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How to Start a Money Transfer Business in 2023

Money Transfer Business

Do you want to start a money transfer business? If YES, here is a complete guide to starting a money transfer business with NO money and no experience plus a sample money transfer agency business plan template.

The money transfer business is one where you help two parties transmit a certain amount of money. It is an ideal business to start up as money transactions happen daily. You however will need to possess certain skills and abilities so that you can effectively manage financial transactions on behalf of your clients. 

The criteria for starting this business however depends on the state where you intend to operate your business from, your start-up capital as well as licensing. To start and run a standard and successful money transfer business, you will need to obtain a license that will allow you to transmit money and this is dependent on the state where you intend to operate from.

The reason why it varies is because of the money transmitting act of the National Money Transmitters Association; this is why it is necessary to know what the requirements of your state are. You might need to submit an online application to the appropriate department.

The next step will be to file for a FinCEN Form 107 with the FinCEN which is at the Department of Treasury. The purpose of filing with this agency is to enable them classify your money transfer business.

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It is only after you have established the money transfer business that you can then register your business with FinCEN and not before. The registration must not be done later than six months and the aim is to ensure that illegal acts like money laundering are not taking place.

Then comes the part where you will need to set up your transactions with commercial banks that you are comfortable with. An alliance with a bank or several banks is very necessary so that you can carry out your full functions as a business.

If you are however still confused about certain parts of the business, this article will help in clearing any confusion or questions you might have about the money transfer business.

Steps to Starting a Money Transfer Business

Table of Content

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1. Understand the Industry

The money transfer industry is one that greatly contributes to the economic growth of countries participating in it. The reason for the growth of this industry is due to several factors such as increase in the labour force of the sending countries, increase in the number of migrants as well as the development of the global economy.

According to a report from World Bank, the money sent back by migrants to families in their home countries amount to $441 billion, which is thrice the amount that is being spent on official aid by international non-profit organizations. The cash that flows in through these money transfers constitute over 10 percent of the GDP in more than 25 developing countries.

As at 2014, $583 billion was transferred globally, with the top three money transfer companies dominating the market with more than 1.1 million combined retail outlets across 200 countries. This has led to an imbalance in the money transfer industry as certain countries dominate the receive volumes while certain other countries dominate the send volumes.

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The united states of America for instance was responsible for about 22% of the money transferred globally in the year 2015, while India topped the receiving money transfer countries globally at 12%. Even though this industry is heavily dominated by banks and money transfer businesses, digital players have started entering the industry and are poised to disrupt how things are done.

According to a report from the Aite Group, the global revenue from the money transfer industry will grow to about 6% CAGR between the periods of 2006 and 2010. This means that by 2010, the industry will have generated close to $18.3 billion in revenue as compared to the $13 billion it generated in 2004.

The group also predicts that cross border transfers will increase by 8% CAGR between the same periods as well. By the group’s estimate, the remittances globally will amount to $456 billion which is up from $369 billion in 2007. The increase is not only due to new players in the industry, but also increased competition that has been caused by so many players forcing them to expand the range of their products and differentiate their services.

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The increase that has been experienced in the money transfer industry is one that has been fuelled by the increase in demand from migrants.

This has caused new entrants into the market with smaller companies making use of new technology to compete with the already established companies and their traditionally high costs, limited payment systems as well as limited distribution methods.

The World Bank, United Nations and the G8 countries have also strived to make money transferring become more common and transparent, thereby causing an increase in the industry amongst the players. The growth that has been experienced by the money transfer industry cannot be pinned to just the increasing demand from migrants or increase in the number of players, as the internet has played a huge role as well.

In the early 2000s, only about 27.6% of households has access to the internet; by 2011, this number jumped to 74.9%, which was caused by an increase in the ownership of smart phones, as nearly a quarter of the global population now own one.

The top three countries in 2014 that are on the receiving end of the money transfer industry are India, China and the Philippines, and these positions haven’t changed in 2016. Asia as a continent is the biggest recipient especially as migrants from China and india sent 0 billion back to their home countries as at 2012.

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According to the World Bank as at 2015, global money transfer exceeded $601 billion. Out of this amount, developing countries got about $441 billion officially as it is believed that this is actually larger because a number of formal and informal channels that aren’t being recorded are used.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those that require the services of a money transfer business include migrants from Asian, African and Middle Eastern countries working in the United States of America. According to statistics, more male migrants, from young adult to middle aged are mostly the ones who are involved in sending money back to their home countries.

This does not however exclude nationals from the United States of America as well; the money transfer business is not only done internationally but nationally as well, therefore making it an all-encompassing business.

3. Decide Which Niche to Concentrate On

The money transfer business is one where you help two parties transmit a certain amount of money and it is an ideal business if you are looking for a lucrative business to start up because money transactions happens daily. There really aren’t many niches in the industry as players are mostly concerned with privacy, data security, ease of transactions as well as other factors.

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However, due to the evolvement of the industry and the financial industry at large, more niches are opening up as new players are looking toward these sort of niches such as;

  • Digital transfer
  • Cyrptocurrency
  • Money transfer services
The Level of Competition in the Industry

The level of competition in the money transfer industry has no relationship whatsoever to the area where the business is located because a money transfer business can operate from any part of the world via physical or virtual location, or even from both.

This is not to however say that any player can get into the industry and compete with already established players. The big players in the industry have a lot of advantage as their services are spread in strategic locations across the country; even as they have acquired the trust and confidence of their clients.

To be able to compete effectively with these big players, new operators are going digital and offering their services mostly via the internet. This is advantageous because almost every country in the world is connected to the internet and more than a quarter of the world’s population has a smart phone which allows them to carry out transactions anywhere in the world.

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4. Know Your Major Competitors in the Industry

Every industry has brands that are well known due to a number of factors such as how long they have been in business, their publicity or advertising strategies, how huge they are and several other important factors, and a money transfer business is no different.

Therefore some of the leading money transfer businesses both in the United States of America and around the globe are;

  • Western Union Company
  • MoneyGram International Inc (MGI)
  • PayPal
  • Transferwise
  • Payoneer
  • Ria
  • Currencyfair
  • World Remit
  • Azimo
Economic Analysis

The money transfer business is one that involves the offering of a service by two parties – where one party sends money to a beneficiary somewhere else using a platform. The service can either be done locally or between two or more countries.

To start this kind of business, you would need to create a business plan so that you have a clear vision of what your business would look like and how the flow of funds will work. You should realize that when running this business that every single penny you make must be accounted for, therefore you must be familiar with every aspect of the business.

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One of the major issues that this industry faces is the that of compliance, which is why regulators globally are advocating for players into the industry to adopt platforms that are not only secure and robust but compliant, so as to effectively enforce proper procedures such as KYC (Know Your Customers) and block list checks against beneficiaries as well as remitters in order to efficiently track all transactions and the information attached.

Another reason why automated remittance platforms are seriously encouraged by the government is because such platforms make use of the latest technology so as to not only improve transaction speed but its efficiency as well.

These platforms can then be used to conduct the required checks and also provide the needed information to the correct delivery agent. The platforms also store all the relevant identification information as well as enhance customer service by ensuring that critical business information is made available instantly.

Also, these automated platforms can help provide financial information that is accurate about the money transfer business and the profit or loss incurred per transaction. It is also useful for auditing and other compliance purposes.

5. Decide Whether to Buy a Franchise or Start from Scratch

How you decide to start your business depends on the vision and goals you had in mind for the business. Starting your business from scratch versus buying a franchise comes with its own pros and cons; it should however be noted that the money transfer business does not operate via franchise and the closest thing to that is being an affiliate.

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Starting your business from scratch means that you are in control of your business and are able to determine how best to achieve your goals and objectives. You can also know what strategies aren’t working and have them modified or removed to be able to make your business achieve the level of success you want for it.

6. Know the Possible Threats and Challenges You Will Face

Every business when established newly is faced with threats and challenges and the money transfer business is not different. Therefore, if you are going to start this business, bear in mind that there are several challenges you are going to face, and how you address these challenges will determine the success of failure of your business.

Some of the threats and challenges that you are going to face are; arrival of a competitor into the industry, unfavorable and stringent government and industry policies and the downturn of the global economy.

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7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

The moment that you decide to turn your business idea into reality is the moment you would need to decide on what kind of legal entity to choose for your business. Even though there are 4 basic types of legal entities in the United States, but the legal entity you would choose must take the industry you will be operating in into consideration.

This means that the legal entity you should choose for your money transfer business should take into consideration; protection of your assets, tax issues, how to take money out of the company, your personal responsibility should your business lose money as well as estate planning. Also, the legal structure you finally choose will affect how you open your business legally.

The good thing about a legal entity is that once you find out that the needs of your business can no longer be met by your legal entity, you are free to change it.  It is however beneficial if you have basic knowledge of business laws as it will be highly beneficial to your business or you can engage the services of a law attorney to help guide you on what is best for your business.

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8. Choose a Catchy Business Name

Choosing the right name for your money transfer business is very important because it would portray the kind of business you are going into. Therefore, if you are considering some unique and catchy names for your money transfer business, here are some names you can choose from;

  • Transferpay International
  • Currency Wise International
  • Moneyfair
  • Pennywise International
  • Cash Central Inc
  • Payable International

9. Discuss with an Agent to Know the Best Insurance Policies for You

Having insurance is very important and for a business as sensitive as a money transfer business, it is very vital that you buy an insurance policy that would protect you from any form of liability. Knowing the right insurance policies to choose from can be quite tasking, which is why it is necessary to approach an insurance agent or broker to advise you on which policies you would need to buy for your business.

Some of the basic insurance policies that you would need to consider purchasing if you intend to start your money transfer business in the United States of America are;

  • General Insurance
  • Liability insurance
  • Workers’ Compensation Insurance
  • Health Insurance
  • Errors and Omission Insurance
  • Payment Protection Insurance
  • Data Breach Insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

While the money transfer business is one that is very sensitive and requires a solid and secure database to protect the information of clients, it is however not a business that requires getting an intellectual property protection. This is due to the fact that this kind of business is a service based business that does not require inventions of any sort.

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However, certain money transfer businesses have overtime applied for intellectual property protection for their company logo, slogan or jingle, and if you consider this as a priority, you can do yours as well, especially your logo or company name.

11. Get the Necessary Professional Certification

You would not need a professional certification in order to start a money transfer business. However, there are certain professionals you would need to have on board in your organization if you intend to run a standard money transfer business.

A compliance officer is very necessary to boost the profile of your business and there are certain certifications that must be taken by the compliance officer. Some of the certifications that a compliance officer must have include;

  • Certified Anti-Money Laundering Specialist (CAMS)
  • AML
  • KYC
  • CIP

The more certifications the compliance officer possesses, the easier it is for you to legally transact your business.

12. Get the Necessary Legal Documents You Need to Operate

The money transfer business is one that is very serious and sensitive, therefore certain documentations must be in place before the business can be started in the United States of America. However, it is necessary to point out that no business can be effectively run without proper documentations in the United States of America.

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Some of the basic legal documents that you are expected to have in place if you want to legally run your money transfer business in the United States of America are;

  • Certificate of Incorporation
  • Operating Agreement
  • Business License and Certification
  • Business Plan
  • Non Disclosure Agreement
  • Insurance Policy
  • Employment Agreement
  • Money Services Business Application form
  • Money transferring license
  • FinCEN Form 107
  • Online terms of use
  • Online Privacy Policy Document
  • Apostil

13. Raise the Needed Startup Capital

The money transfer business just like any other business, would need certain amount of capital from you. While seeking for start-up capital for a business is not an easy affair, it is very important that you have a good business plan in place that will help you convince your banks, investors and friends to invest in your business.

Some of the options that you might need to explore when sourcing for start-up capital for your money transfer business include;

  • Raising money from personal savings, sale of stock or properties
  • Raising money from business partners
  • Sourcing for soft loans from family members and friends
  • Pitching your business idea to angel investors for a loan
  • Applying for Loan from your Bank
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14. Choose a Suitable Location for your Business

The money transfer business is one that can be run from home or from the internet. Whether you choose the traditional brick and mortar building or the internet to run your business, a suitable location is very important to the success and growth of your money transfer business.

One factor that would come to bear greatly on your location issue is the scale of the business you intend to run. If you are a bit constrained by budget, then you might need to choose a location that would not add more financial strain to you.

If you carefully study the money transfer business, you would see that the popular and dominant industry players operate from both a physical location as well as from the internet in order to capture a large share of the market.

The location where you choose to locate your physical offices must be strategic; while it must be close to your banks, it must also not be far from your clients. In the money transfer business, most of the clients are migrants who want to send money to relatives or loved ones in their home countries, so it would be unwise to locate it far from where a lot of migrants live or work.

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If you indeed intend to locate your business far away, a competitor might seize this advantage and use it to get a huge share of the target market.

While your physical location must be conspicuous and easily accessible, your website which should be your virtual office should also be as well. Clients who need to conduct transactions via your website shouldn’t have to experience difficulties, insecure website or downtime.

This is why you should search for a good web host and developer to ensure that you offer your clients a safe place to carry out secure transactions.

15. Hire Employees for your Technical and Manpower Needs

Due to the fact that the money transfer business is a licensed one, there are certain paths you would need to take to be able to run your business successfully in the United States of America. You could decide to follow the affiliate, correspondent, correspondent/ISO, authorized delegate, licensed or banking agent route.

There are also several players in the business such as the sender, the sender’s bank, beneficiary, beneficiary’s bank, money transfer operator (sending side), money transfer operator bank (sending side), correspondent bank (sending side) and money transfer operator/bank (receiving side).

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In order to fully set up and run your money transfer business, you would need basic office supplies such as computers, printers, phones and software (security, customer and transfer software) to enable you run a business that is reliable and trustworthy for your clients.

As regards your website, you will need to create a firewall so that hackers do not hack into your database and steal customers’ information as this could make your money transfer business to quickly lose credibility and eventually fail.

In employing the right people to work in your money transfer business, you would need to conduct security and background checks so as to not employ criminals or those with a bad financial history.

The business structure that you would build for your money transfer business are; the chief executive officer, the admin and human resources manager, accountant, customer care officer for both online and offline inquiries, marketing officer, ethical hackers, cleaner, security guard.

The number of people you would need to employ in order to run a successful money transfer business that is of medium scale is at least 10 people.

The Service Delivery Process of the Business

The money transfer business is one that includes several types of operators to be able to function effectively and this includes banks and money transfer operators. For a service to be delivered well, the remitter of cash usually goes to a physical location where he or she hands over cash to a money transfer operator teller.

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The money transfer operator will have agreed with the agent (a bank) as to the exchange rate as well as any additional charges that will be incurred during the transaction and these charges are passed on to the remitter before the money can be sent to the beneficiary in another country.

The remitter is given a receipt showing the details of the transaction which will include who the beneficiary is and how much will be given.

It is only after this that the money is deposited by the money transfer operator into its bank account and when it has reached a certain amount, make a transfer to the delivery agent in the destination country. This arrangement which depends on the agreement between the money transfer operator and delivery agent can be daily, weekly or monthly.

Once instructions have been received from the money transfer operator, the delivery agent then delivers the money to the beneficiary via the agent’s physical location. A commission is usually charged by the delivery agent for this service. This cycle is usually referred to as a transaction.

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16. Write a Marketing Plan Packed with ideas & Strategies

The money transfer industry is one that is not only stiff with competition but also filled with dominant players as well; this is why you must ensure that all is in place before you proceed to market your business to your potential clients.

Because marketing not only helps generate revenue for your business but equally increases awareness for the business; it is important that you conduct a market survey that will help you identify your target market as well as ways to penetrate the market using certain strategies.

Conducting a market survey will also help you study the strengths and weaknesses of your competitors and then help you develop strategies that you can use to compete with them and get a huge share of the target market.

The result of your market survey would help you determine the right marketing strategies that would be effective for your business. It is also from your market survey that you would determine the budget that you will need to market your business.

The internet has made it possible these days to reach customers from far and wide and so combined with physical form of marketing, any enterprising entrepreneur can achieve all its corporate goals and objectives. Therefore some of the platforms you would need to market our money transfer business are;

  • Ensure you introduce your business to stakeholders in the industry by having your marketing team approach corporate organizations and international businesses with letters and brochures listing the benefits of your money transfer business.
  • Ensure that you place advertisements in newspapers, business and money related magazines, as well as on radio and television stations.
  • Ensure that your business is listed in yellow pages as well as on online directories.
  • Empower your marketing executives to engage in physical and direct marketing.
  • Use your website as well as social media platforms such as Linkedin, Facebook, Twitter, and Google Plus to vigorously market and advertise your business.
  • Place billboards in strategic locations in order to enable your target market be aware of your money transfer business
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17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

If you are serious about starting your money transfer business, then you should be ready to engage in activities that would promote your brand and create a corporate identity for you. Boosting of awareness is what all companies engage in no matter how long they have been in business, because the more you publicize your business, the more you attract new customers and retain already existing customers.

Because the money transfer business is majorly an international kind of business, you would need to understand the international market when creating the necessary strategies for promoting your business.

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The importance of publicity has made it imperative for businesses to get a brand consultant that understands the national and international market and can therefore draft the right strategies that would boost the awareness of the brand.

The money transfer business is one that has a lot of competition and so it is absolutely necessary to create the best strategies that would help the business stand out and be able to compete favorably against its competitors. Below therefore are the platforms that you can leverage on to boost your brand and communicate the corporate identity of your business;

  • Ensure that you leverage on social media platforms such as Facebook, Instagram, YouTube, Twitter to promote your money transfer business
  • Place adverts in popular websites and blogs
  • Ensure that your website is search engine optimized so that it can appear tops in search engines when clients are looking for a money transfer business to use
  • Hand out handbills and business cards and paste fliers in strategic locations
  • Set up branches in countries where you are likely to have enough potential clients and carry out adverts there as well
  • Use your official website to advertise your business