Opening the door for foreign remittances
The start-up, which offers the foreign exchange service on AliExpress, Alibaba’s popular online marketplace, now plans to extend its expertise on foreign currency-based transactions to Korea.
But M-DAQ’s focus in Korea will be on foreign currency remittance. The company hopes to take the role of an intermediary between banks and remittance start-ups.
The Korea JoongAng Daily interviewed Thomas Kang, the head of global outreach at M-DAQ, and Shawn Park, head of the company’s Korean branch, to discuss its entry into the country.
Q. How is M-DAQ going to operate in Korea?
A.Kang: We haven’t officially launched in Korea yet, however, we see Korea as a very interesting market with a tremendous potential. International Enterprise Singapore (ES) organizes regularly events to bring together Singapore companies and Korea’s big corporations. Since our last trip to Seoul in February, M-DAQ has been invited by the City of Seoul to set up an operation in the Seoul Fintech Lab within the Seoul Startup Hub in Gongdeok [in western Seoul].
We are currently looking at what we can do for Korea’s Fintech ecosystem. We are always open to any form of Singapore-Seoul Fintech collaborations. M-DAQ is also considering forming a joint venture partnership with Korean conglomerates. Since our expertise is in FX risk management, we can help Korean companies doing cross-border businesses. At the moment, we see some opportunities in international remittance and cross-border e-commerce business.
What kind of pain points will M-DAQ try to solve in Korea?
Kang: When foreign workers in Korea send money abroad, they should pay higher commission fees if it is done through established Korean banks. The process also takes a while to be completed, so some of the workers sometimes depend on the black market by hiring brokers to handle money transfer. So, foreign workers are mostly underserved customers at the banks without registered bank accounts, because the foreign currency transfer comes with high risks. This is why small start-ups sprung up to serve foreign workers through digitalized platforms at lower prices.
But Korean banks and global banks are reluctant to work with the small remittance firms because of the risks associated with anti-money laundering. In handling the transactions from the start-ups, the banks could face regulatory risks. So, we are trying to address the issue by better connecting banks and remittance start-ups.
How can M-DAQ play a role in connecting banks and remittance firms?
Kang: M-DAQ has been discussing with the local partners about facilitating a platform designed to aggregate remittances from the 20 firms. The remittance size at each company is not large enough to draw cooperation from global banks. But what if we can help to consolidate the process by where remittance companies can reduce cost and gain the trust of the banks? We also can help each player in the ecosystem better identify the needs of their customers in cross-border transfers. We have identified the needs and interests of remittance businesses and have received a positive response from the global banking partner.
Park: Our business focus is business-to-business rather than business-to-consumer. On the side of the remittance start-ups, the platform that we are trying to develop can be beneficial because they can increase the bargaining power toward banks because they can present remittance in bulks to banks.
A new financial business requires approval from financial authorities. How are talks with the financial regulators going?
Kang: We are still in the stage of seeking business partners in Korea. So, we haven’t really sat down with the officials yet. In the current stage, we are researching the needs of corporate players.
Park: We think it is important to make a strong base for a partnership before we discuss regulatory issues. Once we complete the partnership process, M-DAQ will talk to government agencies to see if there will be any regulatory issues that need to be cleared.
How do you assess the prospects of the foreign currency remittance business in Korea?
Kang: Every year, $10 billion is sent abroad from Korea and 70 percent of that goes to Southeast Asian countries. This market is growing very rapidly at about 8 to 10 percent annually. This healthy growth should prompt more remittance players to facilitate the money remittance process.
BY PARK EUN-JEE [email@example.com]