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  • Writer's pictureSANJANA JEVRANI

Exploring the Fundamentals of Remittance and Money Transfer Business


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Remittances are cross-border payments made by individuals or businesses to one another. With 200 million migrants expected to send money home, this is a sizable and expanding sector. This article looks at the principles of the remittance business and the benefits it offers payment businesses, as well as fintech options to expedite the development of money transfer apps.


What is a remittance?


Remittance is the transfer of money across borders, commonly by migrant workers supporting families in their home countries. It's facilitated through banks, money transfer firms, or online platforms, with funds received in cash, bank deposits, or mobile wallets. Service fees vary based on amount, destination, and transfer method. Remittances are vital income sources for families in developing nations and can bolster national economies.


HOW DOES REMITTANCE WORK?


Remittances usually begin with the sender making a bank deposit or using a money transfer service. The beneficiary in their nation receives the money via mobile money, bank account, or cash pickup. Exchange rates are important since they have an impact on the recipient's final amount received.

Step

Sender's Actions

Intermediary Actions

Receiver's Actions

1

Initiates the remittance through a bank, money transfer service, or online platform.

Validates the sender's identity and initiates the transfer through the chosen channel.

Waits to receive the funds.

2

Provides necessary information, such as recipient details and the amount to be sent.

Processes the transaction, deducts fees, and converts currency if necessary.

Receives a notification or reference number for tracking.

3

Pays the transfer amount plus fees.

Communicates with correspondent banks or payment networks for international transfers.

Visits a local bank, or money transfer agent, or receives funds digitally.

4

Receives a transaction confirmation and reference number.

Transfers funds to the recipient's country and converts currency if required.

Withdraws cash or has the funds deposited into a bank account.

5

Share the reference number and transfer details with the recipient.

Collaborates with local banks or agents for final distribution.

Confirms receipt of funds and may use them for various purposes.


WHAT IS THE DIFFERENCE BETWEEN REMITTANCE AND MONEY TRANSFER

Remittance and money transfer are terms often used interchangeably, but they have nuanced differences:


Remittance


  • Definition: Remittance refers to the transfer of money, typically from a person working in a foreign country to their home country, often to support family members.

  • Purpose: Primarily associated with sending money back to one's country of origin to provide financial support to family or dependents.

  • Context: Often linked with international transactions, involving migrants or individuals working abroad who send funds to their home country.

  • Emphasis: Places emphasis on the act of sending money for the well-being and financial stability of the recipient.


Money Transfer


  • Definition: Money transfer is a broader term encompassing the movement of funds from one location or person to another, which can occur domestically or internationally.

  • Purpose: This can be for various reasons, including business transactions, personal payments, gifts, or any form of financial exchange between parties.

  • Context: This can involve a wide range of scenarios, not limited to migrants sending money home, but also business transactions, online payments, and other financial activities.

  • Emphasis: Focuses on the general act of transferring money without specifying the purpose or the nature of the relationship between the sender and the recipient.


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IMPORTANT CONSIDERATIONS BEFORE LAUNCHING A REMITTANCE OR MONEY TRANSFER


Before launching a remittance or money transfer business, thorough preparation and due diligence are crucial. Consider factors such as market research, regulatory compliance, technology infrastructure, competition analysis, and financial planning to ensure a successful venture.


Regulations and compliance: Before launching a money transfer venture, thoroughly research the regulatory framework and compliance regulations both domestically and internationally. This involves understanding anti-money laundering (AML) and Know Your Customer (KYC) regulations. For instance, to operate a remittance service in the UK and cater to all residents, acquiring money transfer licenses across all states is mandatory. Following licensure, securing a bank account for fund deposits, and collaborating with payment processors facilitating ACH or card transactions is essential.


Technology and infrastructure: To ensure seamless and safe transactions, you must make the appropriate infrastructure and technological advances. This includes developing an app or website that is easy to use, incorporating payment gateways and security features, and forming alliances with banks and other financial organizations.


Fees and pricing: Consider carefully your pricing strategy and fees, accounting for your expenses as well as those of your rivals. You can draw in and keep clients by providing affordable costs as well as transparent pricing.


Customer service: Provide comprehensive customer service across various channels to foster trust and loyalty. Quick responses to queries and complaints mitigate frustration, enhancing the overall experience. Offering 24/7 support via chatbots or third-party services ensures timely assistance. Launching a remittance app demands strategic planning for profitability.


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HOW DOES THE PAYMENT BUSINESS BENEFIT FROM REMITTANCE?


  1. Diversification of Revenue Streams: By incorporating remittance services, payment businesses can diversify their revenue streams beyond traditional payment processing. The remittance sector, fueled by the growing trend of global migration and cross-border transactions, presents a lucrative avenue for generating additional income.

  2. Increased Customer Loyalty: Offering remittance services provides a one-stop financial solution for customers, fostering increased loyalty. Users can seamlessly handle both domestic payments and international money transfers within the same platform, making the payment business an essential part of their financial journey.

  3. Cross-border payments: Remittance services enable payment businesses to tap into the vast and expanding global market. By facilitating cross-border transactions, these businesses can attract a broader customer base, reaching individuals who require reliable and efficient remittance solutions.

  4. High transaction volumes: Remittance services often handle large numbers of transactions, leading to substantial revenue for payment firms. This revenue helps cover service costs and ensures a consistent income stream.

  5. Increased customer base: Remittance services draw in a varied clientele, from migrant laborers to expats and those sending money abroad to loved ones. Providing such services enables payment firms to access new customer segments and broaden their market presence.



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PayNet Systems white-label cross-border payments software


Utilize our white-label money transfer software to effortlessly develop a cutting-edge P2P payment or remittance app. Our API-driven approach seamlessly integrates with third-party services, ensuring swift and economical implementation.


Leverage our fintech ledger platform as a robust foundation for constructing your remittance system. Our system is adaptable for on-premises or cloud deployment, enhancing accessibility.


The PayNet Systems money transfer software boasts the following features for your payment business:


  • Multi-Language: Communicate to your users in their native language. 

  • Omni Channel: Notify and engage your users on the channel they use, target messengers, email, SMS, push, and In-App.

  • Bulk & Recurring Payments: Generate payment links in bulk by uploading a simple .csv or .xlsx file. Save time and reduce errors by creating payment links in bulk.

  • Ready-Made Connectors: We have ready-made connectors for leading CRM, CBS, BPM, and ESB, systems, and custom integrations are available on request.

  • Loyalty Programs - Designed to build long-term relationships with customers, and enhance brand engagement.

  • Multicurrency Accounts - Customers can transact in any currency, fiat or otherwise, within the system, without currency-type restrictions.

  • Expense Tracking - Enhance user satisfaction with a transaction map pinpointing each transaction's location for clarity.

Conclusion

The remittance market is sizable and expanding, especially digital cross-border remittances. Before launching a money transfer business, grasp regulations, select suitable technology, set pricing, and prioritize customer service.


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Mar 19
Rated 5 out of 5 stars.

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Mar 15
Rated 5 out of 5 stars.

amazing blog post

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