Remittance 101 – Money Transfer Fundamentals

The fundamentals of global money transfer scenario !!

Migration – The Driving Force for Remittance

“Each year billions of dollars are sent by migrant workers to their home countries, with some estimates putting the total value of remittances at more than $500 billion.”

“Dollars wrapped with love” as elegantly described by Economist Dilip Ratha, remittance is the transfer of money by the a migrant to an individual in his or her home country.


These are the personal savings of migrant workers/families that is sent back to home country for various reasons ranging from Savings to EMIs to parental support etc.

This money not only makes a significant difference in the lives of those receiving it but also plays a major role in the economies of many developing countries. For a particular country outflow of capital is Outward Remittance and inflow of capital is Inward Remittance.
Some amazing facts on Remittances –

  • According to a report by OECD approximately 3% (230 million) of world’s population resides outside their home country.
  • In 2015, these 230 million migrants have sent $500 billion in form of remittance to developing countries which is approximately 3 times more than the total global foreign aid which is $135 million.
  • 10 % of world’s population is directly affected by this money.
International Money Transfer

Money transfer

Impact of Remittance on economy

Remittance is the second largest source of foreign capital for developing countries and is considered as a hidden force which drives their economy. In 2015, India received the highest remittance that is $72 billion as reported by world bank, followed by China at $64 billion.

The US emerged as the largest remittance source country with an estimated $56 billion in outward flow. Inflow of Foreign capital in terms of remittance in developing countries has even overtaken the FDI.

Small contribution from millions of people make remittance a huge driver of economy and hence it requires more focus from policy makers to simplify the inward remittance. For some developing countries like Egypt, Tajikistan remittances also make up a sizable portion of their GDP.

Major Remittance Markets

Remittance market is colossal in size with around $500 billion remitted globally in the year 2015. USA leads the chart for outward remittance by a huge margin over UAE closely followed by UK.

Over 42MM immigrants reside in USA which makes up the 13.3% of the nation’s total population.

This population contributes for over 40% of the global remittance volume and has helped US emerge as the largest source country for remittance over the years.

Remittances top Countries

Countries sending & Recieving Remittances

Major players
There are various services to transfer money overseas each one offering a different preposition – some offer fast transfers while others have low margins.

Banks, being the experts in handling money, were the natural choice for people to transfer money overseas. Currently, the major banks in the segments are Wells Fargo, HSBC, ICICI and Citibank.

But banks do not consider remittance to be a core banking service and hence lag on a host of other parameters like speed, cost, customer service and ease of sending/receiving money.

This led to evolution of dedicated remittance providers or more commonly known as MTOs (Money Transfer Operators).
These companies simplified the process and captured substantial market share quite rapidly which even forced some major banks to exit or scale down their remittance offerings. Some such examples are JP Morgan Chase, Bank of America in USA; Westpac in Australia and BBVA in Spain.

Incumbent Money Transfer Operators:

Today the king of cross border money transfer is Western Union with worldwide share of 15%. Some other top players are PayPal, MoneyGram, Ria and WorldRemit.

They have well established networks and systems in place to serve a large global customer base. But they offer less favourable exchange rates and charge high fees which have drifted customers towards other service providers.

Emerging Remittance Players:

As world bank reported poor countries lose up to $16billion every year due to high fees and restrictive services by few firms. There are new entrants in the game like Remitly, Xoom, Transferwise, Currencyfair and Azimo which aim on low cost and easy practices as compared to the incumbent players.

Niche Money transfer Players:

Products like Bitcoins, Mobile Top Up and Micro – Remittance i.e. sending small amount like $75 with minimum fee, which form the niche segment. Players like Bitpesa, Bitspark, Dahabshiil are working on such niche segment.


Money transfer companies

Remittance top companies

The Cost factor

For all of its advantages, Remittance is something of a double-edged sword.

The global average cost for sending money is around 8% and it goes as high as 12% for remittance receiving countries like Africa. The Fee structure for Money Transfer Services seems to be like it is designed to milk the poor. These services charge a flat fee for a broad range of amount to be transferred.

For instance, if an individual transfers $250 to his home country then the net amount received will be $230 only, after deducting applicable fee and service charges .

Another problem is even if somebody wishes to send a small amount they end up losing a big share as a fixed fee. The most affected are those who want to send small amounts in frequent intervals as they lose a significant amount in terms of fees.

Cost of sending money

Cos of sending money across border

ExchangeRate IQ can help !!

The idea of Exchange Rate IQ is to get a single platform to identify, analyze and compare all available money transfer options between any 2 countries across the globe.

These companies can thus be be compared on different parameters like exchange rate, fees, transfer time, reliability, ease of use etc. This would help the users to find the best possible way to send money across the world.

So, whether you are sending money to India or want to discover best USD to PHP exchange rates or want to find out options for remittances to Mexico, exchangerateiq can help you find answers to all your questions.

We promise complete transparency, unbiased results and clutter free comparison of the money transfer companies, for all the migrants across globe.

Stay tuned for our next blog for more details !!