The Remittance Reveal - Everything you need to know

It can sometimes seem like the world of finance is like a secret club with its own language and rules - but we’re here to change that. At Safari Remit, we’re committed to untangling financial jargon for ordinary folk and, today, we’re looking at remittances.

Remittance explained

If we go waaaaay back, remittance comes from “remit” which translates as “to send back”. This suggests that the term was used with respect to paying a bill or an invoice but, these days, it's widely used when referring to sending money to somebody overseas. You will no doubt have come across this word if you have ever given financial support to loved ones abroad such as:

• A cash gift; for example a wedding present

• Emergency cash on a prepaid card

• Regular bank transfers to family

• Paying international bills or invoices on behalf of family

In the modern world, sending money abroad is easier and cheaper than ever with a number of different options for flexibility and convenience.

Celebrating remittances

Sending money overseas is now such an integral part of modern life that on the 16th of June we even celebrate this with the International Day of Family Remittances. Why? These financial transfers to folk in developing countries not only helps the recipient but also actually helps the economy of that country. Figures show that, every year, 200 million migrants send cash back to 800 million recipients. As these remittances often go beyond immediate requirements, distribution means that communities and economies also benefit from these generous gifts.

When we send money to a developing country, we’re actually contributing to two economies - the host country and the recipient country - which proves that money really does make the world go round.

Big tech for the big business of remittances

While sending a remittance may seem deceptively simple, there’s a lot going on in the background. In order to send money overseas, there needs to be several things in place and these include:

• Channels and processes - transfers can only happen when banks and financial insitutions are able and willing to talk to one another and, more importantly, trust one another. The remittance process is funds capture, funds disbursement and settlement - and there’s the potential for problems at every stage.

• Infrastructure - In order for remittances to happen, there needs to be solid infrastructure in place at both ends with access to the intenet.

• Regulations - From bank to bank and from country to country, remittances rely on agreed financial regulations in order to protect both the financial organisation and the customer.

As you can see, the part of the remittance procedure that the customer sees really is only the tip of the iceberg. There are many many processes in place, working 24/7 to ensure that cash can be sent quickly and safely across the world.

Remittances around the world

While remittances are largely universal, they are more prevalent in some countries than in others so here we’ll take a look at the top five source and recipient countries:

The top 5 source countries for remittance outflows in USD are:

• The United States

• Saudi Arabia

• Switzerland

• Germany

• China

The top 5 recipient countries for remittances are:

• India ($129 billion)

• Mexico ($68 billion)

• China ($48 billion)

• The Philippines ($40 billion)

• Pakistan ($33 billion)

Remittances make up a significant proportion of GDP for many countries, including:

Tonga - 41%

Tajikistan - 51%

Lebanon - 38%

While India receives the highest dollar amount of remittances, this represents just 3.4% of its GDP.

Learning the lingo of remittance

Later in this article, we’ll share our step by step guide to making a remittance but, first, let’s get to grips with some of the jargon you might come across when the time comes to make your transfer:

Bank numbers

If you have a bank account and / or a debit card you’ll probably know that you have a sort code and an account number. You may also, however, have additional numbers including:

• IBAN (International Bank Account Number) - This will usually be found on your bank statement (online or paper) and is used to simplify international payments. Your IBAN number will usually start with your country code; i.e. GB.

• BIC (Bank Identifier Code) - This number will also appear on your statements and is used to identify your bank.

• ABA (American Bank Account) Number - This is used to identify banks within the USA.

3D Authentication

This mysterious term is all about the process of using an extra layer of security when using your debit card. When you buy or pay for something online you’ll see a window pop up which will ask you for a code (which in many cases will be emailed or texted to you). This helps to ensure that hackers don’t get their hands on your hard earned cash.

Chargeback

If something goes wrong with a transfer - or a transfer has not been authorised - it will usually be cancelled and the funds will be returned to the sender’s account. This is commonly known as a chargeback.

Clearing

This is a set of processes and procedures which take place when money is wired from one account to another resulting in the transaction being completed.

Exchange rate

This one’s pretty important as it dictates how much of your cash you and your loved ones will get to keep hold of. The Exchange Rate - which is governed by the FCA in the UK - measures the way in which one currency is performing against another. This fluctuates constantly but a professional money transfer agency will be able to advise you on the best time to make your transfer in order to make the exchange rate work for you.

Interchange fee

Each and every time a debit card transaction occurs, the vendor is subject to a small charge known as an interchange fee. In many instances, this charge is then passed onto the customer and you may see this turn up on your receipt or invoice.

Remittance advice

You may already be familiar with this one but, if not, a remittance advice is a form of receipt which is sent between businesses and customers - and vice versa - as proof of a payment having been made.

Remittance address

As the name suggests, this is the physical address used for a money transfer - for example; a home or office address or a P.O. Box address.

Remittance float

This is simply a fancy name for the time taken between cash being sent and that cash arriving safely in the recipient’s account.

How to send a remittance

If you are living abroad and have friends and family back home, there’s a good chance that you might, at one time or another, want to help them out financially. This can be done in a number of ways and we’ll explore some of these here:

Electronic bank transfer

If both you and your recipient have access to a bank account, this is usually a quick, easy and secure way to flash the cash. This can be done by yourself online however, before you commit to the transfer, you may want to check out your bank’s charges and fees as these may be higher than other methods of transfer.

Cheque it out

If your bank account comes with a cheque book you can simply write a cheque and post it to your recipient - but be warned; this method takes a significant amount of time due to postage and then waiting for the cheque to clear so this may not be the best method in an emergency.

Prepaid debit cards

These are a really handy way of helping out loved ones and are a super easy to access and use. You buy a card and load it with your chosen amount and it works just like a regular debit card. Even better, you can post the card to the recipient or simply send them the digital details which will allow them to either draw the cash or use it to pay for goods and services.

Money transfers

This is by far the quickest, easiest, safest and cheapest way to send money to people abroad - and also the one with the most options available. Although you will need to have a bank account and debit card, sending your cash is super flexible through card payment, an app, on a website or in person. Money transfer agencies like Safari Remit have years of experience in sending funds abroad and so will always be able to secure the best deal for you.

Things to look out for

Sadly, as with many other types of financial activity, transferring cash is something that cybercriminals will do their best to take advantage of so, in this section, we’re sharing our advice on keeping your money safe on its journey between your account and your recipient’s:

Choose wisely

If you decide to use a third party such as a money transfer agency, it’s important to do your research. There are some great agencies out there - both online and on the high street - but, there are also some scammers. When choosing an agency, take the time to read reviews and look for accreditations such as the FCA (Financial Conduct Authority).

Similarly, remember to do the same for the other end if the money is going to be received by an agency rather than into your recipient’s bank account.

Postal theft

These days, thieves have multiple ways of intercepting and stealing people’s mail so, if you’re posting a cheque or a prepaid debit card you need to take extra care. Your best bet is to make sure that the package or envelope is sealed securely and to use a tracked delivery service - although this may cost a little more, it's worth it for the peace of mind of knowing that the item will arrive safely.

Conclusion

For many people it means an awful lot to be able to send money back home to loved ones and this can be done safely and efficiently as long as you stick to a few golden rules. As we’ve mentioned in this article, for the best results, use a registered and accredited money transfer agency to get the best deal and make sure that your cash is safe.

To learn more about remittances and sending money abroad, get in touch with Safari Remit’s friendly and professional customer support team today.