A number of people today emigrate from their country for work, education, or in search of better living conditions. People also travel abroad frequently for both – business and pleasure, more often as compared to a few years back. But whenever they make cross-border payment, there are many challenges that they encounter. These include but are not limited to high cost, uncertainty, slow speed and the probability of lost remittance information. Many times, payment done at one country may not provide the receiver with the same value due to huge hidden fees associated with the transaction that can flow through multiple banks, increasing chances of illicit activities or errors.
But with digitization, multiple solutions have now emerged that make cross-border transactions simple and quicker. We talked to Prajit Nanu, CEO of InstaReM, a reliable, quick, and well-priced money transfer solution.
InstaReM (short for Instant Remittance) is a Singapore-headquartered cross-border payments company that’s licensed as a Money Services Business (MSB) in Singapore, Australia, Hong Kong, Malaysia, India and Canada. InstaReM has created a unique payment mesh in Asia, which is being leveraged by financial institutions, SMEs and individuals to make fast and low-cost cross-border payments to more than 60 countries across the globe.
Read on as Prajit discusses the challenges associated with cross-border payments, how InstaReM addresses them, his take on blockchain and cryptocurrencies and how usage of advanced technologies help them to be successful.
- In less than 5 years, you changed your idea into a successful venture. Please share a quick primer on InstaReM inception and its milestones.
InstaReM was set up as a result of a distressing personal experience while making an international money transfer. Back in 2013, I was organizing a bachelor party for a friend at a resort in Phuket, Thailand. After some online search, I found a terrific resort and booked it. The resort wanted me to wire INR 40,000 (US$640) to their account as a bank-to-bank transfer. I didn’t think too much of it until my bank in Mumbai demanded tons of documentation that was simply too much effort for a not-so-huge one-off transfer. Instead, I found a friend based in Thailand, transferred money to his Indian bank account, and he paid for the resort in Thai Baht. Later, the same friend revealed that transferring money across borders was no cheap or simple transaction. As someone who sent money to India regularly, his bank was charging him a small fortune for every transaction that, over time, made a real dent. The value the friend was sending in Thai Baht was not what was being reflected in what his family received in Indian Rupees. It was this experience that first opened my eyes to reality: millions of people all over the world are paying unreasonably high dues just to get their money across.
Michael Bermingham, the other co-founder, was the first person I called when I strongly felt the urgent need for a convenient, transparent and affordable digital funds transfer platform that would allow individuals and businesses to send money across borders at lower fees cost no hidden fees or charges. After tons of in-depth research on identifying a better way to move money across borders, Mike and I got started on a technology-based solution. Our first technology solution and platform was crafted in a coffee shop! Combining Michael’s expertise in compliance and my experience in sales & consulting, we incorporated InstaReM in August 2014 in Singapore. We started operations in Australia-India corridor as soon as we had our money transfer platform was ready in August 2015.
Life has been in the fifth-gear ever since. We got US$ 5mn in Series A funding and started our Singapore and Hong Kong operations in 2016. In 2017, we got Series B funding of US$ 13mn, got licenses / regulatory approvals in the US, Canada, European Union, Malaysia and India while our global team size crossed the 100-mark. InstaReM got top awards at Singapore Fintech Festival, India Fintech Festival and ET Net FinTech Awards in Hong Kong in 2017.
We consolidated operations in 2018, building a global team and upgrading our money transfer platform. Another significant milestone of 2018 was our collaboration with blockchain major Ripple and receiving of the Blockchain Innovation Award at the Swell by Ripple conference in San Francisco. Towards the end of 2018, we concluded the first-close of US$ 20 million of our Series C round.
We are expecting 2019 to be another milestone year with the final close of our Series C round funding round, our foray into the Forex Cards business and licenses in the new markets like Japan and Indonesia.
- You worked as a sales and consulting professional with a couple of leading global business-processes outsourcing firms in India. What pushed you to choose Singapore as a base for your fintech startup?
When I was in India back in 2013 contemplating to incorporate InstaReM, we had two active VC discussions with Singapore-based VC’s who both told me that I had a better chance of raising capital if I moved to Singapore. Given how much I wanted the business, I applied for the EP on a Friday, got it approved by Tuesday and told my wife that we were moving to Singapore. With less than $300,000 in our bank accounts and a 6-month runway, I took the call to move to one of the most expensive cities in the world. One of the VC’s was Vertex Ventures and we raised our Series A within 5 months of moving to Singapore.
Singapore is an ideal place for fintech start-ups. Singapore’s Fintech landscape enjoys strong support from its central bank and regulatory body, the Monetary Authority of Singapore (MAS). MAS has laid out a detailed roadmap that is helping transform the country into a Smart Financial Center where innovation and technology would be pervasive. Leveraging its regulatory role, MAS has fostered a conducive and supportive environment for innovation by private-sector players, and the establishment and growth of remittance start-ups and next-generation disruptors. Our decision to set up our headquarters in Singapore has paid off very handsomely and is one of the key factors behind InstaReM’s success.
- What is InstaReM’s core proposition? How has it disrupted the money transfer industry?
InstaReM is the only digital cross-border payments company from the Asia-Pacific with a presence in North America and Europe. InstaReM has created a global payment mesh, which is being leveraged by financial institutions, corporations and individuals to make fast low-cost cross-border payments. We power local payments to more than 55 countries and with 8000+ banking partnerships worldwide, reaching out to 3.21 billion people across the globe.
With our disruptive peer-to-peer model, we are able to bypass the entire chain process to facilitate the same transaction directly to the receiver’s bank account for much more competitive charges – as little as 0.5% of the transaction amount – compared to 6-7% charged by the traditional players. Unlike traditional players like banks and money transfer operators, we do not add any margins on FX rates, which means the transfer takes place at the same exchange rate that you see on Google or Reuters. We also bypass the SWIFT, which not only makes money transfers more cost-effective but also quicker for the recipients.
- The cross-border e-payment environment is dynamic and complex. What are the core challenges of cross-border payment services and how do you tackle them?
Money Services Business anywhere in the world is built on trust and it takes an extraordinary amount of time, effort and patience to build trust. Within four years of commencing operations, we – a relatively young fintech start-up – have managed to acquire Money Services Business licenses/approvals in some of the highly-regulated markets including Australia, Singapore, Hong Kong, Malaysia, India, European Union and the US on the back of our strong credentials.
One of the biggest challenges in our business is obtaining regulatory approvals/licenses, especially in Asia. Unlike the EU, where a single license from a member state gives access to the entire EU market, one has to acquire separate licenses in each individual country in Asia. We see this as a continued challenge for the next 2-3 years as regulators must take a cautious approach – rightly so – before extending licenses/approvals for a business that involves dealing with people’s money.
The other challenge is getting customers to move to the digital platform from traditional methods. There is general inertia among the older generation in exploring digital platforms. But with a razor-sharp focus on lowering of costs and superior customer experience, our customer retention rate is as high as 80-85%.
Acquiring talent is expected to be another big challenge for us in the next 2-3 years. On one side, it is difficult to get the right talent with necessary skill-sets, on the other hand, the cost of talent has been high.
Talking about Singapore, living costs in Singapore are relatively higher compared to the other Southeast Asian countries. That’s also true for the expenses of starting and running a business. Employees expect higher salaries and office rents are relatively higher. We are learning to overcome these challenges by managing our costs better. To keep our overheads manageable, we get most of our operations and back-end work done in India, which is not as expensive as Singapore.
- Business banking is expensive and painful, especially for SMEs. How InstaReM is helping to improve payments from SMEs?
For SMEs, the immediate problem to solve is to provide these merchants who work with overseas counterparts, an effective, transparent, cost-effective way to pay their overseas staff, associates and suppliers. For SMEs, especially in the emerging markets, options available for overseas payment services are limited, as banks typically prefer to work with very large firms, and not so much with small businesses. From our extensive interactions with the SME customers, we realized that there are many of them who need to regularly make multiple payments to their suppliers, staff, freelancers and other stakeholders located in different parts of the world. Setting up only one transaction at a time is not efficient.
At InstaReM, we understand that business banking is notoriously expensive and difficult to set up and manage, especially for small businesses. Especially designed keeping SMEs in mind, InstaReM’s multi-currency payments’ feature takes the pain out of this process, while saving a lot of time and effort for businesses.
InstaReM’s multi-currency payments feature enables SME users to make multiple payments at a time to recipients in 55+ countries. With the ability to set up multiple transactions in one go, an SME user can make transfers to multiple beneficiaries in multiple currencies at the click of a button. There are no setup fees or monthly charges to use this feature and it costs nothing extra to send or receive payments. With its wider reach, reasonable costs and SME-friendly features, InstaReM is fast-emerging as a preferred choice over banks in emerging markets compared to a small pool of local competitors.
Suggested reading: “Banks to experiment with new mobile applications and voice-enabled gadgets to enhance both delivery and contextual personalization”—Saket Agarwal, Global CEO, Spice Money
- While the debate continues over the use of cryptocurrency as a legitimate way to make payments, what’s your take on the usage of cryptocurrencies in digital payment? Does InstaReM use any cryptocurrency as payment?
We are seeking clarity on technical and regulatory feasibility for the use of cryptocurrencies in cross-border money transfers. While we do not use cryptocurrencies to facilitate cross-border money transfers on our platform, we have entered into a partnership with the enterprise blockchain payments solution leader Ripple by becoming a member of RippleNet, Ripple’s network of banks and other financial institutions which provides real-time messaging, clearing and settlement of financial transactions.
RippleNet offers an easy, integrated solution to instantly make speedier, hassle-free, international payouts in different markets across Latin America and Asia and offer low-cost transfer rates that are 98% cheaper than the traditional bank payment methods. Within weeks of getting on RippleNet, we began leveraging their advanced blockchain technology to process transactions in real-time payments to our customers as well as for other members on RippleNet. RippleNet is also helping us add customers in multiple markets.
- Blockchain is steadily advancing into the world of payments. What’s your take on efficient cash transfers through blockchain technology application?
Our experience with the Blockchain, the underlying technology behind cryptocurrencies, has been quite encouraging. Given its decentralized nature, transparency, speed and the efficiency that it offers, blockchain, has a great potential to become the preferred way to conduct cross-border money transfers.
The focus for us is to improve the speed of transactions and that is the key challenge that RippleNet is helping us to solve. Ripple’s blockchain technology will allow our banking partners, for instance, to send money to, say, the UK and have the transaction completed in five minutes. It’s huge progress if you take into account that the very same payment sent through the traditional channels take at least 24 hours (but often it can be 48 to 72) to reach its destination.
- Which technologies are used by InstaReM for conducting its money transfer services?
For different purposes, we use different technology solutions. We use React/React Native for our UI/Apps, Java and NodeJs for APIs and Postgres and Mongo for databases. Integrations are managed using Apache Camel-Enterprise Service Bus. Our platform architecture is micro-service based and is deployed on Amazon AWS cloud.
- Investors are the pulse of fintechs. Please share your thoughts and also detail what does it take to convince the investors?
Totally agree. Investors – Angel Investors, Venture Capitalists, Private Equity Funds and other Fintech enthusiasts – are the most important link within the fintech ecosystem and getting the right investors is critical for the success of a business. Start-ups must choose their investors wisely. Often, young start-ups make the mistake of picking the wrong investors. There are investors who have the money but do not share the same vision as the founders of the start-up, which may lead to conflicts.
From a fintech perspective, one must get the business model correct. Founders must understand their product proposition and their differentiating factor over a few months before approaching investors. Their own conviction and ability to make investors believe in the same is the single most important factor that can potentially convince investors. Other factors like the promoters’ background, understanding of the industry, and its market potential also aid in getting investors interested in what they are doing.
Talking about my own experience, we did not get funding from the first investors we approached. We had our own share of rejections before we found someone who believed in our value proposition. We were able to develop our early money transfer platform with funding from Berlin-based Rocket Internet. They gave us half a million when we were just two guys with a PowerPoint. They believed in what we were trying to build, took a nominal stake even if it wasn’t normal for them to do so in this market, and still continue to invest in us.
- InstaReM has joined Visa’s fintech fast-track programme in the Asia Pacific. How does this card program fit into your future plans of cross border payments? Please outline.
The Visa fintech fast-track program makes it easier for fintechs to access the global Visa payments’ network. This program provides a new commercial framework that includes eased access to Visa’s payment capabilities and streamlined processes to support companies of different sizes and at different growth phases. It enables InstaReM to leverage Visa’s and its own existing payment infrastructure to deliver new commercial experiences to the fintechs desirous of being a part of the payments and remittances ecosystem in Singapore without having to wait for six-to-nine months that it takes to acquire a license and develop own payment infrastructure as is the case now.
- What is in InstaReM’s roadmap for the next couple of years?
In the next couple of years, we are looking at augmenting our presence in existing markets while expanding into newer markets. We are expecting to get licenses in more money transfer corridors in Asia, such as China, Indonesia, Japan, Thailand and the Philippines. We are planning to launch a forex card this year which would allow travelers to efficiently convert their domestic currencies on the fly and pay for products and services while traveling internationally, instead of using inefficient credit cards.
The corporate international money transfers’ space is much bigger than consumer remittances and we are aggressively pursuing this segment. We have a strong funnel of potential business customers. We will engage with them further in the coming months for their eventual onboarding on our business platform. While we continue to improve our existing products and platforms with incremental enhancements, we continuously explore possibilities of developing new products that offer a great, differentiated experience to our customers.
- A quick personal round of questions:
- Your favorite sport: Many, but I am a quintessential Cricket fan. If not helping people transfer money overseas, I could be playing cricket for India.
- Your stress buster: My four-month old daughter Arika, who makes me look at life a whole lot differently. Whether at the end of the hectic day or coming back from an overseas visit, having Arika around takes away most of my stress.
- Philosophy of life that you value: No matter what you want to do with your life, be passionate. Only the passion will make you successful and happy.