Hassle Free Ways of Sending Money Online in 2020

The Indian Rupee has closed at a 20-week low against the US dollar. Paired with the unexpected outcome of the US presidential election this past week, the main reasons for dragging the rupee down can be accredited to the strike on black money via demonetization of high-value currency notes and weak industrial output. The US currency, in turn, has strengthened based on speculations that the policies of the US President-elect Donald Trump would be inflationary and lead to a rise in the interest rates, thus impacting foreign money flow to emerging countries like India.Foreign investors withdrew over Rs. 2,350 crore from the stock markets as the US-backed assets are looking more attractive and as a result, the economy is expected to improve in the coming quarters.According to India ratings, the sudden decline in money supply and a simultaneous increase in bank deposits - due to withdrawal of 500 and 1000 rupee notes - will adversely impact consumption demand in the economy. This, coupled with the depreciation of real estate, construction and informal sectors, will further weaken the rupee in the upcoming months. It is very much possible in the upcoming months, as well as even forecasted by many agencies, that US Dollars will become stronger against Indian Rupees. All this means is that the spending power of the NRIs will increase, leading to a rise in the remittance flow to India.Compare. Save. Send Money Home Wisely.TODAY'S BEST RATE USD to INRAdditional ReadingHow will India's Currency Ban Affect NRIs in the USA?How India's currency ban of Rs. 500 & Rs.1000 will affect NRIs?How much Indian Rupees can one carry to India?

An Overseas Direct Investment (ODI) refers to investments made by a domestic firm in a foreign country to expand its operations.From an Indian context, Overseas Direct Investment refers to investments outside India as a business strategy. ODI can be made in different forms depending on the company such as:by way of contribution to the capitalor subscription to the Memorandum of a foreign entityor by way of purchase of existing shares of a foreign entity either by market purchaseor private placement or through the stock exchange, by setting up a Joint Venture (JV), or a Wholly Owned Subsidiary (WOS), signifying a long-term interest in the foreign entity.*ODI does not include portfolio investment.Difference Between FDI and ODIForeign Direct Investment (FDI) is when a non-resident Indian invests in an Indian company. Outward Direct Investment (ODI) is when Indian resident companies invest in a wholly-owned subsidiary or a joint venture in a foreign country as part of a strategy to expand their business.Routes of ODI From IndiaDirect investment outside India is governed by Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, as amended from time to time. Overseas Investment from India can be made through two routes:i) Automatic Route andii) Approval Route.Under the Automatic Route, an Indian Party does not require any prior approval from the central bank, the Reserve Bank of India (RBI), for making overseas direct investments in a JV/WOS abroad. All those proposals not covered by the conditions under the automatic route require prior approval of the RBI.Who Can Invest Through the ODI Route?An Indian Party can make ODI under the Automatic route in any bonafide activity. However, Indian parties are prohibited from making investments or financial commitments in a foreign entity engaged in real estate or banking business without the prior approval of the RBI.For the above restrictions, real estate means buying and selling of real estate or dealing in Transferable Development Rights (TDRs), not including the development of townships, construction of residential or commercial premises, roads, or bridges.Guide on property related taxation and money transfer for NRIsAn Indian Party is also not permitted to invest in an overseas entity, which offers financial products linked to the Indian Rupee (such as non-deliverable trades involving foreign currency, stock indices linked to the Indian market, rupee exchange rates, etc.), and need prior approval from the RBI.Who Is an Indian Party?Indian Party encompasses:a company incorporated in India or a body created under an Act of Parliament, ora partnership firm registered under the Indian Partnership Act, 1932, ora Limited Liability Partnership (LLP), registered under the Limited Liability Partnership Act, 2008, andany other entity in India as may be notified by the Reserve BankWhen more than one such company, body, or entity invests the foreign JV/WOS, such combination will also constitute an "Indian Party."Furthermore, the Indian Party should not be on the following list:RBI's Exporters' caution list/ list of defaulters to the banking system circulated by the RBI/ CIBIL (Credit Information Bureau of India) orList of defaulters by any other credit information company as approved by the RBI or under investigation by the Directorate of Enforcement or any investigative agency or regulatory authority.Also, all transactions relating to the investment in a JV/WOS should be routed through only one branch of an authorized dealer designated by the Indian Party.Investment Limit of an Indian Party:Indian Party can make ODI up to 400% of its net worth (paid-up capital and free reserves) as per its last audited balance sheet.Any Financial Commitment (FC) exceeding USD 1 billion (or its equivalent) in a financial year would require prior approval of the RBI even when the total FC of the Indian Party is within the eligible limit under the automatic route (i.e., within 400% of the net worth as per the last audited balance sheet.The prescribed limit will not be applicable if the investment is made out of balance held in the EEFC account (Exchange Earner's Foreign Currency Account) of the Indian Party or out of funds raised through the issue of ADRs/GDRs (American Depository Receipts/ Global Depository Receipts).The total financial commitment of the Indian Party in all the JV/WOS comprise of the following:100% of the number of equity shares and/or CCPS (Compulsorily Convertible Preference Shares)100% of the number of other preference shares100% of the loan amount100% of the amount of corporate guarantee issued by the Indian Party100% of the amount of bank guarantee issued by a resident bank on behalf of JV/WOS of the Indian Party, provided that the bank guarantee is backed by a counter-guarantee/collateral by the Indian Party50% of the amount of performance guarantee issued by the Indian Party.** Investors need prior approval from RBI before transferring remittance beyond the limit prescribed for the financial commitment.Can Resident Indians Make Investment Through ODI Route?Resident Indians can make overseas investments, including purchase of securities and also setting up/acquisition of JV/WOS up to the limit prescribed by the RBI from time to time, per financial year under the Liberalised Remittance Scheme (LRS). Currently, LRS comes with a maximum cap of $250,000 a year per person.Why Is the RBI Warning People About ODI Transfers?RBI regulates ODI made by Indian entities and resident individuals in joint ventures and wholly-owned subsidiaries outside India pursuant to Foreign Exchange Management Regulations, 2004.Recently, RBI has been sending queries and notices to several domestic entities, including companies and large family offices, seeking the status of unutilized money remitted abroad through the ODI route.The remitted funds parked in foreign countries in financial assets including liquid funds by these firms could be a violation of ODI guidelines. Under the general permission, the remitted funds must be used for a specific business purpose. In this case, the firms would need to explain the retention of the remitted money in liquid funds.As per the rule, any Indian Party that plans to make an ODI needs to approach a designated authorized dealer (AD) for investing along with duly signed ODI form, along with supporting documents like Board Resolution, Statutory Auditor Certificate, and many other documents to essentially satisfy the bonafide business test.The investment can be processed once the AD Bank examines and approves the documents according to the regulatory guidelines. A Unique Identification Number (UNI) will be generated for the particular JV/WOS before the remittance. The UNI can be used for further remittances/ investments in the JV/WOS.Mutual funds are another concern of RBI. Investment in mutual funds abroad is that only entities registered as non-banking financial companies (NBFC) can invest the outward remittances in foreign securities. This means funds transferred via the ODI route cannot be used for investments in mutual funds abroad.Resident individuals can remit money outside India under the Liberalised Remittance Scheme (LRS) which has a maximum cap of $250,000 per year per person. The funds remitted under LRS can be used for investing in foreign securities, travel expenses, or sending money to Non-resident Indians (NRI) abroad.The low limit under the LRS is allegedly making more individuals route the remittances through their family offices via the ODI route because the cap for an entity sending money through the ODI route is $1 billion per year or 400% of the net worth.However, the ODI route is for large companies, corporates, or trusts that need to send large amounts of money out of India for business purposes. Sending money from India abroad through ODI to avoid the LRS limit is a violation of the ODI guidelines.ODI From India Dips 68% To USD 754 Million in February 2022ODI is also called outward foreign direct investment or direct investment abroad. The appetite for foreign investment was picking up and many Indian investors and companies were investing/acquiring stakes in numerous foreign companies.However, following the restrictions by the RBI, coupled with the global economic crisis, investments have dropped. According to the RBI data on Outward Foreign Direct Investment, investment for the month of February 2022 (USD 753.61 Million) has dropped by 68% compared to February 2021 (USD 2284.61 Million).*RBI said the data is provisional and is subject to change based on reporting by banks.An increase in ODI can also be seen as a sign of a country's investment competitiveness, higher growth prospects in foreign markets, and a maturing domestic economy.The Covid-19 pandemic has been widely cited as one of the reasons for not utilizing the money sent through the ODI route. Several deals didn't get through due to the second wave of Covid and people didn't want to lose interest in the money, hence have invested in products like liquid funds abroad. And maybe awaiting the right business opportunity to invest the money.In conclusion, for ODI-related investment opportunities, we recommend consulting with a tax advisor. To keep yourself abreast with the latest guidelines pertaining to ODI, the Reserve Bank of India has issued detailed guidelines vide Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time, which can be accessed at RBI's website.A Master Direction that has consolidated instructions on rules and regulations framed by the Reserve Bank under various Acts including banking issues and foreign exchange transactions and is available at the 'Notification' Section on RBI's website.

The global economy continues to be resilient despite geopolitical turmoil and a prolonged health crisis. A strong global GDP and associated trade growth will keep accelerating the demand for cross-border payments, which is estimated to reach US$ 156 trillion by 2022. Cross-border payments are currency transactions between people or businesses that are in different countries. The existing cross-border payments channels are the lifeblood of the globalized economy, facilitating the expansion of global e-commerce, the rise of complex international supply chains, and remittances sent by migrant workers in billions of dollars each year. 1. Growth Of Digital Remittances And Financial Inclusion Remittances are a vital source of foreign income in many developing countries, frequently surpassing foreign direct investment and overseas development assistance. According to World Bank data, total global remittances totaled $702 billion in 2020, despite the economic slowdown due to the pandemic.More consumers are now connected to the internet and are more comfortable with digital payments than ever before. So the demands for fast, cheap, safe, and convenient digital payments solutions are increasing. Over the last several years, digital remittances have been on the rise, coinciding with the entry of digital-first money transfer organizations (MTOs). According to Pew Research Center, mobile phone ownership among adults in emerging economies now stands at 83%, driving financial inclusion by increasing access to banking services and digital payment solutions. 1.7 billion people globally are still unbanked. As per the Global Payments' 2021,  mobile wallet usage at the point-of-sale is projected to rise to 30% in 2023 from 22% in 2019 globally, and mobile wallet usage in global e-commerce is expected to grow to 52% in 2023 from 42% in 2019. The changing landscape of cross-border payments is driven directly by the rapid change in consumer demands. Consumers are less willing to use banking services due to various disadvantages. Alternative payment methods (APMs) for remittances provide faster, cheaper, and more transparent cross-border payment services than traditional banks. The new entrants are putting pressure on traditional money transfer operators such as Western Union, MoneyGram, Ria, etc. Such incumbents may have a large physical network, but with high fees for sender and receivers. With rapid digitization and mobile penetration, especially in emerging markets, digital channels will gain traction as a medium for remittance payments. Secondly, the shift from cash payments to digital payments is growing, a trend becoming more prevalent in developing economies. For instance, the RBI reported that the use of ATMs in India fell by 47% in April 2020. This trend will continue to increase the volume of remittances sent by the migrants to their families in their origin countries and also bring millions of consumers into financial inclusion and accessibility that were previously closed off from the financial markets.2. Boost In Global Cross-Border TransactionsCross-border e-commerce payments are the fastest-growing segment of cross-border payments. Juniper Research projects a $35 trillion B2B cross-border payment by 2022, a 30% increase from 2020.Overall, global cross-border trade is expected to grow 5% (CAGR) between 2018 and 2022, much of which comes from emerging markets, whose growth is estimated at 11% (CAGR). However, barriers to open market opportunities in developed markets are expected to slow the growth to around 2% (CAGR) between 2018 and 2022. The push for more transparency in payments, coupled with robust trade and international supply chain finance platforms, and improved logistics, will make the international payments industry more competitive. Of the total projected total global payment flows, Business-to-Business (B2B) make up the highest proportion, expected to account for US$ 150 trillion in 2022. For high-value B2B transactions (higher than US$50,000), banks are still expected to dominate the space as costs are comparably low and the correspondent banking networks are still efficient and reliable.Collaborations between aggregators (back-end networks provider) and banks, money transfer operators, or mobile wallet providers enable interoperability within cross-border payments. These partnerships are great for low-value B2B transactions and transactions within Consumer-to-Consumer (C2C), Business-to-Consumer (B2C), Consumer-to-Business (C2B) segments. The back-end networks provide faster, cheaper, and more transparent transactions as compared to the correspondent banking network.Also, platforms like FIS's RealNet will enable real-time payment settlements for corporations, gig workers, and companies.The new entrants in the cross-border payment industry are mostly focused on low-value transactions, which banks and traditional payment service providers do not cover. Especially, the low-value transactions from, to, and between emerging markets have the highest potential to be disrupted by digital-enabled payments providers due to changing customer behavior, increased trade with emerging markets, and higher financial inclusion. 3. Global Expansion Of Small And Midsize Enterprises (SMEs)For businesses to grow globally, cross-border payments have become increasingly important. . Cross-border e-commerce is now the fastest-growing sub-segment in the cross-border payments industry. Juniper Research estimates that business-to-business cross-border payments will reach $35 trillion by 2022 and as of 2021, 83% of global businesses of all sizes found it easy to send or receive cross-border payments. Thanks to the emergence of new technologies that streamline that enable faster and easier cross-border transaction processes to meet the needs of the digital world.Payment solutions like SWIFT's gpi (stands for Global Payments Innovation) and Mastercard's B2B Hub provide the necessary flexibility and SME-appropriate payment options. Other solutions such as Visa Direct, a real-time push platform that expanded with Visa Direct Payouts, simplified cross-border transactions for small businesses.In 2020, 43% of small and midsize businesses handled international business compared to 34% in 2019, according to Visa.As the open market trade unlocks several opportunities and benefits for small and midsize businesses, their needs for cross-border payments will increase. 4. More Investment Appetite For FinTech CompaniesFinTech, the short form of financial technology, integrates technology in the financial services industry to improve financial products and services delivery to consumers. The adoption of FinTech companies and products has grown significantly worldwide. The volume of investment into the FinTech companies has dramatically increased between 2010 and 2019, reaching 215.4 billion U.S. dollars. Global FinTech investment was $105 billion in 2020-the third-highest year on record, despite a significant drop from $165 billion in 2019.FinTech investments have hit $91.5 billion in 2021. The Americas were the region attracting the most investments in the global FinTech sector, accounting for nearly 80 percent of the total. The number of companies operating under the category FinTech has also grown in EMEA (Europe, the Middle East, and Africa) and APAC (Asia Pacific). According to a 2019 survey by Ernst & Young, the most widely adopted FinTech category among consumers was money transfer and payment services. 75% of consumers worldwide adopted some form of money transfer and/or payment service.  Many companies in the payments sector went public last year. For instance, Remitly, the Seattle-based money transfer start-up went public in September while Wise (formerly TransferWise), the London-based money transfer provider got listed in the London Stock Exchange in July.  Remitly sold 7 million shares, raising $300 million through its IPO on the Nasdaq under the ticker RELY. The company is now valued at $6.9 billion.Wise was valued at $11 billion under direct listing, becoming London's biggest tech company by market capitalization.With increasing digitization and customer adoption rate, FinTech investment is likely to continue in 2022.5. Central Bank Digital Currencies For Cross-Border PaymentsCentral Bank Digital Currency (CBDC) is the virtual form of fiat currency. It is issued and regulated by a country's central bank. In short, CBDC is a legal tender issued by a bank in a digital format.In 2019, China became the first major country to launch a large-scale pilot of digital currency, known as e-CNY (or digital renminbi). As of October 2021, 83 countries have been exploring and announcing the idea of a central-backed digital currency of their own to improve cross-border trade.CBDC hasn't been formally used to date, but many countries are running pilot programs to determine its viability and usability in their economy, including India, the highest remittance-receiving country. While the digital currency plans for India seems to be on hold, the government recently announced that income from all digital assets will be taxed 30%, which is being dubbed the "Crypto tax".In 2022, we expect to see more countries launching their own CBDCs. We can expect exponential growth in digital currency payments as the technology matures and regulatory requirements are in place.CBDCs will not only make payments faster and more cost-effective, but with the right technology, it will also increase interoperability between payment platforms and various financial institutions.Essentially, the idea of CBDC comes from cryptocurrencies which are digital or virtual currencies secured by cryptography, which makes them difficult to counterfeit. They are based on blockchain technology, a decentralized, distributed digital ledger that records transactions across a peer-to-peer network. Cryptocurrencies' use is increasingly gaining popularity in the payments world as it enables direct transfers without any intermediaries, bringing speed, efficiency, and cost benefits. In 2021, the crypto industry boomed, with Bitcoin prices going up from $29,000 at the beginning of the year to $68,000 in October, up 130%. US cryptocurrency exchange Coinbase had a successful IPO on the Nasdaq last year, boosting the credibility of crypto trading and traders.One of the notable trends in the crypto industry last year has been the adoption of cryptocurrencies as a means of payment and institutional investors offering crypto services to their clients. However, several regulatory and scalability challenges still need to be addressed before it is adopted at scale. Cryptocurrency has the potential to disrupt and simplify the existing payment system. Some experts think the development of CBCD will be a "major catalyst" to the eventual adoption of crypto payments into the domestic and cross-border money transfer market.6. Incumbents And Big Banks Are Fighting BackThough pressured by the emergence of several FinTech startups and blockchain-based remittance services with the potential to disrupt the cross-border payments space, incumbent players like Western Union and MoneyGram seem to be up for the challenge. The company has been heavily investing in bringing its digital operations on a par with the new entrants.The payment giant's investment in its digital expansion has been a decade-long journey. According to the company's report, in 2020, its overall digital money transfer revenues went up to more than $850 million, from over $600 million in 2019, a 38% increase.Transactions via its digital channels were 29% and made up 20% of revenue from its C2C business, up from 16% and 14%, respectively, in 2019. The company's online transactions site saw a nearly 30% gain in annual active customers to 8.6 million in 2020.Western Union has been in the cross-border payments space for more than 150 years. It is a globally trusted brand. Still today, it claims to hold the largest cross-border, digital, peer-to-peer payments network in terms of scale, revenue, and channels. The idea of everyday innovations that improve the existing products and services has helped the company stay on top of the game.What mainly started as disruption in the payments space has expanded to banking services. The narrative is that FinTech startups use new financial technology to disrupt incumbent banks. In doing so, they are highlighting traditional banking institutions' weaknesses in digital user experiences and operational efficiency.  FinTech startups mainly focus on unbundling banking services, offering one type of product/service, and zero in on doing it very well. 62% of the startups pursue the retail banking segment, and only 11% concentrate on extensive corporate banking services as per one McKinsey analysis. The most popular area for technology disruption is the payments sector. However, it is hard to imagine banks facing their own Kodak moment anytime soon. Banks remain reliable, widely used, and profitable. Banks still dominate the space for large business transactions. Additionally, the back-end of a FinTech startup still uses the legacy banking infrastructure, which is the payment rails of the industry such as clearing (NSCC), payment (ACH), and messaging (SWIFT) systems. To disrupt the banking industry, FinTech startups will have to develop a new technologically-led back-end of finance. For the time being, the innovation is primarily focused on the front-end side, mainly customer-facing facets of the financial services industry, such as providing better branding, better customer services, and cheaper prices. Suppose the tech-led front-end innovation continues with a rented process-led back-end designed years ago. In that case, the result will be sustained margin compression and high operational risks for the startups.In conclusion, the accelerated growth of the cross-border payment industry is being driven by multiple factors. The big trends in the cross-border payment industry are propelled by the emergence of new payments technologies, an increase in cashless transactions in developing economies, increased access to digital payment tools to the underbanked population, and growth of small and medium-sized businesses. Challenger banks, also known as neobanks are growing at a rapid rate, but big banks are fighting back. Over the last few years, many incumbent financial institutions have invested in different FinTech startups, set up their FinTech R&D projects to create proprietary solutions, digitized existing infrastructure, partnered with FinTech, and developed an increasing interest in mergers and acquisitions.Although there are no widespread developments to disrupt the legacy back-end processes, the potential application of new technologies such as blockchain technology and CBDC are massive. At this rate of innovation and competition, the remittance industry might be able to meet the SDG (Sustainable Development Goals) target to bring down the cost of sending money internationally to less than 3% of the transaction cost.