REMITTANCE VS WIRE TRANSFER - WHAT'S THE DIFFERENCE?

14th September 2021

If you're in any kind of business where you must pay someone else for goods or services, you should be familiar with payment options. How do you intend to pay off your debts? What are the accounting procedures in place? It's also vital to keep track of how you pay service providers for tax purposes. To create a solid audit trail, you'll need a payment system that keeps accurate records. Bank remittance and bank transfer are two popular means of payment. It's critical to understand the differences between the approaches and how they might benefit your company.

Is there truly a difference? The two methods go through the same steps. You need to send money to someone and mailing cash in the mail isn't going to cut it. So, you provide your money to another service provider, pay them, give them your recipient's information, and leave the heavy lifting to them. They'll get the money in a few days, and you'll be good to go until your next transfer. For many consumers, the most significant distinction is in how the transfer is set up. Wire transfers are usually handled by banks, whilst money transfers are handled by third parties. It appears to be a no-brainer: you already use your bank for other financial transactions, and you trust them with your money and personal information.

Now, if you’ve ever wondered what is the difference between Bank Remittance vs Wire Transfer, read on as we clear it all up for you.

Bank Remittance

A bank remittance is a payment or gift transfer from one bank account to another. Bills or invoices are paid through remittances, which are sent via the electronic payment system, wire transfer, mail, draught, or cheque. The requirement to transfer remittances develops as a cross-border business expands. In today's financial world, bank remittance is quite important. In recent years, the amount of money transported globally has expanded dramatically. This is due in part to the gig economy, but it's also due to the growth of financial technology platforms that are opening new opportunities.

So, what exactly is a bank remittance? To begin, you must first pre-fund your bank account using your native country's local currency. You'll need to have at least $500 prepaid in ones Canadian bank account to transfer $500 from Canada to Spain, for example. The receiver must contact their local branch or treasury department once the monies have arrived in Spain to obtain the current Euro-to-Canadian foreign exchange rate. The recipient's bank then uses the rate to convert the remittance into local currency. The bank will use a retail exchange rate in most circumstances, especially when the money involved is above a thousand dollars. The disadvantage is that these rates are set to maximize profit for the receiving bank rather than the customer.

Wire Transfer

Wire transfers are a type of electronic funds transfer (ETF) that takes place between financial institutions and banks. And, despite the use of the term "travel" in the preceding line, there is no physical money movement. Instead, your bank confirms that you have sufficient funds for the transfer and transmits information to your recipient's bank via the SWIFT system, instructing them to credit their account with the amounts.

When transferring funds from one bank or financial institution to another, a wire transfer is the most common method. When a wire transfer is made, no physical money is exchanged between banks or financial organizations. Instead, information regarding the beneficiary, the bank receiving account number, and the amount sent is passed between banking institutions. A wire transfer sender must first pay for the transaction in full at their bank. The sender bank sends a message with payment instructions to the recipient's bank using a secure channel such as Fedwire or SWIFT. The recipient's bank receives the required information from the starting bank and deposits its reserve funds into the appropriate account. On the back end, the two banking institutions settle the payment (after the money has already been deposited).

Remittance vs Wire Transfer - Let’s Compare Them

Bank Remittance vs Wire Transfer: Factor 1 – Speed

Money is routinely moved between bank accounts in 3-5 business days through wire transfers. An international wire may take considerably longer, especially in the following situations:

- while sending to a country where your country's banks/intermediary banks do not have strong financial links.

- when sending money in a foreign currency.

Online transfers are the quickest way to transmit overseas funds, usually taking only one business day to complete. However, depending on the effectiveness of the money transfer business you've chosen, it may be instant in some situations.

Bank Remittance vs Wire Transfer: Factor 2 – Cost

Wire transfers can be expensive, especially when dealing with foreign payments. Receiving banks and credit unions frequently charge a small fee to receive funds by wire because they are hesitant to provide services without a cut of the service fees.

Online transfers can be costly as well, with some providers demanding exorbitant fees to process payments. It is not commonplace for some large international money transfer businesses to charge a percentage of the amount being sent as a fee. However, if you explore your options, you may be able to find some transfer providers that charge a cheap and reasonable flat rate.

Bank Remittance vs Wire Transfer: Factor 3 – Security

Wire transfers are usually a highly safe way to send money. However, there is a risk of fraud or theft if you use a wire transfer to transmit a cash payment rather than paying straight into a bank account. At one end of the transaction, a fraudulent identity can be utilized, with the money being collected by a fraudster. If a wire transfer is intercepted and converted into cash, it cannot be traced or recovered.

Online transfers are also a particularly secure payment technique, as they may be reversed in the event of fraud. This implies that if a fraudulent transfer is made from your account, errors can be corrected (subject to due diligence being exercised before initiating a refund request).

Fraud liability laws apply to both online and wire transfers. This implies that if you buy something with a credit card or another form of payment and it arrives broken or not at all, you are covered and can claim a refund. It's crucial to note, however, that if you pay with a cash transfer service like Western Union, you won't be as protected if the wrong individual picks up your cash payment.

Bank Remittance vs Wire Transfer: Factor 4 – Process

Wire transfers, especially for big payments, may require physically visiting a bank or credit union and filling out papers. Wire transfers can also be sent through an internet banking website or a wire transfer processing firm. You must supply information about your account and the account to which you want to send funds when sending a wire transfer. Bank names, account numbers, SWIFT codes, and/or routing numbers, as well as the names of the account owners, will be required. You'll need your account number and a wire transfer routing number to receive a wire transfer. Instead of a wire transfer routing number, international wires require a SWIFT code.

Making online transfers, especially from one person to another, is extremely simple. There is no need to visit a money wiring agency, telegraph station, or even a bank while using online transfers. Filling out a short webform with some information about the person or organization you're funding is common for internet transfers. You can also set up automated payments for recurring bills, such as cell phone or gym memberships.

EVOLET creates financial accessibility for the unbanked.

In Malaysia, there are approximately 2 million (6 million) unbanked migrant laborers, the majority of whom receive their pay in cash. The risk of theft is significant, and there are issues with safekeeping, as well as the difficulty of proving payroll data. Employers have a safety concern about paying employees with cash. EVOLET provides companies with secure income administration and migratory workers with financial access, control, and savings on essential needs. EVOLET enables unbanked people to access financial services.

EVOLET's efficient system can help in several ways. E-remittance is offered as a feature for migrant workers or unbanked individuals needing a way to safely and effectively transfer money back home. On the flip side, employers will be able to pay their people without complications through a sophisticated salary management feature that is secure and easy to use. What's more, EVOLET can assist with a list of other services including digital wallet integration and basic needs like financial or insurance services and simple mobile reloads.

According to a survey, 9 percent of the global population created a bank account to begin receiving their employment payments. Because most people are looking for digital payment solutions and moving away from a cash-based economy, traditional financial institutions must seize the opportunity and make it simple for the unbanked and underbanked to use their services.

Financial inclusion guarantees that individuals and businesses have access to useful and accessible financial products and services that fit their needs, in a responsible and long-term manner: purchases, transfers, deposits, credit, and insurance. The ability to open a transaction account, which allows people to hold money and send and receive payments, is the first step toward wider financial inclusion.

Customers may access a wide range of financial services through technology, regardless of where they live, which is a critical step in decreasing poverty and enhancing people's quality of life. Fintech allows people to save money for household requirements, make payments simply and on time, acquire loans to start a business and save for emergencies. It also saves them time going to faraway bank branches to obtain basic financial services, which is critical for those who cannot afford to leave their work or business unattended.

Financial inclusion aims to involve and involve everyone in society in responsible financial management. Many poor Indian households do not have access to financial services in the country. They have no idea what banks are or what they do. Many poor people do not have access to banks' services, even if they are aware of their existence.

They may not meet the bank's basic eligibility requirements, and hence will not be able to use the bank's services. Banks have minimum income requirements, credit score requirements, age standards, and years of work experience requirements. Only if an applicant passes these conditions will a bank provide him or her a deposit or a loan. Due to a lack of knowledge, resources, money, and other factors, many poor people may be unemployed with no prior work history.

This is why it is up to all of us to contribute to the wellbeing of the unbanked in this country. Employers should do their part in enabling better access to basic necessities including financial needs whenever possible, and EVOLET is the right tool for that job.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/