How Klasha powers payments for International Money Transfer Operators (IMTOs)
International remittances and transfers have evolved significantly from when international transfers used to require up to a week and undergo numerous, often frustrating, due diligence checks. Technological advancement and pressure from the G20 and UN to reduce transaction costs have resulted in cheaper ways to make cross-border payments.
International money transfer operators (IMTOs) are pivotal in enabling individuals and businesses to transfer money across borders. Whether sending remittances to family members overseas or facilitating international business transactions, IMTOs are essential.
At Klasha, we are revolutionizing how IMTOs handle cross-border transactions. In this post, we’ll discuss how Klasha simplifies cross-border payments for IMTOs and helps them navigate the complexities of international money transfers.
International money transfer operators (IMTOs) are facilitators of international payment transactions. IMF defines IMTOs as financial companies (but usually not banks) engaged in cross-border funds transfers using their internal system or access to another cross-border banking network.
These transfers are rarely straightforward transactions. Intermediaries are required to get the funds from A to B (or even from A to B to C to D), and several processes need to be completed for the money to arrive safely. All these processes are usually carried out internally by payment providers who are licensed IMTOs.
Due to the process involved, payment providers charge transfer fees from customers, making international money transfers more expensive than local transfers. This covers the cost of payment processing, foreign exchange, bank deductions, and other charges. In addition to the sender having to pay for these services, the beneficiary recipient is often charged a fee for receiving funds overseas.
Below is a representation of how it works.
IMTOs still face significant challenges in managing cross-border payments despite simplifying cross-border payments.
Challenges of IMTOs
Compliance and regulations: The evolving landscape of international financial regulations can be daunting. For IMTOs to operate successfully, they must adhere to international standards and regulations, such as those set by the Financial Action Task Force (FATF), and the financial regulations of the countries they cover, including anti-money laundering (AML) and KYC requirements.
These regulations prevent money laundering, terrorism financing, and other illicit activities. However, these operators must go through a series of complex reviews by various countries before operating. This could be tedious and demanding; failure to comply can result in legal consequences and reputational damage. IMTOs comply with various laws and regulations in different countries, making their operations complex and costly.
Exchange rate volatility: IMTOs often deal with multiple currencies, and fluctuations in exchange rates can impact their profitability. Sudden and significant currency value changes can affect the amount received by the recipient, making it challenging for IMTOs to offer consistent and competitive rates.
Payment infrastructure: IMTOs need reliable payment infrastructure to facilitate transactions. This often involves partnerships with local financial institutions to ensure funds reach recipients in remote or underserved areas. Building and maintaining these networks can be challenging, particularly in regions with limited banking services.
High transaction costs: IMTOs incur various costs when sending money across borders. These costs include fees charged by correspondent banks for facilitating the transfer and expenses related to currency conversion. IMTOs need to manage these costs to offer affordable and attractive services to customers.
Security and fraud: To maintain trust and keep users' funds safe, IMTOs implement robust security measures to protect against identity theft, phishing, and scams. This usually comes at an expensive cost.
How Klasha simplifies cross-border payments for IMTOS
Poised to provide cross-border payment solutions to African and global businesses, Klasha simplifies payment for IMTO through these features of a Klasha Business Account.
International money transfer: Klasha facilitates cross-border payments for IMTOs by enabling secure and efficient fund transfers across various countries. This is achieved through the international money transfer feature of the Klasha Business Account, also known as Klasha Wire.
With Klasha Wire, IMTOs can manage large payments overseas at highly competitive rates using African currencies. Simultaneously, the recipient receives the equivalent payout in USD, EUR, CNY, EUR, GBP, INR, and more. Klasha currently wires funds to over 120 countries in T+1-3.
Payout API: Klasha streamlines payment processes for IMTOs by facilitating the seamless distribution of funds to their African customers in local currency (LCY). Customers receive their funds directly in their bank accounts or mobile money wallets when a payment is initiated.
This eliminates the need for time-consuming manual paperwork and the reliance on multiple FX vendors. With Klasha's API, IMTOs can effortlessly disburse funds to African recipients.
Pay-ins/collections: IMTOS accepts payment seamlessly from African customers in local African currencies with Pay-ins, also called Klasha Pay. With Pay-ins, IMTOs can expand into Africa and sell to African consumers who pay online in their local African currencies and money methods. At the same time, they get payouts in any hard currency.
The service charges are structured transparently, and you only pay for the transactions you process without hidden fees. Create a Klasha Business Account and generate your API keys to get started.
Data security: Regarding international money transfers, security and compliance are paramount. Klasha is PCI DSS-certified compliant. This means it offers the highest level of security for its cross-border transactions.
Transaction speed and transparency: Klasha completes cross-border payments in T+1-3 regardless of the country or currency involved. The Klasha Business Account has a transparent pricing model that provides real-time insights into the transaction fees charged for each transaction per time and when each transaction has been completed. This enhances transparency for both the IMTOs and their customers.
If you're an IMTO looking to enhance your services, create a Klasha Business Account or speak to our sales team to simplify your payment processing.