions. You can build a flow in different ways but in essence, you will need all of the above to build a compliant end to end solution for money transfer.
Gather your funds
Once you cover regulations, things could get more challenging. Conduct market research to determine the addressable market for the services you wish to offer, as well as the providers of those services and their prices. The most crucial thing is to raise money, maybe at least USD 100,000-150,000.
Building a remittance solution is expensive because your solution needs to comply with regulation. As a result, you will need to allocate funds of about USD 50,000, give or take, a year for SaaS fees to a provider who is enabling your product and an additional USD 50,000- 100,000 for sales and marketing so you can market your product and compete with your niche offering to end users with the value you promise.
If you don't already have that much money, you should start raising funds now, because starting a business without it is unlikely.
Having said that, if you already have an established company, and are looking to add remittance as an additional service to your existing user base, you can avoid a big chunk of the cost.You may only need to offer a global payout solution, this should cost you roughly USD 30,000– 40,000 per year, give or take.
Choose your territory
It is important to adhere to all sides of the regulatory framework to ensure money transfers operate legally and, therefore, understanding where you wish to originate and settle the transaction is important.
For example, if you are sending money from the US to Kenya, you must also be aware of Kenya's rules and licensing requirements because this is how the end user will receive the funds; it is a compliant ecosystem. Remittance is pretty simple if only two parties—a sender and a receiver—are involved
Having a niche territory is also important to validate a market for the sales and marketing effort.
Machnet has more than a decade's worth of expertise in the remittance industry. If you are interested in starting your own remittance business, contact us and we can offer the assistance you require.