What is a money transfer business?

Essentially, a money transfer or money service or remittance business involves offering service to collect money from the sender and deliver it to the beneficiary. This can be a local service within the same country or a cross-border/international service between two or more countries. 

A business managing the remittance process is called a money service business (MSB) which can include banks and money transfer operators (MTOs). 

In most cases, the remitter will go to a physical location (shop, kiosk, etc.) and hand cash to the MTO teller which is then sent to the beneficiary in another country. The MTO will agree with a delivery agent (typically a bank) an exchange rate between the send and delivery currencies along with any additional charges, such as commissions, head office fee, etc. The remitter will be given a receipt showing all the details including who the money should be picked up by and how much delivery currency will be given. 

The MTO then deposits the cash into their bank account, and when it has collected a large amount, it will typically make a bulk transfer to the delivery agent in the destination country. This is usually done daily, weekly or monthly, depending on the agreement between the MTO and the delivery agent. 

The delivery agent delivers the money to the beneficiary at the agent’s physical location (shop, agent outlet etc.) once they receive instructions from the MTO. 

Depending on the agreement between the MTO and the delivery agent, the latter may deliver the money on credit, or request for a deposit to be kept up-front from the MTO. The delivery agent will usually charge a commission for its service. 

Each send-receive cycle is referred to as a transaction. 

The MTO usually makes a profit in two ways: 

  • By offering a lower exchange rate to the remitter than what the MTO must pay to the delivery agent. 
  • By charging a fee or commission for the service (this fee usually varies depending on the amount being sent). 

Some newer developments in the remittance industry are: 

  • Allowing the remitter to create and pay for a transaction through a mobile phone or an Internet portal or website. In this scenario, the remitter does not have to physically go to a shop or an agent outlet. 
  • Remitter and beneficiary receipts can be sent automatically by email or SMS text messages. 
  • Remitter can send utility bill payments, mobile money and airtime top-ups via multiple channels including agents, mobile phones, online portals and self-service kiosks. 

Our solution diagram provides more information. Arrange a demo with us to find out more.