• Muhammad Aathiq

Remittance: Analysing the Present for the Future

Migrant workers play an absolutely vital role in Singapore’s economy and their contribution has been enormous. They have played a huge part in the manufacturing, construction, marine, and process industries. During their stay in Singapore, most of these migrant workers send most of their personal salary to their families overseas. To do so, they use the form remittance. In this article, we take a look at how remittance works and what’s it like for the future.


Remittance, by definition, refers to the method of sending or transferring money to another party. The term is derived from the word remit, which means to send back. Remittances can be sent via a wire transfer, electronic payment system, mail, draft, or check.


In local definition, Remittance is the term used for methods of payment to overseas countries and banks. Migrant workers, maids, or any individual would usually transfer money at a local remittance centre. Using either cash or card, this remittance centre will send money overseas.


Source: WorldRemit


How does Remittance work?

The action of remittance is highly controlled and regulated. The Monetary Association of Singapore (MAS) is the main government regulator. To allow the transfer of money overseas, the company in charge must register themselves as a licenced remittance agent.


When choosing such a service, customers are usually picky. Many focus on admin fees, exchange rate, and even the processing time. It is sometimes of great importance and emergency to transfer money.



Banks offer remittance services and it is one of the easiest ways of remitting money. The request for an overseas transfer can be easily made through internet banking or counter services. The money will be deducted when the request is successful. This service is readily offered by local banks such as POSB/DBS, OCBC and UOB. Foreign banks in Singapore such as Bank of China, Citibank, Indian Overseas Bank, Maybank and Standard Chartered provide similar services as well.


Another way of remittance is through the usage of wire transfer companies. There are many companies operating out of a single location. Some of these companies exist as a multi-national wire transfer company with multiple branches over several countries. Such examples include Western Union or Pay2Home. Nowadays, consumers are turning to digital options such as InstaReM, SingX, TransferWise and WorldRemit as they offer simpler solutions.


Western Union


Source: NUS


Western Union is a popular brand when it comes to money services. Founded in 1851, Weston Union prides on its experience to ensure money is sent properly. They offer users physical branches and online portals to send and receive money. The recipient also has the option to collect money over the counter or through deposits into their bank accounts.


With Western Union, users prefer going to them based on their heritage and an extensive network. Western Union is well-connected with branches in almost every country. Money can be received by the recipient within a matter of minutes.


With that in mind, we now take a look into the future and see what companies are doing now to innovate remittance in general.


How does the future of Remittance look like?


TransferWise


TransferWise is a relatively new fintech company based in London. It’s concept differs from Western Union. TransferWise focuses on matching transfers with other people and then have a small commission while using the inter-bank mid exchange rate. This way, it avoids currency conversion and transfers crossing borders.


They have grown to become a well-established name in this industry. The company does not charge users on any transactions fees, however, the company takes a cut out of the exchange rate. This fee is transparent to the users and the money is delivered within 2 days to the recipient.


In that sense, TransferWise can offer a multi-currency e-wallet for its users. Users are issued a MasterCard debit card, which can be used for transactions. They can also use the card to withdraw cash from the ATM machines. Compared to traditional money changers, TransferWise offers a very competitive exchange rate with their innovative process.


InstaReM


Based in Singapore, InstaReM is a growing company which offers remittance services predominantly in the Asian market. Their focus is to develop a transparent solution for overseas money transfer that is close to live exchange rates.


Their fees are based on charging a transparent premium on their exchange rate. Regardless, their overall transaction fees are very competitive and their money transfer is quick. They offer their services to businesses as well. Overall, they are fast, reliable and well-priced.


WorldRemit


WorldRemit has a wide presence in over 140 countries in the world. They offer quick transfers. Users have an option to make payment through bank transfers, debit card, credit card, e-wallets and deposits to any branches of Xpress Money Network. This flexibility also extends to the receiving end where recipients can receive money through cash delivery, bank transfer, cash pickup, airtime top-up and mobile wallets.


WorldRemit’s fee structure is very complex and it best works for small transfers. This is very unique, but the fixed fees reduce as the amount decrease. They have a transfer fee and a margin on the exchange rate. Their transfers are very quick. In some cases, money transfers are done instantly, but it also depends on the delivery option and demographic.


SingX


SingX is also another Fintech company based in Singapore. It offers its services from Singapore to 37 other countries. SingX does not charge a margin on its exchange rate, but transaction fees of 0.5% to 1% that is quoted. The exchange rate offered is what is actually worth in the global market. Their transfer is also very quick and the recipient gets the money as soon as the same day or within 2 days.


Conclusion


Comparing remittance services is tough, especially when money is on the line. However, we suggest comparing them based on their services. Transfer fees and exchange fees are the two key factors to look out for. Is it worth the amount or are there cheaper alternatives?


The transfer destination is also important. Will it be easy for the recipient to receive? Consider the exchange rate and ease of use. The best option is whichever service which offers lower admin fees and the closest exchange rate to the market rate.


Through these companies, we hope to see greater innovation in the area of remittance in years to come. The potential is there waiting.

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