How a remittance works
The sender pays in with cash at an agent, a card or a bank transfer. The provider converts the amount, usually at a rate that includes its margin, and instructs a payout in the destination country: to a bank account, a card, a mobile wallet or a cash pick-up point.
The money itself rarely crosses the border payment by payment. Providers hold balances in each country or with payout partners, pay recipients from the local balance, and settle the net amounts between countries later.
The route between two countries is called a corridor, and each has its own partners, prices and rules.
How remittance is regulated and priced
PSD2 lists money remittance among the payment services in its Annex I, so in the EU the business is carried on by an authorised payment service provider or by an agent of one. Senders are identified and transfers are screened under anti-money laundering and sanctions rules at both ends.
Cost is the long-standing issue. Target 10.c of the United Nations Sustainable Development Goals is to bring the transaction costs of migrant remittances below 3 per cent by 2030, and to eliminate corridors with costs above 5 per cent.
What a remittance product is built from
Onboarding and identity checks, exchange-rate quotes that hold for a set time, pay-in methods, a ledger per currency, payout partners in each corridor, and screening on every transfer.
Remittance or cross-border payment?
- Cross-border payment
- Any payment between two countries, including trade and corporate payments. Remittances are the personal, low-value part.
- Remittance advice
- A note telling a supplier which invoices a payment covers. The same word, in accounting.
Where a remittance shows up in a platform
Modules that do the work
- FXCurrency conversion with live rates, your margins and the liquidity provider you choose.
- PayoutsMoney out to bank accounts, cards and wallets, on the rail that fits each payment.
- KYC / AMLIdentity checks, screening and ongoing monitoring, with the verification provider you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
Platforms that need it
Guides that go deeper
- Licensing a remittance business in the UAEHow the Central Bank of the UAE licenses money transfer: the Exchange Business Regulation, the app-only Category IV licence, capital and guarantees, AML duties and partners.
- Stablecoin B2B payments: how paying suppliers abroad worksHow a stablecoin payment to a supplier abroad moves, from euros in to local currency out, what changes against correspondent banking, and the rules in the EU, the UK and the UAE.
Where it is written
The laws and standards this page's facts come from.
- Directive (EU) 2015/2366, PSD2, Article 4(22) and Annex I (EUR-Lex)
- United Nations, Sustainable Development Goal 10, target 10.c
General information, not legal advice: what applies to you depends on your services and your market.