Inward Remittance for Indian Exporters 💸

🚢Trades in India

India will become a $5T economy by FY 2028. — Nirmala Sitaraman, Finance Minister

By 2030, we aim to achieve $2 trillion in exports. — Piyush Goyal, Minister of Commerce and Industry.

India is a $3.89T economy.

We exported $328.07B in 2024–25 (Apr-Aug). But we also imported $376.39B, Which put our country in a deficit of $48.32B.

https://www.dgft.gov.in/CP/?opt=trade-statistics

Since the last 20 years, India’s exports have been growing at 11.82%.

If it keeps growing at this rate, it’ll reach $1T in 2030.

In addition, the IEC (import-export code) has increased by 7% YoY for the last 15 years. In the last 15 years, we have added almost 15 lakh new IECs (1 lakh new import-export businesses/year).

India already exports a lot to the world and is a world leader in a few categories and SKUs. But it needs to be accelerated.

🚀India’s Trade Goals

To accelerate trade growth, the government has launched a new Foreign Trade Policy in 2023. (FTP 2023)

The goal is simple:-

1. Be trade-positive as a country
2. $2T export by 2030.

It’s ambitious. But now that the government has a goal at the Macro level, they have built multiple policies to achieve it.

To do that, these are a few things they are doing under FTP 2023:-

1. Ease of doing business through online process and reduced cost
2. Merchandising trades
3. Streamlining SCOMET policy
4. Facilitating e-commerce trades
5. Offering some generic and few specific schemes

Schemes

1. Merchandise Exports from India Schemes
2. Service Export from India Scheme
3. Export promotion of capital goods scheme
4. Advance authorization scheme
5. Amnesty scheme for default on export obligation
6. Other Schemes under FTP 2023:-

a. Focus Market Schemes

b. Focus Product Scheme

c. Vishesh Krishi and Gram Udyog Yojna

d. Served from India Scheme

e. Status Holder incentive scrips

f. Incremental Export incentivizing scheme

g. Duty-free import authorization

h. Schemes for gems and jewelry sectors

😞Exporters Pain Points

Now all of these schemes and policies are trying to solve some major problems for exporters.

These problems are not only being solved by the government alone but private companies are also trying to find opportunities here.

A few of the pain points of Indian exporters are:-

1. Finding cross-border buyers and their verification
2. Cumbursum documentation (still not digitized enough)
3. Payment terms (most of the trades are done on credit, non-favorable terms, fraud customers and more)
4. 💰Cash flow crunch — lending
5. 💸High transaction fee during inward remittance — Payments
6. Finding Local seller
7. Identifying market trends and demands
8. Not knowing which schemes can benefit them
9. Inconsistent supply and demand
10. Ever Changing global regulations and trade laws

For a fintech startup that provids business banking to SMEs, lending and inward remittance problems fit well in the product suite.

Lending is something they are already doing.

So, they are left with Inward remittance.

💰What is inward remittance

Remittance is generally used as a keyword for international transactions/cross-border payments. So, Inward remittance is receiving international payment.

Now depending on the business type you can use different solutions:-

1. B2C/D2C company:- You might need an international PG(payment gateway) like Razorpay, Cashfree or Nium. This helps you receive money from your international customers or service buyers.
2. Freelancer: You can ask your bank to open a Forex Account for you which receives a specific currency.
3. SMEs:- You would need a Forex account but you would need to negotiate a lot of things with the bank to make this setup work in your favor.
4. Retail and NRIs

Now there are a few problems with traditional Indian banking solutions:-

1. Delays in receiving payments: Can take up to 5 days to reach the money in the business’s bank account
2. High fee: Can cost up to 2–3% of transaction value
3. Slow and Bureaucratic process

Multiple startups are working as TSP (technology service partners) to solve this.

Bank fee for a forex account:-

1. Account opening fee
2. Account maintenance fee
3. Forex markup fee
4. Service fee
5. Payout fee
6. FIRA/FIRC fee
7. Swift fee
8. Additional GST
9. International Partner bank processing fee

And more

If you combine all of this it can go up to 5% also. This means if your overseas customer has sent you $100, you would receive only $95.

In some cases, 5% is a profit margin on a good day for an exporter.

🏗️So how we can solve this?

Partner with an international bank and provide a forex account to our customers in their Indian branch. Such as JP Morgan, Citi Bank and more.

Instead of a full KYC account, we can also provide a virtual account which will make onboarding easier while staying fully compliant.

Now that we will be using the forex account of an international bank, things like SWIFT fees, payout fees, partner bank fees turned into zero and fees like forex makeup and more have been reduced significantly.

Benefits for the customers:-

1. Save money whenever you receive money in India.
2. Higher trust in the international market by having an international bank account
3. Receive and settle money quickly

User Journey:-

1. Instead of their Indian bank account details, our customer will share new Forex account details with their overseas customers.
2. Indian exports overseas customers/buyers initiate payment from their bank to our customer’s JP Morgan/CitiBank Forex Bank account.
3. Customers get notified when the payment is received
4. The customer reconcile the payment against the trade invoice/shipping bill
5. Someone from the operations team (initially) verifies the invoice details and payment
6. The Ops team approves the reconciliation and initiates the settlement
7. Money gets converted into INR from foreign currency and gets settled in the customer’s Indian bank account after deducting the transfer fee.
8. Once the money is settled, the customer gets a FIRA for compliance and tax purposes.

💸How we will make money

Customers will be charged a fee for each transaction.

Pricing can be Flat or tier-based as individual product

1. Flat:- 0.5% flat transfer fee on the transaction amount, including GST and FIRA issuance
2. Tier based:-

a. 0.3% if amount > $100k

b. 0.7% if amount < $10k

c. 0.5% otherwise

💹Revenue Projection

IECs (import-export codes) in India is 3 million (estimated, as we have added 1.5 million codes in the last 15 years)

So, let’s assume only half of this number does exports, so TAM = 1.5 million.

SAM = something which we can realistically serve considering we target only SMEs = 60% of TAM -> 9 lakh

SOM = something which we can acquire in a few years -> 5% of SAM -> 45,000

Let’s say we acquire 10% of SOM in 1st year as we would focus on building awareness, acquiring initial users, and creating a strong base. The aim is to gain early adopters and optimize operations.

So, at the end of 1st year, we have acquired 4,350 Indian exporters, out of which 2,175 are actively transacting with us and we have made over $1M in revenue (post-commission)

💡Growth Channels

1. GFF — Global Fintech Fest
2. Trade Shows in India — This is a place where traders across India come and look for customers
3. Content Creators
4. Meta and YouTube Marketing
5. Ads in Print Magazines for importers and exporters
6. Google ads
7. SEO and more
8. Cold calling
9. Whatsapp campaigns
10. Email marketing