-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Explanation of Cross-Border Money Transfer!!
Traditional Model & Pre-Pay (Pre-fund) Model
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
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Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The traditional (i.e. simplest) money-transfer model.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
In the traditional model, a User walks into an Agent Network
premises and user either Cash or some other payment instrument to
pay for a Remittance.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Through out the day, various customers come to the various agent
locations and put up their money for the remittances to be sent
across.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
At the end of the day, the MTO (Money Transfer Operator) takes
all the money, from all the Agents (who essentially have a deposit
with the MTO) and pools everything into a singular transaction.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
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Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Along with all the money that needs to be remitted across, the
MTO also prepares a file that has the instruction set on how to
break down the remittances to the individual orders that came in
for distribution. !This file is prepared for the Settlement Bank in
the Beneficiary Territory.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
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Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Remitting MTO emails (or FTPs) the File across to the
Beneficiary MTO.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The money is then shipped off by the MTO to the Settlement Bank
that the MTO has (on the Remitting Side the Settlement Bank is
essentially the Bank that the MTO is working with). !As not all
Banks handle remittances clients, this is why the nomenclature
assigned to the banks that do work with MTOs.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Settlement Bank then initiates a SWIFT Wire transfer to be
sent across to the Beneficiarys Settlement Bank, usually through an
intermediary, known as a Correspondent Bank (which will have two
elements: !The Send Side Bank (known as Remitting Bank) the Receive
Side Bank (known as the Receiving Bank).
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Via the SWIFT (or other network) the money is sent across the
border and the accounts of both the Remitting Bank and Receiving
Banks are adjusted for the money transfer. !By this time a day or
two has elapsed
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(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
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Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Receiving Bank then informs the Settlement Bank (which is
the final destination) that your Money in US Dollars has arrived
and as per todays rate, I am now giving you the local currency
equivalent in say Pakistan Rupees. !The US Dollars are surrendered
to the Central Bank, improving the economy, whilst the local
currency is provided to the Settlement Bank.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Settlement Bank on the Beneficiarys Side then informs its
client, the MTO, that they have received the money and it is now
available for use in the local denomination (in this example, it is
in PKR - Pakistan Rupee).
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The MTO then starts to distribute this money out, via either
direct bank deposits or Agent COC (Cash Over Counter) payments
thereby completing the Remittance cycle.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The MTO then starts to distribute this money out, via either
direct bank deposits or Agent COC (Cash Over Counter) payments
thereby completing the Remittance cycle.
Hey did you get the money I sent?
Yup! I just got it. Thanks!
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
This example was that of a batch-process, where the two MTOs are
basing their transactions on trust. The two MTOs do not interface
or integrate with each other in any manner. The only common
denominator is the file-sharing they do to break down the
remittance and disburse them.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The second element of trust here was the money. Until and unless
the Beneficiary MTO did not receive the money from the Remitting
MTO, they did not distribute any remittances. This example can best
be summed up as upon realization of funds on the receiving end
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money TransferRemitting Territory Beneficiary
Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
What happens when both the parties can trust each other with
money in advance? How will that change the game?
!The Pre-Pay (or Pre-Fund) Model.
?Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Now, lets look at the same scenario where a Remitter wants to
send out a Remittance, and how it differs using the Pre-Pay (or
Pre-Fund) model.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Sending MTO places an advance deposit with the Receiving
MTO. Under this arrangement, they agree to a floor price, lets
assume US$ 100,000. This way, US$ 100,000 would always be available
to the Receiving MTO. The currency is held in US Dollar by the
receiving MTO and is not converted to the local currency component
(yet).
US$100,000
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
A User walks into an Agent Network premises and user either Cash
or some other payment instrument to pay for a Remittance. Lets say
the amount they want to transfer is US$ 1,000
US$ 1,000 to !send to Pakistan
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
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Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Conversion Rate as provided by the Receiving Banks Treasure
Department for the day is 1US$ = 100 Pakistan Rupees
US$ 1,000 to !send to Pakistan
1US$ = 100 PKR
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(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Let us also assume the MTO/Agent will split this transaction
cost 50/50 and the cost to transfer is US$ 15.00
US$ 1,000 to !send to Pakistan
1US$ = 100 PKRUS$ 15.00
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
So the accounting would look like this
US$ 1,000 to !send to Pakistan
1US$ = 100 PKRUS$ 15.00
Funds to transfer: US$ 1,000!Cost to Transfer Funds: US$
15.00!Total Amount Paid: US$ 1,015.00!Exchange Rate: 1US$ = 100
PKR!Amount To Be Received by the Recipient: US$ 1000 x 100 = PKR
100,000!The Fees for the transfer (US$ 15.00) is not converted.!As
per US Law, the complete breakdown of the transaction, including
the exchange rate and what the beneficiary would receive has to be
provided at the time of the transaction to the person sending the
funds.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Remitting MTO sends instructions via a real-time system (if
integrated) or off-line message (if not integrated) to Beneficiary
MTO to Pay US$ 1,000 to the Beneficiary from the Pre-Pay account
and use the conversion rate of US$ 1 = PKR 100 and credit the
amount immediately.
US$ 1,000 to !send to Pakistan
US$100,000
Deducted US$ 1000 from PrePay Account and!do a direct account
credit for Beneficiary.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
MTOs Receiving Bank then forwards the money in Pakistan Rupee
after conversion to the Settlement Bank for direct account credit
to the Beneficiarys account
US$ 1,000 to !send to Pakistan
Pre Fund Account: US$100,000!Deduct Payout: US$ 1,000!Balance:
US$ 99,000!Exchange Rate: US$ 1 = 100 PKR!Transfer to MTO Account
for further!credit to Beneficiary account:!PKR 100,000
Pakistan Rupees: 100,000 deposited!into Beneficiarys
Account.
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
With the transfers completed, this is what the status looks like
right nowthere are two elements missing???
Paid US$ 1,015
Commission: US$ 7.50
Commission: US$ 7.50
PrePay Account Balance:!US$ 99,000
Received: PKR 100,000
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The US$ 1,000 that was received by the MTO in the Remitting
country. That needs to be sent across to the PrePay Account to
level (or top-up) the balance.
Paid US$ 1,015
Commission: US$ 7.50
Commission: US$ 7.50
PrePay Account Balance:!US$ 99,000
Received: PKR 100,000
US$ 1000.00 ???
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The Receiving MTO makes money on the Exchange Rate. The Actual
exchange rate may be 1 USD = 102 PKR - so the MTOs Receiving Bank
will quote Rs. 100 as the exchange rate and pocket Rs. 2 x
(transfer amount) as its income, which in this case would be Rs. 2
x 1000 = Rs. 2,000 as income.
Paid US$ 1,015
Commission: US$ 7.50
Commission: US$ 7.50
PrePay Account Balance:!US$ 99,000
Received: PKR 100,000
How does the Receiving!MTO make Money?
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Remitting Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
The last open item left is to ensure the US$ 1,000 that is
residing with the Sending MTO to be sent to the Receiving MTOs Bank
via SWIFT Transfer.
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)
US$ 1,000 Sent across via SWIFT
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.
-
Cross-Border Money Transfer: Pre-Pay (Pre-Fund Model)Remitting
Territory Beneficiary Territory
Agent!Network
Remitting!Bank
Agent!Network
Receiving!Bank
Settlement!Bank
Settlement!Bank
MTOMTO
Once all funds have been settled and all payments sent across,
this is how the eco-system would look like.
Paid US$ 1,015
Commission: US$ 7.50
Commission: US$ 7.50
PrePay Account Balance:!US$ 100,000
Received: PKR 100,000
Final Position
Commission: Rs. 2,000
Faisal Khan (Payments Consultant) http://about.me/faisal.khan
(c) Copyright 2013-2014. Faisal Khan & Company. All Rights
Reserved.