Hong Kong Startup Game Changer For Sending Money Abroad
Updated: Dec 15, 2017
HKDsmart, a disrupter of the remittance market, launches in Hong Kong.
Traditional money transfer agents, banks and point-to-point local remittance providers have long gouged customers every time they ‘wired’ funds overseas. But the currency exchange and remittance business is undergoing disruption as fintech startups such as TransferWise’s popularity in Europe to InstaRem’s growing presence in South East Asia have made international money transfers much cheaper and quicker. The latest entrant to the Hong Kong market is Dollarsmart Global, a peer-to-peer remittance specialist, which just launched its local service HKDSmart. Users will get substantial savings every time they send money broad.
HKDSmart’s currency exchange rates undercut most rates by traditional market players. The new service has also removed key pain points in the process including transfer fees and charges per transaction usually imposed by traditional market players. “We offer a better rate and the more you send, the better rate you get. People can check and compare our rates to live internet rates and see that our rates are very competitive,” says the startup’s CEO Dwight Willis.
Consider a transfer of HK$10,000 to Thai currency as an example. As a baseline, a conversion with the mid-rate (the best rate in the market place, which is only available for large corporations that deal with big banks) amounts to 45,453 Thai baht.
A conversion at a traditional bank translates to 42,909 baht.
At HKDSmart, users get 44,351 baht (at the recent rate), or savings of 1,442 baht or about HK$450, says Willis.
“Money transfer from Hong Kong has been too expensive for too long; the banks can take up to HK$500 in fees on a typical Swift or Telegraphic transfer,” says this entrepreneur.
In the traditional method, customers endured unfavorable exchange rates as commissions were often hidden in those rates; consumers also faced charges applied to every transaction. “You go to the bank and they charge a fee and charge to make the transfer and the receiving bank will also apply a fee and charge,” he says.
So how can HKDSmart offer better rates in a service also free of the typical high fees and charges levied by traditional market players? The answer lies on the start-up’s peer-to-peer model, a platform that matches users transferring funds in one direction with users transferring funds in the opposite way.
Instead of relying on banks or other traditional service providers to convert currency (financial institutions apply charges for such service), this process is entirely cut out at this online remittance specialist. Essentially, users of HKDSmart are buying currency from one another through its peer-to-peer money transfer system.
In addition, the online operator does not have high overheads typical of brick-and-mortar operations. “Because my operation is so cost effective to run and the technology is built on scale, I can continue to deliver those cost savings to more and more countries and customers that have joined [the service],” he explains.
HKDSmart will be muscling into a market valued at $1.08 billion where $372 million flows into Hong Kong and $712 million of remittance flows out of this market, according to 2015 World Bank figures. The company's users in the region are predominantly domestic workers or high-earning professionals who want to pay off their house in Europe or vacation home in Thailand for example, according to Willis. Dollarsmart Global moves around $3.5 million every month.
While the two-year-old startup was incorporated in Singapore, the firm will move its headquarters to Hong Kong and incorporate at this destination to facilitate its business and connections in the territory including DBS Hong Kong, Invest Hong Kong and NEST (Dollarsmart Global joined DBS Hong Kong and NEST’s accelerator program after being shortlisted amongst 100 contenders). The ease of acquiring a remittance license in Hong Kong also contributed to this decision. "In Singapore, to get a remittance license, you need to owned by Singaporean company, which means it must be 51% owned by a Singaporean,” he explains. “In Hong Kong, it’s very open as we could get the license being a foreign company,” he adds.
The company is also a licensed operator in Australia, Thailand Vietnam and Laos. It has already captured 10% of the remittance flow between Australia and Thailand and plans to launch in China this year.