Remittance as a Service (RaaS)
Why is Remittance as a Service important?
This page was last updated on 21 Feb 2021.
Remittance as a Service or RaaS was a term coined by Faisal Khan in the early 2011.
Just like Software as a Service (or SaaS), remittance-as-a-service refers to the whole money tranfer business offered as a payable monthly service.
If you are starting out setting up a company that would like to work in the money transfer space, then RaaS is extremely important for you to consider. Setting up a cross border payments company is no easy feat. The most challenging part, other than learning about the nuances of the business itself, are issues like:
Money Transfer License (in multiple geographies)
Pre-funding
Correspondent Tie-up Agreements
Counter Terrorist Financing
KYC - Know Your Customer
KYB - Know Your Business
CIP - Customer Identification Program
IT Systems and Security
Screening (real-time and batch)
Understanding compliance requirements in multiple geographies
Transaction Management System
Transaction Monitoring System
MSB Friendly Banks
Access to Banking (this is a really tough one)
Segragated named accounts
Safe guarding accounts.
Payment Processing (ACH, Debit Cards, etc.)
Internal staff training on AML/CTF
Fraud & Chargebacks
Settlement Accounts
SWIFT Access
Human Resources, etc.
All of the above costs money! Capital. Dollars. Money that is in limited supply. So how does Remittance-as-a-Service help?
The whole idea behind RaaS is to enable would be entrepreneurs, startups, and incumbents to be able to take advantage of this being offered as a service and not have to manage all of the tasks listed above.
Best of it is to think of it as a white-label service, or a 'lease' service. An even easier example if to look at GMail. You could setup your own mail server, and you would need to do a lot of the heavy lifting, get a physical hardware server, OS, e-mailing software, security, hardening, internet connection (redundant), IPs, networking gar, cooling, data center, personnel, routing, spam filtering services, fine tuning, etc. or just pay a few dollars a month, per mailbox and get this service from Google.
RaaS is no different. For a few dollars per month (relatively) speaking, you get all the services of a remittances company, available to you, under your brand.
To give you another analogy. Let's assume you are in the US, and you want to start a taxi service. So, now you dediced you need a taxi in each state (one taxi = one money transmitter license. Having said this, which of the following three options would you choose?
Build/assemble your own car from scratch and make it into a taxi?
Go to a dealership and buy a car and use that as a taxi?
Go to the dealership and lease a car and use that as a taxi?
Chances are you would opt for Option # 3. Well, congratulations, you've just choosen X-as-a-Service model.
Earlier I wrote a paper that compared, in the United States, the money transmitter license cost to that of money transmitter license lease.
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