Starting a Money Transfer Business: Key Tips For Launching The Payment Company

In the fintech industry, money transfer is regarded as one of the promising service offerings. Despite the market being fairly saturated, with multiple financial institutions providing such service lines, there’s still room for startups and established businesses aiming to enter the niche.

In this post, I’ll share details on international money transfers and money remittances as payment processing methods you may consider building a business upon. I provide two guides and a business perspective delving into how to start money transfer business, either an international transfer or remittance transfer one, respectively, and share my insights and bits of my experience.

Money Transfer Industry Overview

Let’s get started by obtaining an insight into the global money transfer industry. It’s projected to reach $3.3 trillion by 2027, showing a Compound Annual Growth Rate (CAGR) of 10.8%. At the same time, the remittance market presents a significant part of the global transfer market, with a size of 731.56 billion. Numbers reveal that online payments are becoming more and more widespread. This is likely due to the higher percentage of the global population obtaining access to it and the increasing number of digital payment software solutions available in the market. 

Explore the money transfer industry overview in the infographics below:

What Is International Money Transfer and Money Remittance

International money transfer refers to sending funds across borders using specialized services or platforms. 

For businesses, international money transfers facilitate cross-border transactions, enabling seamless trade and financial operations. It’s possible to claim that international transfers target, primarily businesses rather than individuals. However, certain financial operations in which individuals may be involved can only be money transfers or international money transfers, and never remittance payments. Examples include the following:

• Purchasing real estate
• Acquiring businesses
• Paying for raw materials and supplies
• Import and export payments
• Investments in foreign asses

The flow of international money transfer payments is shown in the infographic below:

Remittance is the act of transferring money, typically from an individual in one country to a family member or friend in another. 

Remittance is almost always a person-to-person transaction, crucial for supporting families or communities abroad. Remittances play a key role in economies reliant on foreign income. Examples of remittance payments include:

• Sending money directly to family members 
• Covering healthcare expenses
• Covering tuition fees

Despite not exactly being a remittance payment, regular peer-to-peer payments may also be conducted in the same manner as remittance payments via the same transfer flow. However, on such occasions, discount fees are typically not applied. Still, it’s cheaper compared to conducting an international money transfer to send money from one individual to another. 

The flow of remittance payments is shown in the infographic below:

You can discover more about payment remittance from another blog post by DashDevs. 

Expert tip: While some companies, like PayPal, may have both remittance and international transfer available, even via the same application interface, most money transfer service providers target either remittance or international money transfer. It’s because ways to get started with one or another way of providing payments are vastly different, which is described further in the post. 

Money Transfer Process Participants

Before we move any further, we need to understand the roles of money transfer participants, whether they are individuals, entities, or software solutions:

1. Sender (remitter): The individual or business initiating the money transfer.
2. Beneficiary (receiver): The person or entity receiving the transferred funds.
3. Sender’s bank: The financial institution holding the sender’s funds and executing the transfer.
4. Beneficiary’s bank: The bank acquiring or simply receiving the transferred funds on behalf of the beneficiary.
5. Correspondent Bank: An intermediary bank used when the sender’s bank does not have a direct relationship with the beneficiary’s bank.
6. Payment gateway: A service that securely transmits payment information from the sender to the bank or payment processor.
7. Payment processor: A system that handles the transaction between the sender’s and beneficiary’s banks or accounts.
8. Payment network: A network, for example, Visa or Mastercard, that connects banks and payment systems, enabling the transfer of funds.
9. Messaging network: A data system, such as SEPA or SWIFT, used by banks and financial institutions to securely exchange payment instructions.
10. Money Transfer Operator (MTO): An entity that provides end-to-end cross-border money transfer services or facilitates this process.
11. Transmitter platform: The platform used by the sender to initiate and track the money transfer, such as an app or online service.

Note. Basically, you, as a money transfer business owner, are an MTO in this process. At the same time, your software solution, with which you offer transfer services, whether it’s a web or mobile application, is a transmitter platform. 

You can discover more about other money transfer process participants, especially payment processor and payment gateway, in another blog post by DashDevs. 

Business Guide for Launching a Remittance Money Transfer Company 

To find out how to start money transfer business, we should review the organizational, business-level steps you must complete before proceeding with actual app development: 

#1 Choose a Business Model 

• Payment service application: The core money remittance business solution may be both a web platform or a mobile application via which remittance services are provided. 
• Bank app: Leverage existing banking infrastructure to offer remittance services through a dedicated app. This model benefits from the trust and security of traditional banks, providing users with a seamless experience tied to their bank accounts.
• Digital wallet: A mobile-based solution that allows users to store, send, and receive money digitally. This model is popular in regions with high smartphone usage and limited access to banking.
• Currency exchange service: Provides both remittance and currency exchange services. This model is ideal for businesses targeting expatriates or individuals sending money across countries with different currencies.

Pro insight: The listed business model can be combined into a hybrid solution. For example, a large financial institution may have a banking application that additionally serves as a payment service application in this scenario. It may have an integrated digital wallet link to a customer’s bank account and currency exchange functionality enabled for cross-border remittance transfers. In practice, that’s the approach established banks strive to implement. As for startups, they may offer, for example, only payment service applications with currency exchange functionality, without banking account or digital wallet integration. 

#2 Choose Region

Each region has specific regulations for money transfer operators. Naturally, you will need to comply with local laws as well as international regulations. The overview of necessary money transfer licenses for five regional jurisdictions is provided in the table below: 

Additionally, financial businesses from across the world are expected to adhere to AML and KYC requirements and ensure data privacy compliance.

#3 Choose a Legal Model

Once you have sorted out what is your business model and in what regions you intend to operate, you need to decide on your remittance transfer business legal model. It has a considerable impact not only on your legal status but also on the very money transfer flow. Here are your only two options:

#1 Opening a financial entity in both a sender’s country and a receiver’s country. 

In this case, you need to have at least two, but preferably more than two, financial entities open to your name. Basically, you need a new financial entity for every country you intend to cover with your remittance services. Each should have particular regional licenses to be legal. 

Pros:

• It’s a more straightforward model that depends on your business and does not involve third parties.
• It grants an additional degree of flexibility, independence, and credibility in the customers’ eyes.

Cons:

• It’s an expensive approach, with costs scaling based on the number of countries you intend to cover.

#2 Opening a financial entity in a sender’s country only and obtaining a license to operate in many receivers’ countries through third-party finance partners.

In this alternative legal framework, you should open one financial entity only. For any number of countries you intend to operate in, you need to partner with licensed financial institutions that will add you to their partner networks. This will enable you to operate legally in numerous countries without having your own financial entities in them. 

Pros:

• It’s a way more affordable approach.
• Sometimes, obtaining a partner’s license is faster than opening a financial entity yourself.

Cons:

• Becoming a partner with external financial institutions may be difficult for legal and business reasons. 
• Having a third party in your business operations conceive business risks related to potential process disruptions.

Here, it may be useful to explore nuances of open banking and banking API integration additionally. 

#4 Choose the Payment Instrument and Pickup Method

Choosing payment instruments and pickup methods directly impacts user experience, transaction speed, and the types of customers you target. 

A payment instrument refers to the method by which the sender initiates and funds the money transfer. 

Payment instrument options here are:

• Cash: Customers deposit physical cash at an agent location or transfer kiosk.
• Credit/ debit card: Payments are made directly using credit or debit cards, providing instant access to funds for transfers.
• Bank account transfer: Funds are transferred directly from the sender’s bank account to the recipient.

At the same time:

A pickup method refers to the way by which the recipient collects or receives the transferred funds. 

Common pickup methods include:

• Cash pickup: Recipients collect physical cash from an authorized agent location, bank, or partner business.
• Bank account deposit: Recipients collect the money that is deposited directly into their bank accounts. Ways to withdraw funds from a bank account vary from bank to bank. 

Pro tip: I noticed a negative correlation between a country average income and cash popularity, meaning that the lower income is, the more widespread cash, as the primary payment method is. Cash, as a payment instrument, is faster compared to account transfers. With it, transfers can be completed in less than an hour. However,. Using it requires a high liquidity in the money transfer business.

#5 Monetization

Once you’ve sorted out everything listed above, you may proceed with determining monetization methods and their amounts. In the case of remittance payments, you have three major monetization options:

#1 Transaction fees

Transaction fees are the most basic payment processing monetization options. There are two types of transaction fees:

• Variable transaction fees. They may constitute a percentage of the total transaction amount. They range from as little as 1% to as much as 12%, with an average of 6.35%, depending on regions, providers, payment methods, etc. 
• Fixed fees. Fixed fees are a certain amount a user is required to pay per transaction regardless of its amount. Usually, it lies within the limits of $0.5-$20 per transaction. 

Most payment providers and banks utilize hybrid methods with both variable and fixed fees. 

#2 Currency conversion fee

A currency conversion fee or foreign exchange margin is charged when a user sends remittance funds cross-board, so the currency in which funds are sent doesn’t match the currency in which funds are to be received. The currency conversion margin lies in the range of 0.5%-5%, depending on the exchange rate prov ided by payment provider. Such exchange rates tend to fluctuate often. 

#3 Subscriptions/ VIP services

Subscription and VIP services are specialized programs that some money transfer operators offer to encourage their service usage and increase revenue streams. For a certain cost, users can get access to:

• Discounted fees
• Enhanced exchange rates
• Priority customer support
• Loyalty rewards
• Higher transfer limits

After you have a business and legal status as well as monetization options chosen, you may proceed with creating your best remittance transfer application. 

#6 Outsourcing or In-House Remittance Money Transfer App Development

Once you have all business nuances sorted out, you may proceed with the actual development of your payment remittance solution. As listed above, you have a variety of options here, from bank apps and wallets to specialized payment and exchange platforms. Regardless of your choice, you have two main options to have your dedicated software solution developed:

1. Outsourcing remittance money transfer app development: Engage specialized external teams to build a fully-featured remittance app efficiently, saving internal resources and reducing time to market.
2. In-house money transfer app development: Leverage your internal team to develop a customized remittance app, ensuring full control over design, functionality, and ongoing maintenance.

You can explore the outsourcing vs in-house collaboration model from another blog post by DashDevs. 

You may also leverage a hybrid approach, where you have a core in-house team that can be upscaled or descaled due to outsourcing labor resources based on your needs. 

If you consider outsourcing your entire remittance payment app development or some of the development tasks in the projects. You need a trusted fintech engineering services provider. Consider DashDevs as your primary choice. We own market-leading expertise in creating payment solutions from scratch across regions, and can both consult you on business flow of launching a payment business and execute the entire development end-to-end./

Business Guide for Launching an International Money Transfer Company

Since we have a great understanding of how to get started with a remittance transfer business, we can proceed with a slightly more complicated business option — launching an international money transfer for businesses. 

#1 Choose A Business Model

Once again, you begin by choosing a business model. The same software options, i.e., web platform or app, apply here as well. But there are also two forms of business operation models you may consider to cover:

1. Customer-to-Business (C2B) or Business-to-Customer (B2C). Here, you provide the opportunity to send payments either from a customer to a business or vice versa. While C2B transactions are pretty common and applicable to a wide variety of payments, like the above-mentioned real estate transfers, B2C payments are nearly always refunded only. 
2. Busines-to-Business (B2B). B2B international transfers cover the entire spectrum of transactions between established entities. Under this business model, you facilitate transfers between businesses only and never between an individual and a business.

You may freely include all these models in your international money transfer business offering. Still, nothing restricts you from focusing on one of them only.

You may be additionally interested in exploring how to create a neobank from scratch from another blog post by DashDevs. 

#2 Choose Region and A Payment Network SWIFT / SEPA

The specific licenses and standard compliance outlined for the remittance transfer business are applicable here as well, so we won’t review them once again. Instead, I’d like to point out on the more significant aspect concerning international money transfers, specifically — selecting a payment network. Here, you have two main options, SWIFT or SEPA:

Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a global messaging network used by banks and financial institutions to securely transmit information and instructions for all types of financial transactions. 

The SWIFT network does not transfer funds itself but sends payment orders between institutions using standardized codes, allowing for fast and secure international transactions. It is widely used for cross-border payments, enabling banks to communicate details of transfers efficiently.

Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union to simplify bank transfers in euros across member countries.

SEPA allows individuals and businesses to make cross-border euro payments within the SEPA zone as easily as domestic transfers. SEPA harmonizes and standardizes euro payments by providing a single set of rules and requirements for euro transfers.

Note: SEPA is a cost-effective solution for euro transactions within the Eurozone, offering streamlined transfers limited to this region. SWIFT, in contrast, provides global coverage for multiple currencies but comes with higher costs due to its extensive reach and involvement of intermediary banks. So, should you intend to provide payments on a global scale, you can’t go without SWIFT integration.

#3 Choose a Legal Model

There are two ways to join a messaging network and become legally allowed to conduct international payments. Both ways are applicable to SEPA and SWIFT and are pretty much similar to obtaining a legal model for a remittance payment business: 

#1 Obtain additional licenses like a payment institution and manage vendor verification directly

In this model, you’ll need to acquire specific licenses, such as a payment institution license, and set up comprehensive verification protocols with each vendor, i.e., a bank or another payment institution that should send to or receive funds from you. This allows your business to independently handle payments and compliance requirements while maintaining direct control over the process.

Pros:

• Provides full autonomy in managing payment processes and compliance.
• Increases trust and credibility as your business holds direct operational licenses.

Cons:

• Higher initial and ongoing costs due to multiple licenses and direct vendor verification.
• Time-intensive setup, as each vendor and region requires dedicated verification efforts.

#2 Integrate with a bank that offers SWIFT connections for a subscription fee

Here, your business partners with a bank that already has integrated SWIFT capabilities, which is similar to partnering with a licensed financial institution in the case of a remittance payment business. Instead of obtaining separate licenses, you leverage the bank’s infrastructure, legal status, and licenses and pay a subscription fee to access global transactions through the bank’s network.

Pros:

• More cost-effective, as you avoid the expense and complexity of obtaining licenses.
• Faster setup by utilizing the bank’s established SWIFT network and compliance structure.

Cons:

• Involves relying on the bank’s network and services, which could limit control over certain processes.
• Subscription fees may vary, and the bank’s policies can impact your business flexibility.

Once again, if you intend to go global, you will have to leverage both SEPA and SWIFT, and most likely both partner with external financial institutions to join their SWIFT license and obtain a license yourself and verify with external payment vendors. 

#4 Monetization 

In the case of international money transfer business, your payment instrument and pickup method is bank account to bank account only. Besides, you have slightly different monetization models here:

#1 As a payment institution. If you become a licensed PI yourself with a network of verified vendors and your own platform and banking API, you may start providing banking integration to other payment companies yourself. At the same time, by being a payment service provider, you can charge the same variable and fixed transaction as well as currency conversion fees as you would do with money remittance business. Subscription and VIP services are not that common in international transfer businesses, especially in B2B.

#2 As an integrated partner. Being integrated with a licensed PI makes it impossible to monetization your injtegration as you have none. Instead, you have to pay integration fees. Still, you can monetize your main payment transfer offering via fixed or variable fees as well as currency conversion margin. 

#5 International Money Transfer App Development

Similar to remittance app development, you have either in-house or outsourcing development options to create your money transfer app. Once again, I highly recommend choosing your development partner wisely, carefully considering their experience, customer testimonials, and success stories. After all, having a great tech team by your side is already half the battle. Better if that team is already experienced with all sorts of financial app development.

For instance, in our portfolio, the DashDevs team has the Pi-1 project, which is an award-winning modular white-label banking platform. It covers all traditional banking services, meaning that it supports C2B and B2C models. Besides, it has an API with which Pi-1 team partners can integrate Pi-1 neobanking capabilities into any of their digital products, both fintech and non-fintech apps and platforms. 

At the same time, DashDevs has our own white-label modular solution for the fast creation and launch of financial applications, including money transfer apps and neobanks — Fintech Core. You may explore its functionalities in the infographics below: 

With Fintech Core, we can build a fully-fledged neobank, such as Pi-1, as fast as within 3 months. We can make this digital solution to provide all C2B/ B2C offerings, from payment processing to card issuance or lending. Moreover, we can integrate B2B services within it, including the integration of neobanking capabilities into digital products via an API, so you can monetize your integration in all the ways detailed above. 

Explore Fintech Core

Final Take

To launch a successful money transfer business, focus on choosing the right business model, securing necessary licenses, and selecting a payment network, like SWIFT or SEPA, depending on your international coverage needs. Whether you opt for acquiring a payment institution license or partnering with an established bank, each approach comes with its pros and cons, impacting cost, speed, and control. 

DashDevs team specializes in creating financial software solutions, from neobanks to money transfer platforms and applications. With more than 14 years of experience and over 500 projects under our belt, we are ready, willing, and able to provide you with all consulting and development assistance necessary to establish your remittance or international money transfer business.

Contact us