Malaysian start-up MoneyMatch is launching a platform that will allow users to exchange currencies cheaply in a bid to disrupt Asia’s existing currency exchange systems.

Called MoneyMatch Transfer, the online platform essentially works like a crowdfunding site for users who want to swap currencies. For instance, an individual in Singapore wants to send money to Malaysia and swap it for local currency. MoneyMatch matches the individual with someone in Malaysia who wants to transfer the same amount of money over to Singapore. Once the match is made, the respective amounts are transferred to the individuals’ local bank accounts.

“This means money doesn’t move across the border, cutting out bank transfer fees and intermediaries like money changers,” co-founder Naysan Munusamy tells Enterprise. He says banks and money changers typically take a cut of between 3% and 7% when swapping currencies. MoneyMatch, on the other hand, will set a fixed fee for its services that is three to five times lower than that for conventional methods.

Transfer is set to debut in the third quarter of this year, starting off with Singapore and Malaysia, before expanding to other countries in the region. It joins the ranks of the growing number of financial technology start-ups disrupting cross-border currency transfers. Many of such start-ups are based in the UK and have seen tremendous success. Currency platform FXcompared estimates that the Top 20 nonbank money transfer providers in the UK account for £40 billion ($80.1 billion) of foreign exchange every year, helping to save up to £900 million for consumers annually. In Southeast Asia, MoneyMatch is among the first to venture into the currency transfer space.

The two-year-old start-up has secured US$150,000 ($300,031) in seed funding from Kosciuszko Holdings. In January 2015, it also won a place at Cyber- View’s Living Lab Accelerator in Malaysia, which typically makes investments of between RM50,000 and RM100,000 in each start-up.

With Transfer, Moneymatch aims to capture 10% of the number of Malaysians working in Singapore, which it claims will be sufficient to power its next stage of growth. “I cannot find a reason why Malaysians [who are working in Singapore] would not want to send money back cheaply,” adds Munusamy. “There are also a lot of Malaysians moving money to Singapore for investments, or to purchase properties.” Malaysia’s Ministry of Human Resources puts the number of Malaysians working in Singapore at 350,000 and this does not include another 386,000 who have permanent residency here, reported Malaysian news site Malaysian Digest.

MoneyMatch was founded by two Malaysian bankers. Munusamy was executive director of Goldman Sachs Hong Kong. He lived by the motto “work hard, play even harder”. In his prime, Munusamy took helicopter rides to Macau for a meal, bought watches worth more than cars and drove a convertible sports car. “In Goldman, we called it the golden handcuffs. You think the luxury is a norm, but it really isn’t,” he says.

At the same time, Munusamy and Moneymatch co-founder Adrian Yap found the banks too constrained for their liking. “It got too regulated,” says Yap, who was a banker with Bank of America. He explains that banks have scaled back from taking risks post-financial crisis. “There was only so much you could create in a heavily regulated market. [It was] stagnant,” he says.

So, they came up with MoneyMatch, an idea that closely resembles UK-based TransferWise. The two roped in former Rocket Internet Singapore assistant vice-president Fazil Fuad and spent the last year building up the digital platform. “It is important to start in a field that you know really well and you think you can add value to,” Munusamy says.

Blockchain technology
One of the biggest concerns of money transfer startups is security. Users have to transfer their money to MoneyMatch’s trust account before it secures a match and wires the money over to their local bank account. Fraudulent cases among peer-to-peer (P2P) platforms are not unheard of.

But, Munusamy says, the start-up has spent the last year using the funds raised to make Transfer a blockchain-enabled platform. “This means it is highly secure and the money transfer can always be traced,” he says.

Blockchain technology, which is used to secure the virtual currency bitcoin, is said to have the potential to provide better data security than current systems. In April, Forbes reported that tech giant IBM had come up with a new framework to run the blockchain network. This would allow more companies under its blockchain networks to create a data log that can be used for compliance and audits, according to the report. But more significantly, the move may spur more frameworks to run blockchain securely, which will benefit smaller players such as MoneyMatch.

Security aside, Munusamy and Yap understand the need to keep prices attractive. At Transfer, the exchange is made at the interbank rate, also known as the midrate of currency exchange spread. “In most cases, this will be a better deal than the money changer’s — 95% of the time at least,” Munusamy says proudly.

MoneyMatch also uses a fixed fee model, which he estimates is a better deal than the percentage cut taken by service providers. TransferWise charges 0.5% of the amount converted, according to the BBC.

Before Transfer, MoneyMatch had started Exchange. The forum-like platform allows users to post their currency exchange request. If someone wants to make the transfer with another user, they can meet somewhere physically to do so. So far, individuals in 17 countries have used Exchange.

P2P currency exchange platforms such as MoneyMatch are currently unregulated because they do not directly handle funds. Across the world, regulators have also approached the P2P space cautiously, as heavy-handed regulations could stifle growth.

But these platforms have run into trouble. TransferWise was called out for allegedly misleading users about how cheap it was compared with the banks, reported Business Insider UK. There is also concern that money laundering and terrorist financing could be done through these platforms.

MoneyMatch’s founders say they are working closely with regulatory bodies to ensure it operates within regulations. “My view is we can be safer than money changers because it is harder to keep track of people changing money [using that method] if it is a small amount. But with digital platforms, we can always track [the transactions],” says Munusamy.

The future
MoneyMatch feels Southeast Asia presents one of the best opportunities in the market.

“In Southeast Asia, every country has its own currency and capital control,” says Yap. “The cost of exchanging currencies can be significantly high [especially for difficult-to-obtain currencies like the Myanmar kyat].”

They will also not rule out an opportunity to work with banks. “Not all banks are big in the FX and remittance spaces, and there may be an opportunity to collaborate with them [as an additional service to their customers],” says Munusamy. MoneyMatch has plans to expand its offering to Hong Kong and Australia this year and is in talks with parties in Indonesia.

After the currency exchange business takes off, Munusamy hopes to roll out other P2P services such as cheaper methods of funding small businesses overseas. “We are a capex-heavy, opex-low business [so it is not hard to scale up],” he explains. The bulk of its costs are building up blockchain platforms.

The founders are not aiming for meteoric growth, however. They aim to be profitable in three years.

“We’re not that young anymore,” says Yap, “We are not looking to jump into 10 markets, but to build a sustainable business.”

This article appeared in the Enterprise of Issue 730 (May 30) of The Edge Singapore.