Published on
March 23, 2023

Remittances 101: Understanding How Money Moves Across Borders

min read

What is a remittance?

Remittance is the cross-border transfer of funds from one entity to another. This includes any invoice or bill payments that are paid through a bank or payment solution provider.

The term remittance is derived from its root word of remit, which means to “send back”. Ergo, it’s commonly used to describe the money that foreign workers send to their families back home. On this account, this form of payment is an essential contributor to the global economy.

Key takeaways

  • Remittances are defined as the act of one entity sending money to another
  • SWIFT transfers and local transfers are the main methods for remittances
  • The processing time for remittances can range from minutes to days
  • Remitting money through mobile apps and prepaid cards does not require senders and receivers to have bank accounts

Understanding remittances

In 2021, the World Bank estimated that remittance flows to low- and middle-income countries reached $589 billion USD. For developing nations, remittances are an economic backbone because it’s a direct source of income generated by migrant workers overseas. These funds are instrumental in enabling lower-income households to access better healthcare and education, while also helping them to reduce food insecurity.

Corporate remittances, however, take things to a whole new level. Businesses globally are moving as much as $23.5 trillion USD across countries annually, according to a report by J.P Morgan. The report added that the resulting transaction costs amount to $120 billion USD, highlighting the exorbitant costs for businesses to transfer their money across borders.

But just how do remittances work, and how does money travel across borders?

SWIFT Network Transfers

SWIFT network transfers are one of the most widely utilised remittance options today. The moniker ‘SWIFT’ stands for Society for Worldwide Interbank Financial Telecommunications, and it’s a secure way for international banks to exchange information with each other¹. In other words, SWIFT transfers are electronic money transfers from one bank account to another.

It is executed by the payer’s bank, debiting their account and routing the funds through a network of intermediary banks (up to 3). Each intermediary charges a transaction and/or service fee upon receipt of the funds.

Banks globally communicate and handle transactions through the SWIFT network

Local Transfers

While SWIFT network transfers are widely used for remittances, alternative ways such as local transfers are rapidly gaining ground because it’s affording individuals and businesses a cheaper and faster way to send money across borders.

Local transfers are a settlement method for transferring money into a foreign bank account and typically involve an intermediary organisation or financial institution which operates between the originator and the receiver. In this method, customers transfer funds domestically to a remittance provider, such as Wallex, which will then perform the FX conversion through its network and send the converted amount at a pre-determined rate in the destination currency.

The primary difference between the two is that SWIFT transfers require both parties to have bank accounts. But it is not a strict requirement for other methods. We will explore these below.

💡Read more: Top 4 Ways To Make Overseas Payments For Businesses 2023

Inward remittances vs outward remittances

Just as there is a sender and receiver with remittances, there are also inward and outward remittances.

When money is sent from abroad into your bank account, it counts as an inward remittance, with you being the beneficiary. On the other hand, if you are transferring money to someone overseas, then that becomes an outward remittance.

One thing to take note of is that different banks have varying fee rates depending on whether you’re sending or receiving money. Each time you make an international SWIFT transfer, your bank will ask you to choose one of three options, which determines who will pay the transfer fees. Here are the three most common options:

  • BEN: The remittance fees are borne by the beneficiary, or recipient of the funds. You will only send the remittance amount, and after fees are deducted, the beneficiary receives the remaining balance.
  • SHA: The remittance fees are shared between you, the sender, and the beneficiary. You will send the remittance amount and cover the fees charged by the remitting bank, while the beneficiary settles any outstanding fees via deduction from the remittance before receiving the remaining balance.
  • OUR: The remittance fees are borne by you, the remitter. You will pay all fees charged by the remitting, intermediary (if applicable), and beneficiary banks. The amount you remit will be received in full by the beneficiary with no deductions.

How to make a remittance transfer?

While some prefer to stick to traditional routes like credit unions, the more tech-savvy may opt for digital services. Here is a quick summary of the main remittance transfer methods.

Banks or credit unions

Banks and credit unions are some of the most popular choices for performing remittances because they are reputable institutions that users know they can trust. However, choosing banks or credit unions can be more expensive and the processing time can take anywhere between one to five working days.

The only difference between banks and credit unions is that while the former is a for-profit institution, credit unions are non-profit cooperatives that aim to serve their members.

Prepaid cards

This method requires both the sender and recipient to possess prepaid cards. The sender will purchase their prepaid card from a remittance provider and load it with the money they want to send. The remittance provider will then initiate the transfer of funds from the sender to the recipient, who can then use the card to access the funds.

One of the advantages of prepaid cards is that it enables money to be transferred without the need for either party to have a bank account.

Money transfer services

Money transfer services encompass a wide range of platforms. They include Western Union or MoneyGram, which are traditional transfer agents. Senders can visit the transfer agent’s physical location or use online services (if available) to transfer the money. Recipients can collect the funds via cash-pick-up at a branch of the transfer agent or receive it in their bank account.

Mobile applications and digital service providers have seen rapid adoption due to how simple and cost-effective they can be. Mobile payment applications such as Gcash in the Philippines or Paytm in India allow users to make payments or transfers without requiring a bank account. But these platforms are not ideal for businesses as they were designed for retail users, and do not provide dedicated customer support for urgent transactions or emergencies.

Remittances can be performed without bank accounts (Unsplash)

Digital service providers such as Wallex enable users to make cross-border payments to more than 180 countries, with the most competitive rates, zero hidden fees, access to top and exotic currencies, and dedicated account managers that provide 24/7 customer support.

💡Read more: How to Simplify International Vendor Payments At Low Cost

What is the best remittance service?

The best remittance service is contingent on what your needs are, which is why it’s important to determine your requirements. Here are the main considerations.

Transfer limits

For businesses, local transfers are the optimal choice for payments up to $25,000 USD a month, and some service providers make it possible to transfer as much as $1 million USD per transaction as well.

This is the upper limit for local transfers. Bank transfers are the only option for financial activities such as corporate mergers and acquisitions, capital investments, real estate purchases, or any transaction that involves tens or hundreds of millions of dollars.

💡Read more: International Business Payment 101: The Only Comprehensive Guide You Will Need

Speed of transfer

Real-time settlements are ideal, particularly when it comes to global payments between companies. It’s also important for foreign workers who want to ensure funds reach their families as soon as possible.

Local transfers are preferable if speed is the priority and can be processed within minutes or hours. This is because the funds do not have to be transferred through intermediary banks to reach their destination.


Every remittance provider will charge fees, but the amounts differ significantly. Bank transfers and local transfers will usually charge a percentage of the amount being transferred. With local transfers, the fees are about 1% on average, but they can go as low as 0.5%.

On the other hand, rates at banks can go as high as 5%, making it more costly to transfer bigger sums of money. Additional fees may also be incurred from the intermediary and receiving banks, making the final amount received less than the initial amount sent.

Payout method

Individuals and businesses want to enjoy smooth and seamless remittances, but ensuring the same experience for the recipient matters too. Users must check if their recipient’s preferred payout method is supported, whether it is cash pick up or bank transfer.

Choosing a remittance provider that provides seamless payments in top currencies to countries all over the world ensures that such problems can be avoided.

Proof of Payment

Delays in transactions may happen sometimes. For businesses where ensuring timely payments is crucial to maintaining good working relationships and trust, being able to track the journey of funds and show proof of payment is extremely important.

Having notifications, real-time updates, and the generation of MT103 documents as proof of payment allows businesses to monitor the status of every transaction and keep their partners in the loop as well.

Business-friendly features

Not all remittance services or platforms have business-friendly features, with some imposing limits on transaction value or frequency. While this is not an issue for users who only send a fixed amount of money once or twice a month, it will not suffice for businesses with hundreds of transactions going out each week.

Businesses should look out for remittance providers who have designed features that meet their specific needs. These include the ability to perform bulk payments via mass upload of bank and beneficiary information, and built-in maker-checker processes that reduce human error.

Many businesses are choosing Wallex because we’re helping them to make remittances easier, cheaper and faster. With same-day transfers across 21 currencies and customised rates, our cross-border FX solutions will ensure you get double the service at half the cost.

💡Read more: The Maker-Checker Process And Its Benefits For Your Business

The bottom line

Global economic growth has ignited technological innovation and improved the quality of life for millions. Yet, its positive impacts are not evenly distributed, and many developing nations have not been able to fully reap the benefits.

Remittances are helping these nations to close the gap by strengthening their connection to the international economy and increasing financial inclusivity. When individuals, families and communities in these nations have a steady source of income, they’ll begin to have greater access to healthcare, education, and technology — empowering them to contribute to the global economy and help others to do the same.

Wallex meets your remittance needs

SWIFT and local transfers are both viable options for individuals and businesses looking to make a remittance.

Wallex, the leading FX and payments specialist for B2B companies transacting in Asia, makes it possible for businesses to do both seamlessly with an intelligent routing system that deploys local transfers or SWIFT² depending on a combination of factors like the urgency of transactions, amount, and currency corridors.

Supporting your business is our business, which is why we have the most competitive exchange rates, zero hidden fees, and 5-star rated customer service that’s been rewarded with the Platinum service award from Feefo.

Visit to schedule a demo and see how Wallex can help your business.

² Wallex enables customers to perform SWIFT transfers via our network of banking partners.

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