Getting to grips with remittances

Sending money across borders is a lifeline for growing economies, according to the International Monetary Fund. But, more often than not, it's a way for friends and family members to stay connected.

Families can get the benefits of sharing financial wins thanks to remittances or money transfers! As we see more digitization around the globe, there are also exciting developments for transferring wealth and helping to make families and nations richer.

Every day, this helps bring us closer to the sustainability goals of organizations like The United Nations (UN) which supports foreign direct investment in local economies. But before we can get into all of that, we need to understand what remittances are and how they work.

So, what are remittances exactly?

When expats send home some of their earnings in cash, these money transfers are referred to as worker remittances, and that also includes sending things not limited to cash such as mobile recharges, gift cards etc. It's tough to measure exactly how much money is transferred, usually from developed countries to developing countries, because a lot of it is done unofficially.

But there are official channels that now offer better ways for foreign workers to do this. So, what used to be seen as a luxury is now an easy way to handle responsibilities at home and share the wealth!

Over the last few years this method of online international money transfer has become really popular with money transfer operators like Rebtel leading the way.

In short, international remittances are the best way to personally send money across borders and it can be simpler than it seems - even stress free.

The bigger picture: The impact of the foreign worker

Remittance inflows refer to the money that people who are working abroad send back to their home country.

They are usually sent by expat workers who leave their home country looking for better employment opportunities in another country. And, they can have a big impact on the economy of the country that is getting the money.

For many developing countries, remittances are an important part of foreign exchange earnings and add to the country's balance of payments. For now, all you need to know is that this can be a good thing in terms of how wealthy those countries are - and how rich they become!

Sometimes, remittance inflows can also be an important way to bring income into households, helping reduce poverty and improve living standards across the board.

The amount of remittance inflows can change depending on many things, like how many expat workers are in a particular country, the average wages those workers earn, and the exchange rate between the countries of the sender and receiver.

To give us more answers, the World Bank tracks remittance inflows and publishes data on the volume of these between countries around the world. According to their research, remittance inflows to low- and middle-income countries (LMICs) reached about $553 billion in 2021, up by 1.7% compared to 2020 - and the numbers are just going up!

This is where the numbers tell a story.

The Global Knowledge Partnership on Migration and Development (KNOMAD) is an initiative coordinated by the World Bank. It brings together knowledge, development and policies on migration and development problems. Let's take a deeper look at World Bank data for more insights into what this means for global economies.

1. Where is it all going? The top remittances globally were going to India ($107 billion), China ($84 billion), Mexico ($48 billion), the Philippines ($37 billion), and Egypt ($26 billion).

2. Remittance flows to LMICs are an important part of outside financing and income for millions of families. In 2021, flows to LMICs happened more often than foreign direct investment (FDI) flows.

3. The price of sending remittances is still high for some, with average transaction fees of 6.5% of transaction value in the third quarter of 2021 and about 6.3%, today.
   The World Bank aims to make these costs smaller by 3% by 2030, as part of their Sustainable Development Goals - but, as always, it will depend on a number of factors.
   These include, but are not limited to, things like average household income, labor shortages, open bank accounts, low or high fees and how much remittance advice gets to the people who need it.

4. We also learned that the COVID-19 pandemic had a big impact on global flows, which quickly dropped in 2020 because of the economic chaos from the pandemic.
   However, they rebounded in 2021, thanks to economic conditions getting better in some countries and migration starting up again.

Overall, remittances are still an important source of income, according to the World Bank working paper, and a kind of outside financing that develops local economies. However, we need to come together to make it cheaper to send remittances and to focus on financial inclusion for the people who get the money.

Expat remittances are more stable than private capital flows

Like we learned above, remittance flows are about the money transferred by expats to their families and communities in their home countries. While capital flows refer to investments and transactions that foreign investors and institutions make into a country's economy.

Remittance flows are often considered more sustainable than capital flows and official development assistance for a few reasons, the most important are:

Stability: They are usually more stable, more reliable and less volatile than capital flows. Capital flows can be more unpredictable, affected by things like changing market conditions, political instability, and changes in government policies.

Inclusivity: Remittance flows tend to reach a wider group of people and contribute to a more inclusive economy. They are usually sent to families and communities who need the money for basics like food, housing, and education. Capital flows, on the other hand, usually benefit bigger companies and institutions and don't always trickle down to the wider population.

Long-term benefits: Remittance flows can have long-term benefits for the sender and receiver. For recipients, remittances can help lift them out of poverty, improve their quality of life, and give them opportunities for education and to start their own businesses! Good news.

For senders, they can help establish a financial foothold in their home country with economic and family development.

How remittances work

Generally speaking, the remittance provider will take the money an expat worker sends and convert it into the local currency of the country it's getting sent to. The recipient can then get the money through a transfer to a bank account or mobile wallet (like MTN Mobile Money)or by picking up cash at a designated spot.

However, the remittance provider usually charges a fee for this, and they may also apply an exchange rate mark-up to convert the money into the local currency. Once the recipient gets the money, they can use it for things like paying bills, buying goods and services, or investing in their future.

It's important to remember that the process and requirements for remittances can be different depending on the country it is being sent to and how it is being sent - whether to a bank account or to be picked up as cash. And choosing the right service provider is key.

How do remittances affect the global economy?

Over US$600 billion was sent in remittances in 2022 so it's no wonder that they are such an important part of the global economy. As more people head abroad looking to get new jobs and get better paid, the amount of money they "share" can help keep low- and middle-income countries afloat.

However, while too much of a dependance isn't healthy, as with anything, there are so many ways that low-cost online services for money transfer benefit everybody:

1. Boost recipient countries' economies: Remittances are a big source of income for developing countries, and they can boost these countries' economies. Recipients of remittances may use the cash to invest in their businesses, pay for education, or buy things they want and need, which all adds up to improving the general living conditions.

2. Cutting down on poverty: Remittances can help reduce poverty levels in developing countries, as they can be a source of income for families who don't have other financial support.

3. Increased consumer spending: Remittances can also lead to people spending more in their hometowns, which can stimulate economic growth and create new jobs.

Tap into remittance flows the smart way with a few words of advice.

Compare fees and exchange rates in the remittance industry: You'll see that Rebtel offers the lowest for money transfers. But if you want to double check, use a site like Monito to compare the fees from other remittance providers and see for yourself.

Even small differences can add up over time which is why we make it our mission to let you send money for free from the app.

Use a trusted provider: Choose a remittance provider you can trust with a proven track record. Rebtel and Ria are licensed and regulated in the countries where we operate so you know your money will reach the right person and place!

Consider how quick it is: Our remittance services mean you can send money quickly, but some other providers take weeks to help you do this!

Verify recipient details: Always double-check the recipient's information, including their name, address, and bank account details, to make sure the money is getting sent to the right person.

Keep track of your transactions: Make sure to keep a record of all your remittance transactions, including the amount you're sending, the exchange rate, and any fees you pay. With the Rebtel app, you can view your transactions - all from one place.

Be aware of fraud when you send money internationally: Sadly, fraud is a risk when sending money online and without the right accreditations, you could be dealing with people who are stealing or even money laundering.

Be cautious of offers you don't understand, and never send money to someone you don't know or trust. Stick to brands like Rebtel and only send to recipients you know are safe.

Remember taxes: Depending on the country you're sending money to, there may be taxes or other fees to pay for remittance transactions. Make sure to check the local regulations before sending anything.

What are your options? Payment method for remittances

If you need to transfer money, there are a range of options available, including:

1. Bank transfers: You can transfer money directly from your bank account to the recipient's bank account using online banking or through a wire transfer.

2. Online money transfer services/ mobile wallets: There are various online money transfer services that let you send money to other people or businesses - but it's easiest to have a dedicated app on hand if you're going to send between mobile wallets.

3. Money transfer companies: You can use money transfer companies like Rebtel to transfer money to someone in another country. Get started in just 15 minutes!

Remittance transfer: Getting the money there

According to findings from the Pew Research Institute, more than 5 billion people have mobile phones. This means greater access to services on the go.

And with so much connectivity, there's room to keep improving how families and friends share information and resources. It also means that it's easy to send money abroad at the tip of your fingers.

Quick, safe and low-cost money transfer services: Beat high remittance costs.

As one of the most trusted money transfer providers, Rebtel offers easy-to-use mobile services that help you move money, fast. Even though you're sending money to foreign countries, you still get reasonable prices on your transfer of money.

This means you're not only sending money to the people you know but also adding to the country's Gross Domestic Product (GDP).

Your best bet is Rebtel for quick, easy & cost-effective money transfers.

Start with the Rebtel app for Android or iPhone, it's easy to download from the Apple Store or Google Play like you would any other good app. Then:

1. Set up your Money Transfer account.

2. Go to the Marketplace in the app and choose Money Transfer.

3. Put in the amount of cash you want to send and the country of the recipient's account.

4. Accept Rebtel and Ria's terms and conditions and start.

From here you'll be able to add in the remittance address and other details and fill in the answers to any extra qualifying questions. fill in the payment details and check that everything you've entered is right.

If you have any questions or need a hand, Rebtel support can help. From there it only takes a few minutes to review your transfer, depending on your country, and you should be good to go. It's also important to say that Rebtel is anti-money laundering with security measures in place to help protect you and your community.

Pro tip: Be sure to check that all the details for the bank accounts or mobile wallets are right before you confirm the transfer. You'll also be able to view your transaction costs and make sure you're getting a good deal when sending money abroad.

Overseas workers and expat communities could become more financially relevant than credit unions

In short, people who send remittances home are helping their families and the global economy. We've learned that relying on private capital flows tend to make economies vulnerable, so money transfers help change that. If expat workers still send money and pay transfer fees, especially in economic downturns, it creates a more democratic and sustainable flow of wealth to developing nations.

Now that you know all about the role expat remittances play and how easy it can be to make a transfer, why not Download the Rebtel app to send money across borders with our remittance services?