Tag Archives: currencyfair

How to Save Money on your Foreign Remittance

Sending money overseas is getting cheaper. There’s no question that for many migrant workers that there are new ways to send money back home, but in order to save people will need to start changing their financial habits. Part of what has traditionally restricted people to send money around the world with ease is that the traditional banking system is not standardised across the world. Yes, it is pretty standard across many western and developed economies but many less developed and rural regions of the world do not have the same rules to transacting. To understand this, it’s firstly important to understand what the role of banking is.

A bank is an agent who settles a transaction. Accounting for your balances is simply a by-product of settling your transactions but has become standard in the industrialized world. The primary role of a bank is to authenticate the monetary trade between to parties and exists in more primitive forms throughout the world. Within traditional western banking, the settlement of transactions and account registration go hand in hand but in many less developed regions, account registration is not so formalized. Take an individual money changer in a less economically developed or rural of the world.

Informal money exchanges are the norm across many countries and account access is achieved through a third party exchanges or money brokers. These are people who less formally exchange money but operate in the field. They will send money abroad converting cash to credit under their won accounts.  This inherently conflicts with western KYC and anti-money laundering/terrorist financing regulation because of its less formal nature. It also ends up increasing overall rates for the end user. Money brokers in less developed regions have have professional networks across the world but the way that their western counter-parties interact with traditional institutions is problematic. Their entire business model can’t comply with traditional regulation by its inherent nature of informal dealings. This is only one of several opportunities that lie for operators within the field. Political relations have also been an obstacle for agents remitting internationally but is less of a controllable factor for money exchange businesses.

The way that foreign remittance is currently getting cheaper is through the improved access to global financial markets whether formal or informal by end users. People only need access to the internet to have access to a financial markets to trade Dollars for Euro or even M-Pesa for Bitcoin. SMS technologies are even now evolving to include payment services which is granting access to using sophisticated devices. This is huge for two thirds of the world because they can now access global financial markets cheaply.

What this means for much of the world is they will now have access to financial services because the new types of institutions are setting up using digital currencies. These are for the most part, currencies that are designed to be crowd sourced meaning anyone can transact in them without needing any outside authority. This is  a less formalized process which is better suitable for less formal economies, countries or regions. A the moment, the bulk or the infrastructure is needed for intermediaries (agents or brokers) between the digital economy and the formal financial system, but it is coming.

For people who do currently do have access to banking in first world nations, sending money abroad has also changed. We now have companies like Payonner and CurrencyFair who are specializing in foreign remittance and have cut cost significantly for end users by not having physical branches. CurerncyFair is an internet company designed for the new online world. They focus on providing excellent rates for remittance within more developed countries. This has lowered cost significantly by focusing large efforts in developed economies with online payments. Payonner on the other hand is a little different than traditional money exchange. With them, you basically send money anywhere that has postal service and ATMs. They will send pre-paid MasterCars anywhere in the world and it can be refilled. It’s like sending a cheque to your family back home and they can actually cash it then use it whenever you refill it. For sending money to less developed areas, Payonner can be a good option because the intermediary can literally be a bank machine or point of sale (POS).

What I’m suggesting, is that to save money when remitting payments back home, understand that the entire industry is blossoming and becoming more competitive. New type of financial institutions are starting up worldwide to meet your need, regardless what they are. No longer does your remittance have to be a side operation of your bank because you can deal with a wider variety specialist that can connect to world markets.  Understand your needs and the most suitable company will save you the most money sending foreign remittance.