One of the major drivers of USD inflows into India is the seamless transfer of money by Indians living abroad.
In United States, examples of three such specialised apps that made international money transfers extremely smooth:
• Remitly
• Xoom (a service of PayPal)
• Western Union
These platforms have simplified the process of sending money from the USA to India and other countries, especially for small and medium remittances typically below $10,000, which constitute a large portion of global remittance flows.
Regulatory Framework in the United States
Money transfer apps operate as Money Services Businesses (MSBs) and are regulated mainly by Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury, along with state regulators such as New York State Department of Financial Services and California Department of Financial Protection and Innovation, with oversight from Consumer Financial Protection Bureau and Office of Foreign Assets Control.
Customer Verification and Compliance
Before allowing a person to transfer money, these apps build a detailed profile of the sender.
Verification normally includes:
• Social Security Number
• Name and Date of Birth
• Address and Occupation
• Income details
• Expected transaction patterns
These checks help ensure compliance with anti-money laundering and financial monitoring regulations.
How These Apps Actually Work
These apps do not maintain bank accounts for customers. Instead, they act as intermediary platforms.
Once a user initiates a transfer, funds are debited from the sender’s checking or savings account through:
• ACH transfer
• Debit card
• Internet banking
• Cheque-based clearing systems
The fintech company then arranges credit to the beneficiary’s Indian bank account.
Role of Correspondent Banking
These transfers are settled through correspondent banking relationships, where Indian banks maintain accounts with banks in the United States and route funds to beneficiaries in India.
This settlement is typically facilitated through Nostro and Vostro accounts, which allow banks in different countries to hold accounts with each other for international fund transfers.
Final Thought
Indian banks operating in the United States also provide remittance services.
However, for transactions below $10,000, fintech apps have become extremely popular because of their:
• Speed
• Convenience
• Mobile-first experience
Millions of such small transfers collectively move large volumes of foreign exchange into India, making remittances one of the strongest contributors to the country’s external inflows.
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