Remittance as a Service (RaaS)

This page was last updated on 21 Feb 2021.

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Introduction

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.

Why is Remittance as a Service important?

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
• Due diligence
• Compliance
• Anti-Money Laundering
• Counter Terrorist Financing
• KYC - Know Your Customer
• KYB - Know Your Business
• CIP - Customer Identification Program
• Reporting
• Auditing
• Surety Bonds
• 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?

1. Build/assemble your own car from scratch and make it into a taxi?
2. Go to a dealership and buy a car and use that as a taxi?
3. 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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