A remittance payment is the transfer of money from one account to another, generally overseas.
The amount of money being sent internationally has increased massively in recent years. This is thanks to many businesses working with customers and clients overseas. Another huge factor is economic migration.
With the continuous increase in people working abroad, comes an increase in the number of money people send back to their families and friends. The equivalent of a staggering $601 billion US Dollars was sent home by expat workers worldwide in 2016. This does not even include business payments across countries which run into trillions of dollars.
For some countries, remittances make up a sizable portion of GDP. Therefore, it cannot be denied that remittance payments play a massive role in the world today. If you or your business needs to send or receive money from overseas, then it’s important to understand them.
Here’s everything you need to know:
How Do Remittance Payments Work?
First of all, the sender will pre-fund their bank account with their local currency. So, if you’re sending $5,000 from Canada, you will have to have at least $5,000 in your Canadian bank account.
Let’s say you’re sending money from Canada to France.
Once the funds reach the bank in France, the receiver contacts their bank’s branch or treasury department to obtain that day’s Foreign Exchange rate.
EUR/CAD represents how many Canadian Dollars are needed to buy 1 Euro. This rate is then quoted back to the receiver and then used by the recipient’s bank to convert the remittance to their local currency.
In most cases, banks automatically apply retail exchange rates without recourse to the receiver. This is especially common when the money involved is a few thousand dollars.
It’s no secret that the retail exchange rates are always designed to deliver maximum profits to the receiving bank.
How Can You Send A Remittance Payment?
One common method used to send a remittance payment is to use a wire transfer. This type of transfer typically takes 3-5 business but can take longer – especially with overseas payments.
This type of transfer uses wire networks, such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT). These networks basically act as the messenger between the banks.
If you on using a wire transfer to send money abroad, it’s a good idea to do some currency research. This is especially important if you are sending money to a country using an exotic currency. You’ll need to check what currency your receiver uses, and then make sure your bank sends money in that currency.
Wire transfers can also be quite expensive. Some banks charge very high fees to send them, with rates increasing depending on the currency and amount being sent.
Along with these fees you’ll have to keep in mind the foreign exchange conversion rates that will be applied by your bank. Banks do not offer the real live FX rate, they charge you a higher rate in order to make a profit from your transaction that is definitely above-average.
Sometimes, the final receiving bank won’t be able to receive the wire transfer directly. This is often the case with international payments, as certain banks may not have strong corresponding bank relationships in certain countries. This means funds have to travel through an intermediary bank, with many of these banks charging the recipient a fee.
To add to the above fees, the recipient of the funds may also be subjected to a fee by the receiving bank. These fees are never disclosed upfront and can lead to some friction between you and the receiver. This nasty surprise annoys those who expect to receive the full amount invoiced, net of any fees.
Is There A Better Way?
A better alternative to a wire transfer would be an online transfer.
They are usually commonly complete within one business day, and in some cases can be instant. Online transfers are where the old-fashioned concept of wiring money meets the modern technology of electronic funds transfer (EFT).
With an online transfer, you send money simply by transferring it (or the data that represents that money) to another person. They can be done online using any device with Internet access, therefore they are also known as Internet Money Transfer.
Unfortunately, many banks and Money Service Businesses (MSBs) charge high prices to send online transfers.
Some large global money transfer companies charge their fees as a percentage of the amount being sent. And, despite harping on about banks’ unfair FX conversion rates, many MSBs disguise their own fx rates cost in their fees.
However, some trusted transfer companies offer a very low and favourable flat fee.
REMITR – The Best Way To Send And Receive Money Internationally
Whether you’re sending or receiving a remittance payment, REMITR has got you covered.
Here at REMITR we offer the most simple, fast and inexpensive payment process to our customers.
Our service allows you to send money to over 150 countries worldwide. Payments are sent within 1 business day, and for only $5.
With REMITR’s 24/7 service, you get the best live foreign exchange rate – regardless of banking hours.
REMITR also offers services for receiving payments that allow you to receive payments from US and European customers instantly.
Once you register for REMITR Collect, you will receive a free Remitr Global Account in USD and EURO.
Receiving payments into this Global Account is free! You then have the ability to withdraw funds into your local bank account at any time you wish.
Funds are transferred to your local bank account within 1 business day of submitting your online withdrawal request, all for the same flat fee of $5 / EUR 5 depending on where you received the payments.
Time is money – save them both by getting in touch with REMITR today.