Global Remittances are all about transferring funds across borders. Foreign workers often send money back home to support their families.
Business owners make international payments for salaries, purchasing inventories, and other professional purposes. The remittance process involves various entities, facilitated through diverse channels and banking institutions.
If it’s your first time sending money abroad, whether for personal or business purposes, knowing how does a global remittance work is paramount. In this article, we’ll break down the global remittance process in detail. So, continue to read on…
- Here’s How the Remittance Process Works
A typical remittance transaction follows a standard flow, no matter which provider is used:
Initiation – The sender provides the funds (in cash, by debit/credit card, or by bank transfer). Then, they give the recipient’s details to a chosen service provider, such as
- name,
- address,
- bank account number,
- SWIFT/BIC code for international transfers.
Before offering details to a bank, an online app, and a money transfer firm, they cross-check the information to ensure accuracy.
Verification and Compliance – In this phase, the provider verifies the sender’s identity and the transaction details. This guarantees strict compliance with anti-money laundering (AML) and Know Your Customer (KYC) regulations, reinforcing our commitment to financial integrity and security.
Fund Transfer and Currency Conversion – The agency (at the sender’s side) instructs its agent in the recipient’s country to deliver the funds.
Funds from one currency are converted to another country’s currency at fair rates. This transfer frequently uses large, secure networks like the SWIFT network for traditional bank wires.
Settlement and Delivery – Lastly, the funds are sent to the recipient. You need to pay the agent through your chosen method, whether it’s direct bank deposit, mobile wallet credit, or cash pickup at a local agent’s location.
The timeframe depends on the method and the destination where to send the funds, and usually ranges from a few minutes to several working days.
- Key Participants
Sender – An individual or a business professional who initiates the transaction.
Recipient/Beneficiary – A person or an entity who’ll receive the funds.
Service Provider – The bank, money transfer firms (like Western Union, Remitfy, or Wise), or online apps designed to send and receive money to and from.
Intermediary/Correspondent Banks – These are third-party banks that facilitate payments between financial institutions without a direct connection. They’re often involved in traditional bank wires.
- Key Aspects That Affect Remittances
Cost – The senders have to pay a transaction fee, currency conversion fees (which are often embedded in the exchange rate margin), and intermediary bank charges.
Speed – With many digital platforms, transactions are completed instantly. If you send money through a traditional bank, the transaction can take more than 5 working days to reach the intended destination. The speed relies on operating hours, time zones, and the number of intermediaries involved.
Regulation – Money transfers must comply with the financial regulations and tax laws of both the sender’s and the recipient’s countries. This may require specific documentation and reporting requirements.
Method – Compared to conventional bank transfers and checks, online remittance firms and mobile money transfers frequently offer quicker, cheaper options.
Final Words
Still, confused about what global remittance entails? Then visit SoFi for more valuable insights that will help you stay on track and feel confident when making international transactions.
