Fintech disrupting international payments industry by ditching SWIFT network

Money remittance startup InstaREM wanted to solve a common problem with international payments – there was no transparency, and sending money overseas was more painful and complicated than it should be.

Co-founder Prajit Nanu set out to build a platform where it didn't have to be, and now InstaREM employs 110 staff across the globe, finding success in payments corridors where migrants are sending money home to their families.

In three years, it's established a significant business in the fintech space, recently raising US$13million in Series-B funding.

InstaREM's service differentiates itself in two ways: it's transparent about the cost, and doesn't take a cut of the money transferred as fees.

TechDay spoke to InstaREM APAC president Blaine Fabi about how far it's come in three years and how InstraREM works.

The big thing we don't do is that we don't use the SWIFT network. When you're sending money through a bank or another remittance company, it goes through SWIFT, so, SWIFT takes their fee out of it, intermediary banks along the way take fees as well.

There are a few problems with that - one of them is that it takes 2 or 3 days for the funds to get where they need to go because the banks need to communicate with one another.

The other thing is because of the SWIFT fee and the intermediary bank fees, the amount of money that the beneficiary gets is not what they're expecting because all these fees come out of the money that's being sent along the way.

So if you're sending $1000 for example, the beneficiary might get $980, the rest is lost to fees. What we've done is we've created a network of banking partners in Asia, Europe, and North America. Because of the banking partners we have, we don't use the SWIFT network at all.

It speeds up the process and makes sure that the beneficiaries get the amount of money they're expecting.

There are other players who don't use SWIFT for certain corridors, but we don't use SWIFT for any of our corridors.

The way we operate, if our customer is sending money from Australia to India, we have a banking relationship with a bank in India, so our customer funds us here in Australia, and at the same time, we fund the beneficiary in India.

The money doesn't actually get sent cross-border, it just gets handed between Australia and India, and we're able to do that because of the banking relationships that we've set up.

In the beginning, not so much because we were a startup and we didn't have the reputation or the volume, so a lot of banks said to come talk to them in a few years when we had more volumes and they would think it's worthwhile. 

We've been working with banking partners across Asia and across the world trying to set up these partnerships since day one, when we launched in 2014.

As we're growing and we can show volumes and we've got good investors on board now, the banks are becoming more willing to work with us.

We are a money remittance company, so there are a bunch of regulations and AML and money laundering issues that come along with being in our industry, so a lot of banks are a bit risk-averse.

So we've had to really put a lot of time, effort and money into making sure our compliance programme is top of the line and bulletproof.

Again, that was something that has taken us a while because every bank we speak to has different requirements and we add to our compliance programme based on their requirements.

Over the years, we've built up a good, solid programme so now when we speak to banks, we're able to show that we've been in business for three years and have been compliant and had no issues, so it's made it easier.

We've applied for an EMI license in Lithuania, and one of the things we can do with that license in Europe is SEPA payments.

So once we have the license, we can debit or credit any bank account in the EU in 10 seconds, so it's really a real-time payments system that we'll be able to participate in, which will be beneficial in a lot of ways and really open up Europe for us.

As well as that, we're working with a bank in Australia called Goldfields Money to create a digital bank for SMEs and individuals.

Goldfields will act as the backend banking, and InstaREM is going to build a digital bank on top of that.

We feel in Australia, especially, SMEs are really under-serviced. We don't see a bank specifically for SMEs who service them as well as we think they should be in Australia, so that's why we're going to target that market - it's a huge market in Australia.