A Complete Guide On How to Start Providing Money Remittance Service

The remittance market is experiencing a massive boom. People settled abroad send money to their home country, and businesses offering global services also rely heavily on international money transfers. According to Statista, by the end of 2029, there are expected to be around 18.83 million digital remittance users. With this growing demand, starting your own remittance service can be a highly beneficial business if done correctly. However, the remittance sector is highly regulated and involves various complexities revolving around technology, security, and more. In this guide, we will help you understand the technical requirements, legal regulations, and everything you should know to start an international money transfer business and provide remittance services.

Understanding A Remittance Service 

What is a Remittance Service?

Remittance service involves helping individuals and other businesses transfer money across borders. A remittance business offering these services acts as an intermediary to facilitate successful cross-border financial transactions. A remittance service is extremely useful for promoting business transactions or sending money to support families.

Here’s an overview of how remittance services work:

• A sender initiates the remittance service request.
• The remittance business processes the payment based on the details provided by the sender while also converting the currency at the applicable exchange rate.
• The funds are delivered to the recipient in another country via cash pickup, bank account, mobile wallet, or otherwise.

Different Modes Of Remittance Services

While the general flow of remittance remains the same, the service can be offered through various channels. Here’s a closer look at each option:

• Bank Transfer: Carried out using online banking applications directly from one account to another.
• Wire Transfer: Money is transferred from one bank account to another, involving an intermediary bank.
• In-Person Transfer: Funds are transferred to the recipient in person without the use of bank accounts.

Types of Money Remittance Services

There are different types of international money transfer services. Here is the basic classification:

• Conventional Services: These consist of bank branches and remittance centers that carry out in-person money transfers.
• Online Remittance services: These facilitate international money transfers using advanced remittance software that is accessible through both mobile devices and web browsers.
• Peer-to-Peer (P2P) Payment services: The sender can instantly transfer money to the receiver’s digital wallet or even bank account through these services.
• Mobile money transfer Services: These services are specifically provided through mobile devices, serving unbanked areas of the world.
• Cryptocurrency-Based Remittance Services: It involves the use of blockchain technology to carry out cryptocurrency transactions.

How To Start A Remittance Business To Provide Remittance Services?

While there are various types of remittance services, online money transfer services represent the most lucrative business model to invest in. It is relatively easy to enter the market, and the potential for profit is significant.

Let’s explore the step-by-step process to launch an international money transfer business:

Define USP and Target Audience

Although it’s true for starting any type of business, conducting deep market research for a remittance business is extremely important. Thus, make sure to analyze the remittance market, your competitors, and your target audience, as well as the challenges they are currently facing. It would assist you in identifying and establishing a unique selling point for your company, as well as developing a solid business strategy based on it.

Sort Your Business Model

You need to decide on the business model you want to use for providing remittance services, such as a sole proprietorship, partnership, or corporation. Make sure to research well and only choose the model that suits your long-term business goals. Each one has different licensing options, initial investment requirements, technical infrastructure, and much more.

Obtain Required Licenses And Permits

A remittance business operates globally and is subject to numerous legal regulations and laws. Therefore, it is essential to conduct thorough research to understand the regulatory framework your remittance business must follow to operate legally. You may need to gather and submit business registration documents, proof of identity, financial statements, and any other documents required by both national and international regulatory authorities.

The most important legal requirements include adherence to Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) regulations. Moreover, specific licensing requirements may vary as per the business location and typically include

• Payment Institution License
• Electronic Money License
• Money Transmitter License (MTL)
• Financial Services License from a Central Bank

In countries like the United States, remittance businesses have to follow the federal, state, and local regulations. In the European Union, the Payment Services Directive 2 (PSD2) mandates that remittance businesses obtain a Payment Institution License to offer cross-border money transfer services. You can consult an advocate and a legal advisor to gain a better understanding of all the regulations, rather than relying solely on research.

Setting Up A Money Transfer Software

When providing money transfer services, it is critical to use smart money transfer software to ensure compliance with legal regulations as well as the security of finances and sensitive information of remitters.

A remittance software should have key features, including

• User registration and verification (KYC)
• Account management
• Compliance integration
• Live tracking
• Currency exchange rate management
• Transaction routing and processing
• Fee calculation and invoicing
• Integrated multiple payment gateways

Additionally, this international money transfer software should implement advanced security protocols, such as end-to-end encryption, two-factor authentication, fraud monitoring, AML/KYC adherence, and PCI DSS compliance. You can consider outsourcing a white-label money transfer software solution from a reputable remittance software provider like Tech Remit.

Create A Business Bank Account

You will need a business bank account to carry out numerous international financial transactions and provide remittance services. Just make sure to partner with a secure and reputable banking service provider that offers complete transparency and aligns with your business goals.

Structure Revenue Streams

When offering remittance services, a company can make money in two different ways. One mode of revenue is through set fees for international transactions and another is a margin on the exchange rate. Now, you can either set a fixed fee for both or choose a percentage-based fee structure.

Always examine the pricing strategies of your competitors and consider return on investment when setting your service charges.

Effective Marketing Strategies

No matter how good your remittance services are or how secure your platform is, if you don’t invest time and effort into marketing your business, it will all be for nothing. Consider hiring a marketing team or outsourcing your marketing services to attract clients effectively.

Final word

In conclusion, starting a business that provides remittance services requires extensive research, proper planning, compliance management, and other factors. However, with the right technological infrastructure, you can set your remittance business on the right path to success. 

Tech Remit is a software development company that creates white-label money remittance software to facilitate international money transfers. We prioritize compliance, security, and ease in our remittance software solutions to simplify remittance services for businesses. Not only that, but we also provide comprehensive consulting to ensure a smooth transition to your new money remittance app.  Contact us to learn more about how we can help you.

Also Read : The Pros and Cons of Peer-to-Peer Remittance Systems