International money transfer

What is remittance and what are the different type of remittances?

Apr 05, 2024

Global markets and remittances

With the opening of global markets for trade activities, the payment mechanism also needed a secure and reliable mode for monetary purposes.

People travelled across borders with the motives of high-paying jobs, career advancement opportunities, and permanent citizenship. The massive rise in international transfers was witnessed in sending money to family and friends back home.

To expand their customer base and explore new markets, businesses began with importing and exporting activities. Therefore, they required a centralized medium for transferring goods and services in exchange for money.

This article walks you through the fundamentals of remittance transfer and how companies can send and receive international payments through remit wire transfer.

What is remittance?

Remittances are the exchange of money using a transfer medium. Usually, a significant portion of remittance payments is in the form of international remittances.

These include transfers like business payments and people sending funds to their family in their home country. Remittance payment are settled immediately as soon as they are transferred from the other party.

Remittances are chargeable. However, the transfer fees vary from country to country.

Related read- Remittance advice explained

Types of remittances

Broadly, there are two types of remittance of funds based on the recipients of the funds.

1. Inward remittances

When the money is received by a person/company from abroad or other institution, it’s said to be an inward remittance.

For, e.g.:- a company receives payment from another company for their equipment supplies.

2. Outward remittances

When the money is sent from the home country to a person/company/ other institution residing abroad, it is called outward remittance.

For, e.g.:- a company sending salaries to international employees.

How to send remittance?

Remittances do not have a single mode of payment. Depending on the options available near them, there are several ways to send or receive funds in their bank account.

Though all of the alternatives are slightly different, in the end, the agents and parties involved in the process strive hard to ensure the funds are settled as soon as possible. Here are some ways to send a remittance:-

1. Money transfer services

The most common form of remittance is direct money transfer. The sender of funds can straightaway transfer the money from his bank account to the recipient's bank account.

The sender can either choose to transfer from his bank account or debit or credit card. But the fees for each mode of payment differ. Credit cards usually attract the highest fees.

If the sender is unavailable with the option of online transfer, he can visit the branch office of their bank and make the transfer.

2. Money orders

Money orders are one of the cheapest ways of money transfer. You can deposit these at the bank and fill in the recipient's bank account details/address. 

You can always use these options if you are not in a rush and want to avoid the high transaction fees.

3. Banks and credit unions

The home country’s banks also have international branches across the globe. But if you find it challenging to locate your bank, you can always approach a new bank and create a new bank account.

Many credit unions are operated by individuals who provide transfer services to companies at a low cost. They have partnered with a few banks and make transfers via their services.

4. Cheques

Remittance transfers aren’t just electronic payments — you can transfer money via the cheque payment option. Not to mention – these options are the slowest to settle. They take a lot of time verifying the beneficiary’s bank account and processing it.

5. Prepaid cards

Another convenient electronic payment option is prepaid debit cards. You simply have to load funds into your prepaid card, add the beneficiary’s details and transfer the desired amount.

But one thing should be noted, some prepaid cards charge heavily for international transfers — also, not many countries support payment from prepaid cards.

Ready to streamline your cross-border transactions

Parties involved in remittances

Primarily, there are four parties involved in a remit wire transfer process:-

1. Sender

Sender is from whose accounts the funds are debited and transferred to another party.

2. Sending agent

This is the first mediator in the transaction, usually, a financial institution, which collects the funds to be transferred, receiver’s details, mode of payment, transaction fees, and other information.

3. Receiving agent

The second mediator is the receiver’s bank. They verify the sender's details and intimate the recipient of the transaction.

4. Recipient/receiver

This is the last party who receives the money into their account after deducting the foreign exchange fees and other taxes.

What are the benefits of remittance?

No economy can survive without exchanging services and money in return. Remittances significantly contribute to developing and maintaining the equilibrium of the balance of payments.

● International remittance money is helpful in a situation of natural calamities. People can use these transfers to make donations and send help.

● Inward remittance receipt increases the spending power of the people. They try to spend more on consuming goods and services available to them. This increases the production activities, thereby strengthening the distribution channels.

● With the increase in the spending capacity of the people, more goods are purchased, more money is floated into the economy, and the GDP rises. This causes a rise in the sectoral income of the company.

Differences between remittance and bank transfer

A bank transfer and remittance payment are essentially the same and fulfill the typical funds transfer. But there are some differences in the way they operate:


A bank transfer is simply a money transfer from one account to another. At the same time, a remittance is an international transfer between two identical or different banks.

Transfer speed

Remittance is an instant payment method. The money transfer happens expeditiously. In comparison, the settlement time for an international bank transfer takes up to one or two working days.

Transaction fees

Remittance transfers usually have lower fees as compared to bank transfers. Remittances have a fixed fee depending on the booking area, but bank transfer fees increase with the amount.

Mode of deposit

In a bank transfer, you cannot deposit the funds in cash. You can transfer from the bank’s net banking services or the linked debit or credit card. On the other hand, you can bring in the cash and transfer the amount without any hassle.

Are remittances taxable?

Remittances are taxable depending on the federal law of each country. Some countries deduct taxes on any amount of remittances. Also, remittances in the form of gifts are tax-bound. But there is a ceiling after which the taxes are deducted. 

But because remittance transfers are counted as an income for the recipient and contribute to the GDP, it is always taxable. 

In countries like India, inward remittances are not subjected to taxes if you are an NRI. Likewise, in the US, a significant portion of the remittances are not tax-bound.

Send money internationally with Volopay

With Volopay, you need not maintain separate accounts for making cross-border transfers. Our platform single-handedly is capable of swift and non-swift transferring to more than 130+ countries supporting 65+ currencies.

Our bank-grade encryption and security checks highly protect your transfers and other transactions.

Our multi-currency wallet lets you hold multiple currencies in different wallets from which you can pay according to your use case. 

Instant domestic transfers for salary payouts or vendor payments without the hassle of reconciling them — Volopay automatically reconciles and syncs them into your accounting software.

Send money to vendors across borders at the lowest costs


What are the fees for sending and receiving remittances?

Volopay charges zero dollar remittance fee while making transactions through our platform.

What documents do I need to send money overseas?

The primary documents include the sender’s home country’s passport, beneficiary passport copy, and bank statement.

Does remittance expire?

No. But if the receiver does not acknowledge the remittance, a non-refundable fee will be charged after one to three years.

Are remittances taxed?

Yes, remittances are taxable. Check your country's laws governing remittances to know how they are taxable.

What does remitter mean?

The one who intends to send money across the border is said to be the remitter. In simple terms, the sender of funds.