The international money transfers or online remittances sent by the migrant workers have become one of the main income sources for many developing nations in the world. On the other hand, it has become one of the major international financial resources and sometimes it has exceeded the foreign direct investments (FDI) in countries.
In the Asian and African region many people go abroad to work in order to get a better income. In these regions remittances represent the largest source of foreign exchange earnings and represent more than 10 percent of GDP.
According to the world bank data from 2014 global remittance was $430 billion dollar in 2011 and remittance was 0.31% of global GDP in 2009. Remittances help in countries economic growth both directly and indirectly. Remittances have increased the consumption level of rural households and alleviated poverty. It also improves the quality of lives in many rural communities.
Families that depend on foreign remittances can always gain a better education, health and nutrition. Remittances have encouraged self-employment and small scale business development. More foreign currency inflow gives a country more purchasing or import power, more capability on infrastructure development and minimizes the credit constraints. So it is clear that remittances increase financial development and help for a speedy economic growth for many countries.
Remittances have a long history dating back to the 8th century, then known as Hawala system was an informal way of transferring money without physical money being moved from one place to another. Later the telegraphs were used to transfer money. In 1973 the SWIFT (the society for worldwide interbank financial telecommunications) was formed to transfer money between banks around the globe.
In 1998 the paypal system was introduced and this service enabled people to transfer money online for a half of the cost of traditional methods. The evaluation of the money transferring methods did not stop from there but over the time with many technological advances many new methods that are more user friendly were introduced. These new innovative fintech products offer a range of benefits to their users.
As remittance market expands over the time importance of remittances or dependency on it becomes more around the globe. People who send money to Sri Lanka and other foreign countries are always in search of cheap, secure and fast methods of sending their money. This is the reason they started turning into online transactions to send or receive money and online money transfers have become one of the major components in many countries.
Online Remittances reduces poverty via Financial Improvements
Digital transactions are not only trouble free but they do not require the sender or the receiver to have an account in a bank. This may not sound like a problem for those who are working or earning in developed countries but for the many who are receiving may not have an account in a bank or may not have access to a bank.
The digital remittance services have provided many such adults an access to financial services by providing mobile money accounts. Making more people access basic financial services is crucial for poverty reduction and economic growth of a country. On the other hand, traditional bank to bank remittance will require both sender and receiver to have accounts in banks.
Online Remittances are Cost effective
As human mobility keeps increasing, so does the need for international money transfers. Many were looking for cheaper yet safer ways to transfer money from one country to another. Cost reduction in remittances even became one of the 2030 Sustainable Development Goals developed by the UN.
Mobile money transfers or using digital technology for remittances has reduced the cost of money transferring to a considerable amount and it keeps reducing as technology keeps advancing over time.
Transparency
When performing an international money transaction in a traditional way there are several fees to be paid. A fee may be charged on the amount of money getting transferred, exchange rate, how fast you need the money to be transferred and how you prefer the receiver to get paid. Some of these fees may not be clear to many of us and may go as hidden fees in every single transaction.
The lack of transparency in many traditional money transferring methods have made people switch to digital remittances which provide full disclosure of all the fees upfront with the total amount to be paid before going ahead with the transaction. This lets consumers compare different service providers and pick the best that suit their requirement.
Speed
Bank transactions will still make customers to physically visit an institution and wait in line whereas in online money transfers you can access your account from anywhere as long as you have access to an internet connection.
You may do all the needful without even stepping out from your home. With less paper work these electronic transactions can be performed immediately. Efficiency is one of the key factors people look into when they are choosing a reliable method to transfer money with their busy lifestyles.
Safety
Online Remittances have a proven record for its safety when selected a trusted company is selected to handle the transactions. With a minimum chance of identity theft and due to the notifications the both parties receive during the process to keep them informed on every single step people now prefer transferring their money online.
Around the clock service
Most of the digital money transferring companies provide 24/7 customer service which is very helpful to both the money senders and receivers. Since these transactions are to different parts of the world, time differences will not affect their customers when they want to clear any doubts about their transaction. This is another major reason for the people to prefer digital remittances over the traditional money transfers nowadays.
Wide Coverage
Accessing the digital money transfer service only needs a smart device and an internet connection. This is why it is accessible from any part of the world where sometimes you cannot find a bank for miles. In addition, these service providers showcase the exchange rates in their apps or websites and these rates keep getting updated 24/7. Customers can watch the exchange rates and perform their transaction when a favorable rate appears.
Above discussed reasons are the few that online remittances have become so much popular among many migrant workers over the time. With globalization online remittances have no doubt become one of the main sources that has been used for the movement of the cash around the globe.
These cash flows are vital for many countries for their economic development and since people’s trend is toward the digitalized transactions online transfers will be the future of the global remittances. Recognizing the importance of online money transfers in order to provide more facilities and improve the technology will ease and double the remittance flow towards the countries where remittances play a vital role in their economies.
Hope this blog clearly explained how online remittances are actually helping to improve a nation’s economy and quality of life of people living in their homeland. In addition to Money Transfer, we are also offering International Courier Service and Flight Ticket booking for international trips.
