There are many ways to make international money transfers and payments. From remittance companies, banks and even peer-to-peer transfers, there is a solution for everyone. But how do consumers decide between remittance services and bank transfers?
There are several factors to be taken into account when selecting your desired transfer method. The most common of these being price, speed, exchange rate and convenience. Depending on the priority of the customer, it is difficult to define which service is better than the other.
|Remittance Services||International Bank Transfers|
|Price||Usually a flat fixed fee on Sender||Usually a percentage of amount sent and flat fee based on receiving country|
|Speed||Depending on the company and payout method, it can be as fast as minutes for the money to be received||Transfer time can take from 24 hours to 5 business days. This duration usually decreases when the transfer is repeated and the bank has sufficient record and information
|Exchange Rates||Usually competitive||Usually competitive with large volume|
|Convenience||Allows money to be transferred to the receiver’s bank account. Some companies even have cash pickup points.||Mostly allows only the option of money to be transferred to the receiver’s account|
*factors vary from company to company
Based on the table, it may look like remittance services have the upper hand. Why then do some consumers still prefer using international bank transfers?
Charging a percentage of the amount being sent works well for smaller amounts only. For example, John is an expatriate who sends US$1000 overseas to his family every month. A remittance service might charge flat fee of US5 of this amount is much lower than 1% of sent amount.
This is considered important only for consumers looking to send money for emergencies. In this case, remittance services are more likely to be faster than banks due to banking processes.
This factor is highly dependent on the local cross-border payments landscape. While the common believe is that banks have better rates, remittance companies are known to be relatively competitive. There is no harm in making comparisons before deciding on which method to use.
Depending on your priority, convenience can mean different things. It might mean being able to send money on the go through an existing bank account straight to your receiver’s bank account or allowing your receiver to access the money immediately.
What is cross-border fee? Understanding the cost of your business
3 reasons why fintech adoption among small and medium-sized businesses are poised to rise
Why making inward and outward remittances more accessible is important
Why understanding international payment processing is important for e-commerce firms
Mobile payments for everyone