TranSwap takes aim at remittance business


IN THE crowded but growing space of remittance startups, TranSwap is hoping to stand out by standing up for small and medium enterprises (SMEs).

The company recently launched an application programming interface (API), and it burnished its credentials as an SME specialist by joining as a value-added service provider on the Singapore government's Networked Trade Platform (NTP) for import and export companies.

"For retail customers, the transaction amount is smaller, and they can be expensive to acquire because you have to provide incentives. Corporate clients take longer to acquire, but... we can have a tighter handshake," co-founder and chief executive Benjamin Wong told The Business Times.

The 57-year-old Mr Wong speaks from experience. Having worked in finance and treasury roles in a range of industries, from steel manufacturing to shipping, he said that he is familiar with the challenges of settling foreign payments.

One of the biggest sources of friction has been costs, with banks often charging a markup to the exchange rate, he noted. Like TranSwap, numerous other fintechs have already sprung up to soothe that sore spot, offering more competitive rates and same-day transfers. These include London-headquartered TransferWise, which raised US$280 million in 2017 to expand in Asia; and local startup InstaReM, which recently raised US$20 million for the first close of its Series C round.

The incumbents are competing as well, like DBS Group Holdings' offering of same-day cross-border transfers to selected countries with locked-in exchange rates and zero transfer fees.

TranSwap, which was incorporated in 2014 by Mr Wong and two other partners, obtained its remittance licence in Hong Kong in 2016, and in Singapore in July last year.

Through TranSwap's platform, individuals and companies can transfer funds in the local currency or US dollars to some 45 countries spanning Europe, Australia and Asia, as well as the United States.

Like its peers, TranSwap enables customers to make transfers at the mid-market exchange rate obtained from third-party sources like Bloomberg and Reuters without a mark-up.

Instead, TranSwap charges a transaction fee of between 0.25 per cent and 1.7 per cent of the sum transferred, depending on the currency pair.

The highest fee of 1.7 per cent presently applies to transfers from Singapore dollars to the Korean won.

To get an edge out of those margins, TranSwap is courting the enterprise market. For instance, TranSwap can merge its API with its clients' platforms to provide a more seamless solution for regular payments.

Mr Wong also believes that getting on the NTP, which contains a directory of tools and services for importers and exporters, will raise the company's profile.

TranSwap's platform currently has about 300 registered and approved users, Mr Wong estimated. About 70 per cent of them are companies, ranging from SMEs to a few larger players.

Transactions have picked up towards the end of this year, according to Mr Wong. For the financial year ending Dec 31, 2018, he expects more than S$30 million worth of transactions to have been made on TranSwap, of which S$15 million to S$18 million would be in the fourth quarter. Some 90 per cent of the total transaction volume comes from corporate clients, he said.

TranSwap has about US$1.2 million in initial funding, including inputs from Mr Wong, his co-founders and friends and S$50,000 in cash-and-kind seed funding from venture capital firm Quest Ventures.

The firm has also received about HK$600,000 (S$105,538) in additional grants from Cyberport, a tech incubator owned by the Hong Kong government.

The startup, which is awaiting approval of a remittance licence in Indonesia and has plans to apply in Europe, Australia, Canada and the US, is now on the lookout for institutional investors to raise a further US$5 million to US$10 million for growth. Beyond remittance, Mr Wong thinks that TranSwap could eventually expand to other capital management tools for SMEs, such as trade and invoice financing, and forex hedging tools.

"Remittance is like the cake - once it is in place, we can have these value-added services as the icing," he added.

TranSwap at a glance

  • CEO, co-founder: Benjamin Wong. Held finance and treasury roles in industries such as steel manufacturing and shipping
  • Business: Cross-border payments
  • HQ: Singapore
  • Backer: Quest Ventures
  • Funding rounds: US$1.2 million (Seed)