The is achieved by what is called a ‘pre-funded’ account.

Let’s take an example. Money needs to be transferred (using Remitly) from Chicago (USA) to Mumbai (India).

Traditionally, if money needs to be sent to India from the US, Remitly, every day will collect the money and then using SWIFT, send the money over to the bank in India for further distribution. However, this can take 2–3 days.

In such a transaction, at each step of the way, you are waiting for money to be cleared, settled and then forwarded. This is called the good-funds model. Where funds are only transferred once they are settled into your account.

Because Remitly knows with a high certainty that the funds in US will be settled in a day or two, Remitly can use its own money and pre-fund a US Dollar account in India.

Now when a transaction happens in the US (which is subject to settlement and funds availability in 2–3 days), Remitly can go ahead and release those funds from its already pre-funded account in India. Let’s say $500 needs to be sent. Once the transaction via Debit Card or ACH is done in the US, Remitly, instructs the bank in India to take $500 from its pre-funded account, covert it into INR and payout using the real-time switch, i.e. IMPS (Immediate Payments Service).

Remitly is essentially, extending credit to its own transaction. Because it knows that funds will be available in the US after 2–3 days, it can, using its pre-funded amount, make available that same amount of money, immediately.

The pre-funded account is topped out every day or couple of days, depending on the volume.