Cross-border payments company InstaReM snaps $5M in Series-A funding


Cross-border payments company InstaReM on Wednesday announced receiving an investment of $5 million in Series A, led by US-based Vertex Ventures. Fullerton Financial Holdings and Global Founders Capital were the other investors. The investment will be used for licencing, geographic expansion, scaling the product, technical teams and marketing of the company that mainly serves Asia.

In an earlier story, Prajit Nanu, Co-founder, InstaReM explained about their twofold focus and working. First being peer-to-peer consumers (where person X sends money from India to somebody in Thailand/Singapore/ Australia). Second are freelancers, who receive money from abroad to India for freelance services they provide.

Pricing edge

As a part of the transaction, InstaReM charges users an amount that covers the intra-day FX (Forex) fluctuations, without applying any additional transaction fees like banks. In totality, the venture takes only 1 per cent of fees or less (including the intra-day fluctuations). Other operators like ANZ and Western Union charge a transaction fees, along with a FX spread for each transaction. Additionally, banks can cut close to 2 to 3 per cent FX spread from the inter-bank rate, in addition to transaction and other charges.

Prajit had explained that the bigger picture for them was facilitating volume. Their goal is to be one of the fastest companies to send one billion dollars, a feat that, on an average, takes companies four years to reach. The team at InstaReM is determined to reach that figure in two-and-a-half years.

In October 2015, the firm claimed to have hit a weekly remittance volume of AUD 1 million.

With the current average transaction size on InstaReM being $1,800, the platform claims to process transactions in a few hours, as opposed to the 24-to-48 hours that other money transfer operators typically take. Within 12 months, the business also claims to have been managing about 2 per cent of the total remittance (sending payments) from Australia to India.

Currently licenced to function in Australia, Hong Kong (from January) and Canada, InstaReM is in the process of applying for licences in Singapore, Malaysia, Japan, Luxembourg and some states in the US.

On the investment, Chua Joo Hock, Managing Director at Vertex Ventures says the appeal lay in the business model and the startup's rise. He says

“Trying to do a startup in the fintech space is not easy, as you may need more finance background than technology to manoeuvre the complicated industry. InstaReM’s unique deep-integration model with banks, and the capabilities to execute are two important qualities that really excite us.”

The situation

According to an estimate by World Bank, Indians abroad will send $72 billion home this year, the highest when compared to its neighbours China (estimated at $64 billion) and Philippines ($30 billion). Moreover, remittances to India have grown at 2.5 per cent in 2015, from 0.6 per cent in 2014. However, the cost of sending this money remains high, globally averaging 7.7 per cent.

There are a couple of upstarts in the US that are challenging the titan Western Union, which holds 15 per cent worldwide marketshare in the remittance market. According to CB Insights, some of the bigger ones are TransferWise and peerTransfer (now FlyWire), which have gobbled up $90.3 million and $43.3 million in Series C last year.