The digital money transfer business is constantly growing, a trend that will continue for a long time.
Why is that happening?
With more people migrating, there is always a lot of demand from customers looking to use the services of a money transfer specialist. True to fashion, we can see people eager to jump in and take advantage of the opportunities this sector provides.
Well, guess what? It is a lot harder than it appears on the surface. How so?
The financial sector is quite sensitive, and any lack of preparation or research will result in quick setbacks. Failing to do your due diligence will hurt your business and cost you heavily.
How do you ensure this is the right business for you? How do you know if you are ready to jump into this field? We will explore the answers to these questions and more in this post.
Also, we will consider how you can make the most of the opportunity. Keep reading.
Why Start a Money Transfer Business?
You can spend time looking, but chances are you will find that few financial sectors net the same impressive profit margin as the remittance industry.
And guess what? The more transfers you do, the higher the profit.
There’s even data to back this up. A financial web report showed that money transfer businesses experiencing a 10% rise in transaction volumes also saw a 15-20% profit increase. It’s essential to gain a thorough understanding of starting a successful business to stay ahead in the competitive landscape; again, this indicator can vary significantly from one location to another and might even be higher for you.
For example, you will make even more profits working in a city than an operator in a small village.
This type of business is also flexible with emerging digital platforms and trends.
There is room for expansion, especially with digital technology and innovation, such as mobile digital payment services that allow fast and reliable transfers.
Digital advancements make it convenient for more and more people to rely on electronic transfers instead of depending on traditional bank transactions.
Wonder how much profit you can generate?
Well, that will depend on the size of your money transfer operations and expenses.
However, you can always find ways to boost your profit margin, such as SEO or paid ads, to build a strong online presence.
Search engine optimization makes it easy to attract more potential customers, which is essential in a competitive market like the money transfer business. It brings any online business into the limelight, connecting it with its target market.
It costs less than paid ads and pays off in the long term. Tactics like making your site more user-friendly, posting optimized content, and doing guest posting go a long way. But, you might need assistance from webmasters, SEO experts, link builders, and other professionals who can help you build a strategy that makes your website more visible in Google search results.
Better visibility will eventually result in higher profits for you.
What Are the Forms of Money Transfers?
Generally, money transfer operations fall under three common types:
- Wire transfers. Wire transfers are popular for international remittance services as sending money to unlinked bank accounts is easy. Usually, money is moved digitally by the bank or other payment processors serving as intermediaries (e.g., Western Union).
This is quite common for remote workers, those who travel frequently, and people who would like faster transactions. - Bank transfers. Like a wire transfer, anyone can make a bank transfer via a mobile application or online banking transactions, but it can be slow and take days.
- In-person transfers. Not everyone has an account number or a routing number. In this case, there are money transfer services with local agents. You can find some in local banks or other physical locations that provide these services to people without bank accounts.
Can Anyone Become an Operator in the Money Transfer Business?
The short answer is “no.” Each country has unique rules and requirements that you must meet to become an operator, and you may find the licensing process more straightforward in some locations. To become one, you need to:
- Be a legal adult.
- Be a citizen (or a legal resident that meets certain conditions).
- Apply for the proper money transfer license. Some countries may request different licensing requirements to handle digital currency and exchanges and operate small local money remittance businesses.
- Get a lawyer and an auditor on your team, which depends on the size of your business.
The last step might be optional for small mobile money transfer operators in some countries.
8 Strategies for Starting Your Digital Money Transfer Business
So, do you want to be the next Wise, WorldRemit, or Payoneer? Starting any new business is always a challenge, let alone the fact that, like in this case, people entrust you with their money.
Like every other type of venture, there are certain things you can do to prepare better and make the most of the experience.
#1 Before You Start a Money Remittance Business, Study Your Target Market
The financial sector is very sensitive; the same applies to the money transfer sector. To start on the right track, you will need to find out the following:
- The requirements and the licenses you need to apply for.
- The specific type or form of money transfer services you want to offer people.
- Provide important details about your prospective customers, including their pain points and how your financial product and service can help them.
- Information on your competitors (what’s working for them).
- Find the existing risks and the current market situation, including the exchange rates.
How do you go about doing all these? The first step is often the most overlooked and takes simple research.
Yes, you want to know which regulatory bodies are responsible for registering and approving your new business (and what the requirements are).
Often, the information you need will be listed on their websites. At the very least, a Google search can pull up their office location so you can go there and ask your questions in person.
In the UK, for example, this would mean going to Companies House and the Financial Conduct Authority (FCA).
Of course, you must state the range of services you intend to offer, including the platform you want to use. These important details will be required before you can get a license to operate.
Also, if you plan to become a big brand in this niche, you must conduct a competitor analysis.
And no, you don’t need to hire a private investigator for that.
SEO tools like Ahref and Semrush can give you insights into your competitors’ content marketing strategies for achieving a dominant position in search results.
Go through their website, compare pricing, and see if you can offer better service for less.
Then, use a SWOT analysis to organize all the information you’ve found about your competitors. Use this to find a market gap you can fill.
#2 Build a Detailed Business Plan to Get Where You Want to Be
If you don’t know where you’re going, don’t be surprised if you get somewhere you didn’t want to be in the first place.
You need a document that outlines your business ideas and how you will run your money remittance business. Carry out market research and plan on the competitive exchange rates, cross-border payment solutions, and modes of payment to offer. The document must also show a step-by-step strategy for proceeding.
Of course, you can’t take every detail into account (life happens to all of us), but you need an overall direction and the stages you’ll walk through.
Would you like to take out a loan or attract investors? You need a business plan to convince them to work with you.
This document helps others easily understand where you drive the business, why, and the routes you intend to take to get there.
You can find many templates online to help you create your business plan. As for the general outline, your business plan should include the following information:
- Business description
- Market analysis
- Business strategy
- Operational plan
- Technology infrastructure
- Financial plan
- Marketing and sales strategy
- Risk analysis
- Implementation timeline
Pro tip: When creating your business plan, try to learn from the best in your industry. You can Google their “name + case study” and find some interesting ideas on the software and tactics they’ve used.
Here is an example of how Western Union improved its customer support.
#3 Get Legal Documentation and Regulatory Compliance Requirements Sorted Out
At this stage, you already know the requirements for your business form and region. Therefore, it’s a good idea to start sorting out the compliance issues before you start looking for employees and partners.
You must get different types of licenses depending on your location, size, and operational activity. So, ensure you take your time to study all the requirements thoroughly.
However, learning all the transaction details and legal requirements yourself might be complicated, especially if you have no prior experience.
In such situations, it is advisable to hire a lawyer or any other professional with extensive knowledge of the legal requirements for international money transfer activities.
Even if you’re on a budget, at least get a consultation with an expert for certain legal costs because you can lose much more in paying fines later. For a deeper dive into legal aspects and ensuring compliance, you might find this guide on starting a cybersecurity business helpful, as it covers regulatory issues that can be similar across various industries.
#4 Create Your International Merchant Account
You made it this far, cleared those background checks, and even got your special license. Congratulations!
Now, you are ready to make big moves like creating your international digital merchant account for international transfers.
To do so, you can apply with a merchant account provider. Sometimes, this only requires you to fill out a form online. However, a physical visit to the bank might be required in other countries.
Why international financial transactions?
Well, online or international transfers across countries (like Remitly) are expected to increase because the world has become even more interconnected, and people need to receive payments and transfer funds across country borders.
You will probably get regular customers who engage in cross-border transactions to send money to families or pay for goods in other countries.
This might not be an option for everyone.
Still, expanding your market across regions increases profit margins, as you now have a wider customer base interested in international transfers.
#5 Get Your Marketing and Promotion Right
It’s pretty hard to think of a digital money transfer business that doesn’t have an online presence.
You have quite a crowd of money transfer companies and individuals fighting for the same customers’ attention.
But it happens in every industry, so there is no need to stress about it!
Instead, take your time and consider how you can stand out from the rest and offer a better customer experience.
This is where marketing and promotion come in. With the right online marketing strategy, you can grow brand awareness and attract leads.
What marketing tactics should you use? Your choice is endless:
- Social media marketing
- Paid ads (Google Ads, Facebook Ads, etc.)
- Influencer/celebrity collaborations (e.g., maybe get a tech-finance niche YouTuber to talk about your service)
- Software development partners and other potential business partners
- Referral marketing to push word-of-mouth promotion
- Participating in niche events, maybe as a speaker and networking within your industry
- Creating loyalty programs, giveaways, and even referral programs to encourage users to stick around and get their friends to join, etc.
- Sponsor a couple of local charity events to boost brand awareness and more.
Yet, many of the strategies on this list can be too expensive for beginners. If you want to become and stay successful, you’ll have to think long-term.
What can you do on a budget?
Your best shot is probably social media, email marketing, referral marketing, and SEO. You can try using these as your major marketing and promotion strategies.
Why? They don’t require a big initial investment, and some (e.g., SEO, referral marketing, etc.) can accumulate their effects over time.
Of course, even for these tactics, you might still need some SEO tools or referral software. Yet, it will still be much cheaper than influencer marketing or sponsoring an event.
Using these budget-friendly promotional tactics, you’ll reach the desired audience, build a powerful brand presence, and avoid spending a fortune on marketing.
You can even find some free marketing plan templates for remittance companies. Of course, it won’t be the same as working with professional marketers. But it is better than nothing.
#6 Get the Right Partners
To run a successful business, you’ll need to attract the right people or partners. This includes choosing skilled employees and deciding on the kind of investors you would like to attract for your money transfer firm.
You should define the services you want to partner with to provide seamless payment methods and experiences for your potential customers (more on this later).
Each partner and payment method chosen has a unique role that impacts your business’s growth and sustainability. So, you’d better be very selective here.
Additionally, as you build and scale your business, partnering with a proficient call center can significantly enhance your customer service and support capabilities.
#7 Build a Solid Customer Support System
Almost every business with an online presence has a custody support system, but not all make a good impression on the customers.
You must have heard or seen reviews of users complaining that some support teams are hard to reach or, worse, not helpful.
This can deter potential customers from choosing your money transfer business for cross-border payments.
No one wants to struggle to reach a support team, especially when it’s anything connected to money, like international payments or remittance transfer services.
So, make sure you build a solid support team from the very beginning. Make it easy for potential customers to reach them on social media, by phone, email, or otherwise.
Besides, they must be available 24/7 to answer potential customers’ questions or resolve issues.
#8 Continue to Learn and Make Efforts to Grow and Remain Relevant
The truth is the money transfer industry will undergo significant changes over time.
Are you ready to adjust quickly and safely to ensure seamless financial transactions?
We can see new regulations emerging to boost security and address issues with online payments. Then, some of the latest innovations, like AI, will probably have many effects that we can’t even predict now.
If you keep an open mind, you might be able to think of creative ways to help your business grow even faster.
For example, we now have AI content creation tools to help you with your marketing efforts.
Besides, thanks to AI-driven chatbots, it’s now easier for money transfer businesses to provide round-the-clock customer service at a fraction of the cost.
Some of these can even be integrated into popular messaging platforms like WhatsApp, which is useful if you want to prioritize ease of access and better customer experience.
Many money transfer businesses already use this AI-chatbot trend to save money and deliver better client service.
Partner with Remittance Services
Say you have started operations, your business is going well, and you are leveraging email to grow your business with impressive success rates.
Now what?
Almost every company that wants to expand and evolve needs partners to meet growing market demand. We would lie if we said that managing increasing customer acquisition rates and transaction volumes was easy—it’s not.
However, it is necessary to find and sign partnerships. In the end, no business can be done without a proper network.
Here are some of the ideas for your future collaborations:
- Banks for transfer of money.
- Payment networks and payment processors for more money transfer options and straightforward operations
- Mobile money network operators to be able to expand services to people in rural areas and money transfer providers,
- Anti-money laundering and KYC providers to boost security features,
- Payment gateways for more seamless card automatic payments, etc.
Conclusion
Starting a money transfer business can feel like becoming a new parent. You’ll need to nurture the business with love and patience.
You have to invest time, energy, and resources, too. Like parenthood, you can’t do it all alone.
So, create your own personal village made up of your team and partners and the right tools. Keep learning and adjusting to trends in the money transfer process.
This strategy helps you remain relevant in the industry and dominate your competitors.
