Remittances play a massive role in our current financial ecosystem, and you’re likely using one without even knowing it. In an increasingly connected world, more people are sending money to their families as a means of support.
The remittance, broadly speaking, can be any payment of a bill or invoice, but the term is more often used by those who work abroad.
What is a remittance service?
A remittance service is any service that specializes in international money transfers. Businesses like Western Union, Wise, and Remitly are responsible for the majority of payment transfers.
The customers that use remittance services are typically migrants living in Canada, the United States, and the UK who send away part of their income to support their families.
While using a remittance service is technically impossible for salaried employees and unreliable for overseas employees, freelancers can use a paystub creator to create and send their paychecks overseas. Remittance services ask for a fee per transfer.
How can an employer use a remittance service?
Employers will need to sign up with their chosen remittance service provider either online or in person. Wise’s front page is incredibly user-friendly and provides information about the currency you wish to use, the conversion rate, and the total fees you’ll incur based on payment method.
All websites will ask you to sign up with your email and input your personal banking information as well as the receivers. Follow the instructions on the page to send funds overseas.
International employers who hire freelancers and independent contracts in another country can use a remittance service instead of a bank or e-wallet, like PayPal.
Is this legal?
Remittance transfers are legal. In fact, under federal law, these services have a legal precedent for providing you with up-to-date information on a country’s exchange rate, fees, and foreign taxes.
Remittance services also have to offer their customers an encrypted and secure means of transferring funds, information on when the money will be available, and the right to cancel. Most services give you 30 or so minutes to cancel and infinite time to submit a complaint.
What are the benefits of using a remittance service?
One of the main benefits of using a remittance service has nothing to do with businesses directly. Remittances are an essential source of income for millions of families, most of which are low income and have little employment opportunities unless they move.
As one of the first financial products lower-income people use, remittances act as stepping stones to acquiring an extensive array of financial services and products, like loans or mortgages.
Anyone who uses these services is benefiting the international community, which is striving to substantially reduce transfer fees and costs. Employers will also receive the following benefits:
- A reduction in transfer fees, sometimes as much as $10-$30.
- Instant to near-instant fund transfers, ranging from 24 hours to 7 days.
- Access to several payment options that aren’t available through traditional banks.
- Higher transaction limits (Example: Wise has a $250,000 limit per translation per day).
- Increases convenience for senders of remittances and their families.
- No holds on paychecks, as the sender must pay upfront.
Employees who receive their money right away are less likely to go into debt from taking out high-interest loans to pay for necessities. If an employee doesn’t have access to a bank account, employers can transfer paychecks into e-wallets, credit cards, or directly to a bill.
Using a remittance service is easy to use, convenient, and costs less than bank-related transfers. If you’re an employee who wishes to be paid using this method, let them know! They’re sure to get on board after you’ve explained all of the benefits this service offers.