CEO Series

This M'sian Startup Is One Of The Cheapest Ways To Send Money Overseas—With A Catch

As good filial Asian sons and daughters, many of us take a cut of our monthly salary to send home to our parents. But you’re doing this from overseas, those international transaction fees can be a problem.

So this Malaysian startup thinks that it’s found a solution.

Your Vocabulary Word For The Day: Sending money from one place to another is called a remittance.

This startup claims that remittance companies hide transaction fees into its exchange rates, which bumps up transfer prices. Instead, TransferFriend wants to offers users “the real exchange rate”—without those fees—through its app.

Making Overseas Transfers Cheaper 

As proof of concept, it even promises to “pay 100% of our transfer fee back if we don’t match the cheapest cost of transfer”. Meanwhile, each transfer costs RM5, as far as we’ve experimented.

TransferFriend offers a transfer service that can save its users up to 85% of costs by utilising Artificial Intelligence-driven financial education.

Before you get too excited though, do note that the app currently only allows transfers from Malaysian Ringgit to either:

  • Indonesian Rupiah
  • Nepalese Rupee

Also, the app has just finished its beta phase, and the team is still in the midst of fine-tuning it before the official launch.

Why They Inserted Themselves Into The Industry

They also do physical cash pickups / Image Credit: TransferFriend

With a mission of redefining the Financial Service Industry, we’re sure that there is more in the works. From their website, it seems like the Philippines and Bangladesh are the next targets for expansion.

For now though, the business has a clear target demographic: Indonesian workers in Malaysia sending money home to their families. 

With a regional office based in Malaysia, the company hopes to tap into a 580 billion USD global remittance market. According to their press release, only 6% of global remittances are done digitally.

After launching their beta app on Google Play last year, TransferFriend saw over 20,000 installs and claims that it’s saved customers an average of RM66 per RM1,000 of transfers.

Why They’re Banking On This Model 

They aren’t the first to be doing something similar. MoneyMatch is another example in Malaysia, and there are many others internationally, like Ripple, that base their entire business on this model.

But as far as our own little experiment went, they are in fact, cheap and easy to use.

Not to mention, being able to see the rates directly from an automatic calculator on their app is a big positive notch. When I tried to check the remittance rates for both Public Bank and Maybank, I was sent to a confusing series of tables that I, as a finance novice, completely didn’t understand.

(Insert crying emoji here) / Screenshot from this Maybank PDF

Our Own Experiment On TransferFriend’s Rates

When most of us think about transferring money online, we usually use three methods:

  • Bank transfers on platforms like Maybank2u
  • Credit Card
  • PayPal

Credit cards carry the lowest transfer fees from those methods, but aren’t practical for remittances. PayPal will charge a 2.9% of the amount you send if you’re drawing from credit or debit card.

The average Malaysian (or Indonesian sending money home from Malaysia) may find it difficult to parse exactly how much the money will be, converted into Indonesian Rupiah. There are estimates online, but each transaction might change drastically from bank to bank.

So we did a small experiment by attempting to send RM1000 into Indonesian Rupiah, using the following platforms and these are Rupiah we would have ended up with:

  • TransferFriend: 3,347,142.16 IDR
  • IME Remit Online Estimate: 3,250,387.00 IDR (using bank transfer)
  • IME Remit Online Estimate:  3,2503,87.00 IDR (using cash transfer)
  • MoneyMatch: 3,317,880.90 IDR
  • PayPal: 3,267,803.40 IDR

For this, we used the IME Remit Online website as an estimate for what banks might charge for exchange rates.

From this cursory glance, TransferFriend is the clear winner in terms of direct conversion. You get the most bang for your Ringgit. Not to mention, of all those we tested, only TransferFriend and MoneyMatch has an in-app converter that is able to offer their rates directly on the platform.

Keeping Transfer Costs Low

Their press release also stated that TransferFriend can achieve these rates by using blockchain technology, though when we asked for further detail, they’re currently unable to explain further. This is because they’re still refining the app and are waiting for a launch before they can release this statement to the public.

But we have our guesses, though. Many remittance startups overseas utilise cryptocurrency to keep transfer costs low.

Ripple, a cryptocurrency which markets itself as a cross-border transfer method, was the best performing cryptocurrency of 2017. Rebit.ph from the Philippines uses the Bitcoin network, and so does Hong Kong-based Bitspark.

Besides Transferring Funds, They’re Transferring Knowledge Too

Some personal stories available on WalletFriend / Image Credit: TransferFriend

Besides just transfers, TransferFriend wants to help its customers manage finance by teaching them how.

On the WalletFriend extension of their platform, they want to create a network for its constituents to share money-saving budgeting tips and advice on money transfers, from personal anecdotes of migrants, to editorial money-saving tips. Think about something like FinSpark is trying to do, but specifically for migrants in Malaysia.

Apparently, this is where the A.I. bit of their platform comes in too, though again, the team declined to provide further details for now.

While we’d like to know more about their offers, it is interesting to see that they’re able to charge a low fee for their services, especially for the migrants in Malaysia. Though the migrant reputation in Malaysia needs some work, you can’t deny that they are an untapped market rife for monetisation.

We’re curious about the full extent of their services when launched, and we’ll definitely be checking out the platform when it does.

  • TransferFriend is a startup based in Malaysia that wants to helps migrants send money back to their home countries without having to pay expensive hidden remittance fees. 
  • Their app is newly out of the beta phase, and is currently only available for conversion from Malaysian Ringgit to Indonesian Rupiah and Nepalese Rupee, with Philippines and Bangladesh on the way.
  • Based on a cursory test, it is currently one of the cheapest options to do cross-country transfers with, though with limited countries as options. 
  • You can visit TransferFriend’s website here and download their app on Google Play. However, keep in mind that the app is not fully launched yet, and is in the midst of being fine-tuned.

Editor’s Note: This article has been modified to clarify the actual status of the TransferFriend app.

 

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