Eleven years back, Indore boy Rajesh Agrawal had just £200 in his pocket when he left a cushy financial sector job in Mumbai for pursuing bigger dreams in the UK. Today, he hopes to revolutionise the global money transfer industry with his start-up, RationalFX, a company that already does $1 billion worth of yearly business.

Started in 2005 with just a laptop and a business partner and now valued at £250 million, RationalFX is UK's first Web-based currency exchange system that charges no fee and promises a platform for money transfers that is about 15 per cent cheaper than traditional modes such as banks. This has worked like magic for both corporates and individuals looking to cut expenses in a tough economic climate.

“We sensed a vacuum in the market in terms of money transfers, especially as most traditional ways meant huge charges. We make our profits on the exchange rates and are being preferred over banks as we specialise in foreign exchange,” Mr Agrawal, Chairman and CEO, told Business Line .

Security

“Our advantages are a complete Web-based model, which means extremely low overheads and economies of scale. It's convenient, safe and fast and the customer knows exactly what he gets — there is no overcharging.”

The model relies on “back-to-back” bookings, where each transaction is booked immediately in the forex markets, leaving no risk of currency fluctuations. While RationalFX brokers mainly for large corporate transfers, a sub-service ‘Xendpay', is dedicated to retail customers.

Mr Ravi Trivedy, Partner at KPMG, said that the “value proposition” of such a model makes it a cost-effective option for transferring funds across countries, especially when large amounts are involved.

“The money transfer business is fairly commoditised. It seems to be a good option for both individuals and companies, though one has to see what security is being provided to the customer as this is outside the banking system, where funds can never be lost.”

RationalFX is regulated by the UK's Financial Services Authority as an Authorised Payment Institution. The client funds are segregated and are kept in ‘Client Trust Accounts' with the main banking partner Barclays. FSA also requires maintenance of a certain level of capital in the company, while the Web site is Verisign secure — similar to most Internet banking sites.

Global Stage

Though already present in many European, American and Asian markets, RationalFX is now looking to become the first and the top platform to offer such services on a worldwide basis. Specialised variants, such as education fee payment services, are also in the works. On such plans, it has an ambitious target of a 15 per cent share of the $400-500 billion a year global remittance market.

“Such services are currently offered only on certain corridors, so you have Indian Web sites dedicated for the US/UK to India payments. There are many opportunities in the remittance market, such as South Asians in the UK, France to North Africa, the US to South America,” Mr Agrawal said.

The challenges

Challenges though remain in terms of exchange and regulatory controls in many countries, apart from risks of online fraud. An example is India, the country of his origin. Opening an office at home may still take him time because the Reserve Bank of India does not currently permit business-related foreign exchange transactions by non-banking entities. In the subcontinent, however, RationalFX already has a presence in terms of bank tie-ups in Nepal and Bangladesh.

“Other firms here (India) already offer very competitive rates and there is a less need and as customers are also literate,” he said.

>roudra.b@thehindu.co.in

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