Remittances are amounts of money sent from one person to another. Unlike transfers you make to another person in the same country, remittances are sent overseas, usually via electronic transfers. Many people use remittances to send money back to their home country to provide financial support to relatives.
According to the United Nations, remittances sent home by migrant workers:
- Support about one in nine people globally.
- Are three times more important than international aid.
- Often (up to half the time) go to rural areas, where the world’s poorest live.
|Did you know? Remittances make up part of a country’s gross domestic product (GDP), i.e. a measure of the size and health of its economy.|
How do remittances work?
Depending on the chosen method, there are several ways to send remittances.
For example, if you can send money overseas using your bank, the money will be sent from your account to the recipient’s bank for processing. Once the money is at the bank, a foreign exchange rate and banking fee are usually applied. The funds then become available, minus the fees, for your recipient to access.
For money transfer services, the exchange rate and fees are typically applied before the money is transferred. That means both you and your recipient will know the exact cost of the transfer beforehand.
Another difference between banks and money transfer services is the range of delivery options. While banks transfer money from one bank account to another, money transfer services offer more flexibility.
If you’re sending remittances with your bank, you can do so by either a bank or a Society for Worldwide International Financial Telecommunication (SWIFT) transfer. Whereas, when using a money transfer provider, your delivery options usually include:
- Direct to bank transfers.
- SWIFT transfers.
- Cash pick-up transfers.
- Mobile top-up transfers.
- Mobile wallet transfers.
- Home delivery transfers.
How to send remittances to someone
Most remittances are sent by wire or electronic transfer. A wire transfer is done through a network of banks or transfer agents from one account to another. Electronic transfers move funds from one bank account to another bank account either within the same financial institution or between different banks.
It’s worth noting that electronic transfers (or electronic fund transfers) are an umbrella term used to cover all forms of transferring funds electronically. For example, if you pay your rent by direct debit or pay for your shopping with a credit card, you are doing so by electronic transfer.
How to send remittances through a high street money transfer service
You can also send remittances through high street agents or at the Post Office. As these types of transfers are paid for in cash, you don’t need to submit your bank details. There are many reasons why you might want to send cash, including if you’ve just moved here and are waiting to open a UK bank account.
Simply hand over the funds you want to send and pay any fees. After paying, you’ll get a reference number which you’ll need to give to your recipient to use at the collection point.
While high street options may be fast and convenient, they are also notoriously costly. That’s because they often charge high fees or poor exchange rates or worse, both. Another potential disadvantage of transfer agents is the pick-up options.
In some cases, pick-up shops can be long distances away, especially when you’re sending money to remote locations or vulnerable relatives.
Remittance companies in the UK
If you’re looking for UK remittance companies, you have plenty of options.
Perhaps the most well-known remittance companies in the world are WesternUnion (WU) and MoneyGram. With a combined 250 years of remitting money and the largest global networks, it’s no surprise that both providers are synonymous with money transfers.
However, if you’re looking for modern alternatives, your best bet is to use a digital transfer service like Azimo.
In the UK, in addition to the big two, your options for remittance services include:
- Wise (formerly TransferWise).
- pagofx (by Santander).
- Small World.