Remittance Terms Every Sender Should Know

The first time you wire money overseas, you're faced with some unfamiliar terms at checkout: spread, payout amount, correspondent bank, KYC. It's not complicated when explained properly, but providers often don't bother and that's where people make more money that they shouldn't. This guide explains the terms you are likely to encounter, organized by the types of effects it is likely to have: the amount that your recipient receives, how it is likely to travel, how quickly it will arrive, and what checks will take place along the way.  
 

Terms about money: what actually determines the costTerms about money: what actually determines the cost 

Exchange rate 

This is just the exchange rate which converts pounds into the recipient's home currency. Most of the real cost is found in the difference between the provider's exchange rate and the actual market rate.  
 

Mid market rate 

The real market mid price is the price which the two extremes (buy/sell) meet in the wholesale market where banks and large institutions trade. It is the fairest benchmark available and you can check it free on any currency converter site in a few seconds. The rate that the provider is giving you is not usually this, providers add to it.  

 
Spread 

The spread is the gap between the mid market rate and the rate you are actually given. If the mid market rate is 212 and a provider quotes you 204, the spread is 8 per pound in your local currency. On a £300 transfer, that spread alone costs your recipient roughly 2,400 of your local currency, often more than the visible fee. 
 

Transfer fee 

It's the flat fee that a provider charges over and above the exchange rate, which is displayed explicitly at checkout. It is the most common number consumers use to compare first and the number providers use to make consumers forget about a lower number. You may still find that a zero rate with a bad rate is more expensive than a 2.99 rate with a good rate.  
 

Payout amount 

This is the figure that matters-the one which your recipient will receive after applying both fee and the rate. You will get a true idea of who is the cheapest provider if you compare this number, rather than the fee.  
 

Rate lock 

Some will allow you to lock in on a quote for a short period, typically minutes to a few hours, before it changes between the time you quote and send it. The significance of this lies with the bigger transfers, as any amount of a small difference can add up to a significant amount at the bottom line. It's not available at all providers, so if you're sending a bigger amount and you're looking for assurance, check.  
 

Promo code 

A promo code is a short code that is entered when signing up or checking out and that will give you a discount, usually on the first transfer or first few transfers, a fee waiver. It's a good idea to see if he or she is doing one, since they're not always prominently advertised on the home page.  
 

Terms about how the money travels

Remittance corridor 

The sending country and the receiving country are the only two that apply in this case, a corridor. Each company charges and supports different prices and support corridors, and a company that is outstanding in one country can be average in another. Don't take it for granted, always check rates and payout options for your specific corridor. If you need the details on the cheapest corridor for a specific country, our guide on the cheapest ways to send money to Kenya, Somalia, Ethiopia, Ghana and Uganda does the rest.  
 

The first time you wire money overseas, you're faced with some unfamiliar terms at checkout: spread, payout amount, correspondent bank, KYC. It's not complicated when explained properly, but providers often don't bother and that's where people make more money that they shouldn't

This is how your recipient actually collects the money. The three most common methods are: 

1. Bank deposit, paid directly into a bank account. 

2. Cash pickup, collected in person at a partner location using ID. 

3. Mobile money, sent straight to a mobile wallet such as M-Pesa, MTN Mobile Money, Premier Wallet, E-Dahab or EVC Plus. 

The right method depends entirely on what your recipient can actually use, not on what sounds most modern. 
 

Correspondent bank 

In order to move funds from one bank to another from across the border, a transfer normally goes through one or more correspondent banks in between, which are the intermediary banks that facilitate movement of funds between banks that do not have direct contact with each other. 
 
Being able to take a small cut is one of the reasons why sometimes bank deposits end up being less than what one expects, and why mobile money and cash pickup can be more economical for smaller, more frequent transfers.  
 

SWIFT or BIC code 

It is an international code, which identifies a particular bank and is mainly used for bank to bank transfers. It is eight or eleven characters long, and your recipient's bank can provide it if they don't know it.  
 

IBAN 

International Bank Account Number is a standardised form of bank account number which can be recognised internationally. Many African and Asian bank routing corridors don't support IBANs either, so don't fret if your recipient's bank doesn't have one.  
 

Terms about speed

Real time or instant payout 

This means the money is available to your recipient within minutes of the transfer being confirmed, most common with mobile money and increasingly common with some cash pickup networks. 
 

Same day payout 

The transfer completes within the same working day it was sent, common for many bank deposits when sent during business hours. 
 

Next business day 

The transfer arrives the following working day, more common for bank transfers sent outside business hours, or over a weekend or public holiday. This is one reason mobile money often beats bank transfer on speed for corridors like Kenya and Uganda, where wallets are not affected by banking hours at all. 
 

Terms about checks and compliance

KYC 

The term KYC means Know Your Customer, the verification process all regulated money senders must go through before sending any money. This typically involves verifying your name, address, and possibly a photo ID. It is designed to stop fraud, money laundering for the law's sake, rather than a problem with your account.  
 

Beneficiary 

This is just the individual who is getting the money. Their name must be written exactly to what is written on their ID or registered mobile wallet. One of the most frequent causes of a transfer being delayed is a misspelling, for instance Mohamed instead of Mohammed, so make sure you check the spelling before sending.  
 

Sending limit 

The amount you can send in one transaction or within a certain period of time is limited by both the provider and the regulator, and is generally lower for new accounts, and higher after full identity verification. If you do make larger and more frequent transfers, you should be sure to check your limit before you send a transfer, instead of after.  
 

Regulatory body 

In the UK, remittance providers will normally be controlled by the Financial Conduct Authority (FCA), the body which establishes standards on the methods used to protect the money of their customers and the way that providers operate. It only takes a minute to see if a provider is FCA regulated or not and will help you to find out if your money will be safe if things go wrong.  
 

Transfer reference number 

This is the special code that is assigned to the transfer as soon as it is dispatched, which allows you to keep track of the transfer and quote with your customer support if you are ever delayed. Store in a place where it can be readily retrieved until it has been confirmed received for transfer.  
 

A quick example putting it all together 

You want to send £250 to Ghana via mobile money. The mid market rate is 15.20 cedis per pound; the provider offers you 14.85, which is a spread of 0.35 per pound. They also have a fee of £1.99. After the spread and fee are charged, your recipient will receive about 3682 cedis. 
 
If you are in a competitor with a smaller spread, say 15.05, your recipient would receive nearer to 3,731 cedis (with the same £250). The difference, about 49 cedis, is purely because of the rate itself and not the fee, which is why it is important to understand these terms.  

Five terms to check every time you send 

You do not need to memorise the full glossary before your next transfer. Narrow it down to these five, in this order: 

1. Payout amount: ignore the fee first and look at what your recipient actually receives. 

2. Mid market rate: check it separately on a currency converter so you have a fair benchmark to compare against. 

3. Spread: work out the gap between the mid market rate and the quoted rate, since this is often the biggest hidden cost. 

4. Payout method: confirm your recipient can actually use whatever method you choose, whether that is a bank account or a mobile wallet. 

5. Regulatory body: confirm the provider is properly regulated before you hand over any money at all. 

Once you've gone through that list, a quote is no longer a wall of numbers you don't know, but a thing you can judge in less than a minute. 

SafariRemit displays the entire amount to be paid before confirming any transfer, allows you to make deposits using mobile money, bank deposit and cash pickup in its corridors, and is regulated by FCA. For the first three transfers, the fee is waived with the code 3FREE when signing up for the first time.