South Asian remittance firm InstaReM has launched its cross-border P2P and B2B digital money transfer service in the U.K. and the EU as it prepares for an IPO in 2021. It also expects to become profitable by then.
InstaReM, which is headquartered in Singapore and has its European office in Vilnius, Lithuania, is passporting the EU electronic money institution (EMI) license it was awarded by the Bank of Lithuania last September across Europe. The company opted for a Lithuanian EMI license as, in the event of a “hard” Brexit, it can offer its remittance services across the EU without additional country licenses.
“We’re waiting to see what effect Brexit will have on the passporting of EMI licenses before deciding whether to apply for a U.K. EMI license,” said Michael Bermingham, InstaReM’s COO and head of global compliance. “Everyone in the remittance business is wondering what impact Brexit will have, especially those firms which opted for a U.K. EMI license and not an EU license.”
InstaReM doesn’t have a branch in the U.K. yet, but is in the process of preparing to submit an application for approval. The U.K. is an important market for InstaReM, which estimates that a third of all cross-border remittances flowing from the U.K. go to South East Asia.
InstaReM, or “instant (online) remittances,” was co-founded in 2014 by Prajit Nanu and by Bermingham, who has a background in compliance in Asia and Europe. The inspiration for the company came from a friend of one of the co-founders who needed to pay for a bachelor party in Thailand. As he was based in India, he couldn’t use his credit card since the Thai resort only accepted bank transfers. So he had to get someone to pay for him in Thai baht, whom he then reimbursed in Indian rupees.
The remittance volume InstaReM is already seeing from Europe to Asia comprises a mixture of P2P transfers plus businesses paying salaries and B2B transfers such as payments to marketplace suppliers and contractors in Asia, Bermingham said.
Lithuania seems to be a popular destination for Fintechs seeking EU banking and EMI licenses, as U.K.-based challenger bank Revolut has applied for a Lithuanian banking license.
“Lithuania’s ambition to establish itself as a gateway to Europe for non-European financial companies has been acknowledged by investors from all around the world,” Marius Jurgilas, a member of the Bank of Lithuania’s Board, said in a statement.
In March 2018, the Bank of Lithuania and the e Monetary Authority of Singapore agreed to work together to support the development of their respective fintech ecosystems and encourage greater financial innovation in the two countries. The agreement enables fintechs to receive support from their respective regulators to better understand the regulatory regime in each country.
"Lithuania is an emerging fintech hub in Europe right now and one of our largest markets,” Revolut spokesman Chad West told PaymentsSource. “They have a fantastic regulatory environment that provides deep consultation during the banking application process and you can obtain a banking license much faster than in some other European markets.”
InstaReM offers margin free mid-market FX rates and low transfer fees for bank account-to-bank account transfers. InstaReM charges an average transaction fee of 0.35 percent, instead of the usual fee plus marginal FX spread that its competitors charge.
“Our initial focus was on South East Asia,” said Bermingham. “The Asian remittance market didn’t have sufficient transparency and some of the regulatory licencing processes there were longer than in other regions. So we took the opportunity to provide more transparency, low fees and margin-free FX rates for clients in the Asian region. We are able to offer low-cost transfers as we work with specific banks which give us speed of service and low charges based on the volumes we bring them, that we can pass on to our clients.”
In 2017, InstaReM received $13 million in its Series B funding round, which Bermingham said the firm wants to use to expand its remittance corridors. Currently, InstaReM is licensed as a money services business in Singapore, Hong Kong, Australia, the U.S., Europe, Canada, India and Malaysia.
“We want to expand into the Latin America corridor and to move further throughout Asia,” said Bermingham.
For its core network, InstaReM uses conventional banking infrastructure, relying on pooled, segregated funds held by its partner banks around the globe, which it nets off at end of day. However, InstaReM is integrating at the back-end with Ripple for blockchain-based fiat currency transfers via RippleNet, Ripple’s enterprise blockchain network.
InstaReM joined RippleNet in February 2018 and last month announced a partnership with São Paulo-based BeeTech, a South American payment service provider, for cross-border transfers over RippleNet. The two firms said their partnership is the first of its kind between non-bank RippleNet members in Asia and in South America.