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In a correspondent tie-up, who sets the FX rate and who gains from it?

Sponsoring principal license holder only deals in the US Dollar. The FX rate is provided by the payout partner and the cost of termination is also provided by the payout partner (assuming the principal license holder has these arrangements in place). For example in the current RaaS provisioning, these are the payout corridors and countries.



Needless to say, there are three scenarios that can play out here:

Option # 1. You do NOT have a payout partner relationship in the country you want to payout to, so then you would be using the rates provided above. The FX rate would be provided directly by the payout partner and you are free to adjust your margin accordingly. The termination rate is also provided by the payout partner and you are free to adjust your margin accordingly.

Option # 2. You are in the process of getting your own license in the payout country or are seeking a relationship with an existing licensed payout partner, till such time, you will bank on Option #1. When you have acquired your own license or have a candidate payout partner, you will request the solution provider (i.e. principal license holder) to start due diligence of the candidate payout partner and then start the necessary paperwork on the correspondent tie-up agreement.

Option # 3. You do not want to work with an existing payout partner and you already have a candidate payout partner. In which case, you will request the solution provider (i.e. principal license holder) to start due diligence of the candidate payout partner immediately and then initiate the necessary paperwork on the correspondent tie-up agreement.


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