Singapore’s startups, immigrants get new channel to send money abroad at lower cost

By Malavika Velayanikal for TechInAsia

Indians abroad will send US$65.5 billion home this year, according to a World Bank estimate. That’s slightly lower than the US$69 billion inflow in 2015, but it’s still the largest for any country, followed closely by China.

Remittances declined mainly because of the impact of lower oil prices on Middle East economies; they continue to grow from other parts of the world which have a large Indian diaspora. One of these countries is Singapore, which adopted open policies towards immigrants to give a boost to its economy at the turn of the millennium. As of June this year, Singapore had 1.7 million non-residents in a population of 5.6 million.

Many of them are Indians working in Singapore who send money home – from low-skilled workers all the way to top professionals in tech and finance. There are also many Indian startups who prefer to be headquartered in Singapore but have most of their employees in India.

Now, a Singapore-headquartered startup, InstaRem, has a license to help both individuals and companies lower the cost of their money transfers, which banks eat into with their ‘FX spread.’ (FX spread is the difference between the wholesale inter-bank foreign exchange rate and the rate quoted to you by the bank or international money transfer company.)

“We can do cross-border remittances and payments from Singapore to the rest of the world – except Africa and Latin America. For example, if a startup in Singapore has employees in India, you don’t need to go to a bank to wire them their monthly salaries; we can do that for them at a much lower cost,” says InstaRem co-founder Prajit Nanu, who hails from Mumbai.

The digital edge for speed of transactions

InstaRem started out in Australia early last year, then got licenses for remittances from Hong Kong and Canada as well. So it is also a conduit for foreign companies to send payments to workers and companies in Asia.

Apart from lower costs, InstaRem also claims to have an edge over banks in digitization of micro- payments. “For one of our customers, we built the system from scratch, directly connecting to his accounting platform and to his payment circle in India. Go and ask a bank to do that. They can’t,” explains Prajit. “System adaptability and flexibility is much higher with us than a bank. That is why when it comes to volume business, we are outscoring them.”

The startup has scaled rapidly since raising a series A funding round of US$5 million, led by Vertex Ventures. “We’ve grown 12x in terms of number of transactions,” says Prajit. “We were doing around 10,000 transactions in March and now we’re doing over 120,000 transactions.” He did not want to disclose the volume of money involved in the transactions.

The main impediment to scaling up comes from the four to six months it takes to obtain a remittance license. But InstaRem turned that to its advantage by focusing on corridors to countries like India and Malaysia which see large volumes of remittances, instead of spreading thin. “Western Union focuses on 190 countries. I don’t do that. I only focus on five or six countries,” points out Prajit.

The focus also helps in gaining an edge in the speed of transactions. “On our platform, all transactions are processed on the same day,” claims Prajit.

Love-hate relationship with banks

InstaRem has a love-hate relationship with banks. On one hand, they are rivals. But on the other hand, many of them are also clients and partners.

System adaptability and flexibility is much higher with us than a bank. That is why when it comes to volume business, we are outscoring them.

For example, a large bank in the Pacific Islands – which Prajit did not want to name – uses InstaRem for remittances and payments. “Their P2P transaction volume was small for a large bank like them, but for us it is a huge volume to have,” explains Prajit.

For corporate clients like that, InstaRem creates tailored solutions, taking care of everything from digital payments to compliance requirements. These are clients who could be doing 20,000 transactions in a day.

Some banks are also partners in disrupting the remittances and cross-border payments space with InstaRem. “We have a secret sauce: a network of banks which we can use to send money anywhere. We don’t go outside our network at all – and that allows us to move much faster,” says Prajit.

That’s handy for a hotel booking site like Zenrooms – a Rocket Internet-backed version of India’s Oyo.

Zenrooms, headquartered in Singapore, has a budget hotel network across Southeast Asia and in Sri Lanka. It has already switched from banks to InstaRem to handle its large volume of micro-transactions – as in the US$100-150 that somebody pays to stay in a hotel. A significant portion of it would be swallowed in a bank transfer.

Kiren Tanna, co-founder of Zenrooms, elaborates further on this: “Being a budget accommodation network running across multiple countries in Southeast Asia, we have all kinds of payments to be made to and from suppliers and partners across the region. InstaRem has helped us save 80 to 90 percent of the remittance costs compared to bank transfers and other methods. And it’s fast as well.”

Competition for InstaRem mainly comes from other remittance startups like WorldRemit, TransferWise, and Remitly. Toast is another young remittance startup in Singapore – although it focuses on money transfer by foreign workers.

First appeared at TIA