By Jon Russel for Techcrunch.com
InstaRem, an international remittance payments startup headquartered in Singapore, has raised $5 million in a round led by Vertex Ventures.
The Series A investment included participation from Fullerton Financial Holdings, an investment fund that, like Vertex, is a subsidiary of Singapore’s sovereign wealth fund Temasek, and existing investor Global Founders Capital.
A wave of fintech companies are promising to liberate bank customers from pain of international transfers, which come with sub-market exchange rates and hefty processing fees. While the likes of TransferWise, which was founded by Skype alumni and is backed by famed U.S. investment firm Andreessen Horowitz among others, offer better exchange rates and lower fees, the usual cross-border service takes days and has limited support worldwide.
That’s where InstaRem hopes to stand out from the crowd.
The company is focused on serving Asia, and it claims to charge lower fees than banks and traditional remittance services like MoneyGram or Western Union — InstaRem’s rate is typically less than one percent — while transactions are completed within one day, if not same-day.
The service started out serving Australia. InstaRem isn’t saying how many customers it has, but co-founder and CEO Prajit Nanu said it has already captured two percent of the country’s payments corridor to India in just over one year of operations.
He added that the average transaction size is $1,800 — multiples higher than typical remittance companies — while InstaRem sees 60 percent repeat trade, and 80 percent of new customer accounts make a transfer within the first five days of registering.
Companies like TransferWise use myriad bank accounts to funnel money across borders using different customer transactions as the float. InstaRem, by contrast, uses more traditional means. It works with mid-size banks that already trade in overseas currencies. It’s the financial equivalent of putting a few boxes on a UPS freighter that’s about to head out, thus paying just a sliver of the costs you’d incur if you had to find a boat and ship it yourself.
Banks might seem like they are being cut out here. But the cross-border payments represent a fraction of their overall business, while mid-size establishments are interested in companies like InstaRem, Nanu explained, because they have the potential to bring them transaction volumes.
The company holds financial licenses in Australia, Hong Kong and Canada, and it said it is in the process of applying in Singapore, Malaysia, Japan, Luxembourg (which opens banks across Europe) and a number of U.S. states. That said, according to Nanu, “the focus will largely be on [serving customers in] Asia.”
Beyond just individuals — such as expats and first-generation migrants wanting to send money home — InstaRem also works with SMEs, which make up around 20 percent of its customer base. While non-business customers tend to appreciate the cost savings, Nanu said that business customers are also keen on the faster transaction times.
“Some of our SME customers I thought used us for price, but one told us recently that a primary reason is because they can sit on invoice longer than with a bank,” he recalled.
In other words, one-day overseas transfers help small business owners with their cash flow because they can hold on to their money until just before it is due.
InstaRem currently has 20 staff and is anchored in Singapore, with offices in Sydney, Singapore, Mumbai and New Jersey. Nanu is targeting volumes of $100 million per month before the end of the year, as the company and its service ramps up to include more markets, which he said will include “more remote places” like Nepal and Bhutan as well as more obvious markets.
InstaRem is currently working on a range of new products, targeting unbanked populations in South Asia and tapping into its mesh network to offer new services to banks. The latter is one area where its relationship with Fullerton, which made its first investment in a tech startup with this deal, could pay dividends since it holds investments in banks across Southeast Asia.
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the article first appeared in techcrunch.com