In 2016, the global payment industry witnessed a growth of 7 per cent in overall banking revenues, as per McKinsey’s Global Payment Map report of 2017. The report also noted down few insights, one being that of cross border transactions which yield higher margins than the domestic payment segment.
With more non-bank players entering the cross-border payment space due to the evolution of e-commerce and open banking system, there will be an undoubted hike in margins in cross border transactions in the near future.
Back in 2013, when there was no digital cross-border payment platform other than traditional Money Transfer Operators (MTO) and banks, Prajit Nanu saw the dire need of one such platform. The margin charged on FX rates, which is the difference between inter-bank currency conversion rate and the rate quoted by banks and MTOs, was higher than the real mid-market rate or FX rate that should ideally be charged.
After this observation, and discussion with Michael Bermingham, Nanu’s friend who dealt with FX compliance across the US, EU, and Asia, both decided to provide Instant Remittance to the people. And that’s how InstaRem was brought to the global digital platform.
The Fine-Tech of InstaRem and how it became one of the leading companies in 4 years
InstaRem was incorporated in 2014 in Singapore. It has now become a leading cross border digital payment company with business operations in Singapore, Hong Kong, Australia, USA, Lithuania, Canada, India, and Malaysia. This year, it also expanded the services to Europe and North America.
When asked what made InstaRem’s customer base so strong, Prajit explained, “The global average cost of sending remittances is around 7%, which is more than double of the UN’s sustainable developments goal target of 3%. InstaRem offers efficient solutions to these challenges both for the Retail as well as Corporate/SME users.”
Further explaining how it benefits an individual, Nanu elaborated that his platform offers efficient money transfers by offering the mid-market rates sourced directly from Reuters. Their policy of zero margins on FX conversions, unlike the hidden cost quoted by most banks and money transfer services, help them charge only a nominal fee, which is not more than 1%. This fee is to cover the costs of processing the transaction.
There are some issues expected while dealing with SMEs and corporate clients since the business transaction involves a big amount.
Addressing this issue, Nanu claimed with a smile, “Our “masspay” system at InstaRem allows for a batch file upload and an API integration to its users to manage their high-volume payouts to multiple beneficiaries in multiple currencies. We have a coverage of 8000+ banks in 55+ countries.”
Talking about the challenges that came his way, Nanu recollected his initial years in the business. He said, ”It was the time when even the digital payment platforms were at a nascent stage, especially in India. It was difficult to get customers to move to a digital platform from traditional methods. But eventually, people started realising that there are better offers in digital space.”
Another challenge that many startups suffer from is the pain of raising capital. Same was the case with InstaRem, when the company was just two founders and their powerpoint presentation. Rocket Internet was the only venture investor that pooled in US$500,000 in January 2015. Two and a half years later, InstaRem has now received around US$ 20 million, and is planning further expansion into other high-traffic corridors in the Middle East and Africa, where the average cost of remittance is still very high.
InstaReming in India
The Reserve Bank of India has been stringent with extending approvals to provide service for outward remittance. Only banks are allowed to function and deal in outbound money transfers. March 2018 was the month when these rules changed and a new chapter began for InstaRem, as it became the first non-bank company to get the RBI approval to offer outbound money transfer services from India in partnership with DCB Bank, an authorised dealer Category-I Bank.
This can be a great deal for the Singapore-based firm because Indians are increasingly engaging with their overseas counterparts in relation to business, leisure, medical, education, and entertainment-related activities.
Apart from the RBI’s policy inclusion, InstaRem founder and Jeff Bezos’s admirer Nanu also expressed gratitude for Indian government’s initiative to support start-ups. He only seeked one help from the government and said, ”We would expect the government to recognise the potential of fintech in achieving financial inclusion. It is desirable that the government offers fintechs a level-playing field and treats them at par with banks and extends sandboxing so that they can launch products/services to assess their potential benefits and risks to consumers in the market.”
With the idea to provide them a better option and save people from paying the hidden cost that the banks quote, InstaRem cofounder Nanu concluded on a positive note and said, “While fintech has been radically transforming the way financial services are delivered and consumed globally, we have barely scratched the surface when it comes to cross-border money transfers. With growing awareness and internet penetration, digital non-banking money transfer service providers like InstaReM will take an even larger share of the remittance market.”