Remittance: Definition and how to send one

People and businesses need to make international remittances on a regular basis. Whether to purchase goods, pay employees or consulting services, subscribe to software from abroad, or simply send money to third parties, remittances act as true financial lifelines that connect millions of people and businesses around the world.

Understanding the definition of remittances and how they work is essential to grasp the impact of global money movement and to make more informed decisions when sending funds abroad. In this article, we will explore:

• Remittance Definition
• How a remittance works and how to send one
• What is remittance advice?
• Remittance Fees
• How to optimize time and costs in B2B remittances

Remittance Definition

A remittance refers to a transfer of money sent by an individual or company to another party as a payment or gift.

They can serve the purpose of fulfilling a commercial obligation, such as paying an invoice or bill, but they are also typically non-commercial and represent a vital source of income for millions of households around the world, particularly in emerging and developing economies. One of the main reasons for remittances is the transfer of funds sent by family members who live outside their country of origin. 

Beyond their individual impact, remittances play a critical role at a macroeconomic level. In low-income countries, they account for approximately 4% of GDP, while in middle-income countries this figure is around 1.5%. In some cases, dependence is even higher, especially in countries affected by economic crises or natural disasters.

In summary, a remittance occurs when funds are transferred from one account to another, typically using electronic payment systems such as Automated Clearing House (ACH), Fedwire, SWIFT, and similar networks.

How a remittance works and how to send one

A remittance happens through a step-by-step process to transfer money from someone in one country to another person in a different country. It starts when the sender begins a transfer using a bank, a money transfer service, or an online platform. The sender gives important details like the recipient’s name, the country where they are, and how they will receive the money. This could be a bank account, a mobile wallet, or a cash pickup spot.

Once started, payment networks and settlement systems handle the transfer. The movement of funds depends on the provider and the route. Money might go through local payment systems, como ACH, global messaging networks, or even middleman banks before it reaches the target country. During this process, checks like anti-money laundering and sanctions screenings happen.

After completing any required currency conversion and processing, the recipient receives the funds through the chosen payout option. The time between sending the required information and the availability of the funds can range from minutes to several business days, depending on the type of service, the destination country, and the method used. 

Once the transfer is completed, a remittance advice will be made available.

What is remittance advice?

Remittance advice is a document or notification sent by a payer to a recipient to inform that a payment has been made, explaining how that payment should be identified and applied. It provides the context and details needed to reconcile a payment once the funds are received, which is especially critical in B2B contexts.

The remittance advice does not follow a single mandatory standard, but it typically includes:

• Date of Payment
• Expected Settlement Date
• Invoice Number
• Amount
• Payment Method
• Name and address of the sender
• Name and address of the the recipient

Remittance Fees

The cost of international transfers is a relevant and often unpredictable factor, with the global average hovering around 6.49% of the amount sent. World Bank data indicates that a reduction of just 5% in these costs could save USD 16 billion per year globally.

Traditional institutions typically charge the highest fees, largely due to the use of legacy rails and the involvement of multiple intermediaries and correspondent banks throughout the transfer process, each adding its own fees and processing times. For this reason, seeking alternative solutions is essential to ensure liquidity and achieve cost efficiencies at scale.

How to optimize time and costs in B2B remittances

In the context of B2B remittances, stablecoins emerge as an efficient alternative to optimize time and costs. By connecting directly to local payment networks, stablecoins eliminate the fragmentation typical of legacy systems and reduce reliance on multiple intermediaries, acting as a unifying layer across different domestic rails.

The result is international transfers that are simpler, faster, more efficient, and more predictable, bringing the global remittance experience closer to that of local payments.

Elevate your international operations with Conduit

Conduit was built for companies operating globally that need a modern, stablecoin-powered infrastructure to move capital efficiently. We combine natively digital technology, global reach, and regulatory rigor to simplify complex operations and unlock new business flows.

If your company is looking for greater autonomy, scale, and control over international transactions, talk to our team and discover how Conduit can support your global growth.