Remittance: Definition, Types, Benefits and Components

Last updated on August 13th, 2024 at 09:40 am

In the era of globalization, sending money abroad has become increasingly common, whether for living in another country, education, or online shopping. Therefore, choosing a reliable money transfer service provider is crucial. Remittance is an important aspect of the banking world that facilitates cross-border transactions.

It is important to understand the remittance, types 汇款， and the factors to consider when choosing a service provider for international transfers..

As someone who requires international transactions, selecting an efficient and trustworthy money transfer service involves considerations such as cost, speed, and reputation.

To learn more about remittance, check out the detailed information below!

What is Remittance?

汇款 refers to the service that facilitates the transfer of funds in foreign currency (forex) across borders. In other words, remittance is a specialized service aimed at international transactions and is distinct from domestic money transfers through the banking system. 

In Indonesia, the banking system has implemented a different approach for remittanceIn addition to meeting the needs of customers wishing to send money abroad, remittance also plays a role as a means of foreign currency trading in developing countries, including Indonesia.

Benefits of Remittance

Remittance provides convenience for sending and receiving money from abroad. Moreover, remittance contribute positively to the country's economy by generating revenue and supporting economic growth.

For those of you needing international money transfers, Easylink can be the best solution. By using Easylink for your remittance transactions, you can enjoy several advantages, including:

1. 24/7 Accessibility

Easylink is available on the App Store and Google Play Store, enabling customers to perform remittance transactions online anytime and anywhere using their smartphones, without needing to visit a branch office.

2. Attractive Monthly Promotions

Easylink offers special promotions every month for both business and personal needs.

3. Competitive Exchange Rates

Easylink also offers more competitive exchange rates, so you don’t need to worry about currency exchange when sending money abroad.

4. Fast Money Transfer Process

For those who want to send money abroad quickly, Easylink is a great option. The time needed for money transfers through Easylink varies depending on the destination country, ranging from real-time receipt, same-day transactions (same day) , to a maximum of 3 days after the transaction.

5. Hassle-Free Process

Using Easylink, you don’t need to visit an offline branch. Transactions can be done easily through the Easylink app online, using just your smartphone. smartphones.

Types of Remittance

Remittance is divided into two types based on the destination: incoming remittance and outgoing or (or outward) remittance, as outlined below: 

Inward Remittance

Incoming remittance refers to money transfers from abroad to the recipient's home country. For example, if someone in Indonesia receives money from family in China, that is an incoming remittance. 

Similarly, Indonesian migrant workers (TKI) and Indonesian migrant domestic workers (TKW) send money to their families back home. Typically, incoming remittance transactions remittance are conducted in foreign currency (forex) and converted to local currency, benefiting various parties, from the recipient to the country itself. 

Incoming remittance becomes a significant source of income for a country as it can boost the economy.

Outward remittance

Meanwhile, outgoing remittance also known as (or outward) remittance is the opposite of incoming remittance. It is the service used to transfer money from a country to another country. The transfer is usually made in the local currency and received in foreign currency. 

Outgoing remittance occurs, for instance, when someone sends money to a child studying abroad. remittance service will incur a transfer fee for each transaction.

Read Also: How to Transfer Money Abroad Easily

Purpose of Remittance

The primary purpose of remittance is to provide support to Indonesians working, studying, or residing abroad. Remittance services enable them to send or receive money from family, friends, or acquaintances back home. 

The advantages of remittance are strengthened by the use of technology, such as websites that make it easier for users to access these services. Additionally, remittance contributes to economic growth, as cross-border money transfer activities are a significant income source for the country.

Read Also: What is Remittance Advice? Here's the Explanation

Remittance Mechanism

As previously mentioned, remittance involves sending money abroad. This process is different from domestic bank transfers. If you plan to make a remittance soon, it is recommended to understand the involved mechanisms.

The first step is to visit the bank or financial service provider that suits your needs. Even if you are not a customer of the bank, you can still perform remittance. 

The staff will guide you to carefully fill out the form. Make sure to double-check the amount, recipient’s name, account number, and other details. If you are an account holder, the funds will be debited from your foreign currency account. If not, the money will be converted into foreign currency according to the prevailing exchange rate.

After filling out the form, your remittance request will be processed by the correspondent bank This process involves a correspondent bank that acts as an intermediary, collaborating with the recipient bank. The recipient bank will then receive the funds and forward them to the final recipient. 

In addition to the conventional method, you can now make remittance via smartphone. This method is faster and more practical, and Easylink is one of the services platform you can use. Easylink offers cost-effective, fast, and practical money transfer services.

Components of Remittance

Remittance Remittance consists of four key components:

1. Recipient (Beneficiary)

The recipient or beneficiary is the individual or entity designated to receive the funds in the remittance service form. Only this party has the right to receive the funds according to the instructions provided in the remittance form.

2. Beneficiary Bank

The beneficiary bank or beneficiary bank is the bank that receives the funds and is responsible for forwarding the money to the recipient.

Remitting Bank

The beneficiary or remitting bank is the financial institution responsible for sending the funds. This is the bank where you use remittance services to send money, either domestically or internationally.

Correspondent Bank

The correspondent bank correspondent bank is an intermediary bank involved in the transfer process between the remitting bank and the beneficiary bank.

Tips for Safe Money Transfers 

Sending money abroad is a common activity, often for purposes like sending money to family abroad, online shopping, or business transactions. 

Therefore, sending money becomes a routine that needs to be carried out regularly to ensure smooth transactions. Here are some tips for safe money transfers:

1. Choose a Trusted Service Provider

Selecting a reliable service provider is an essential step in sending money. Make sure to choose a provider that has proven reliability.

2. Check the Exchange Rate

Before sending money, check the applicable exchange rate. Understanding the current exchange rate helps you secure a better value.

3. Double-Check the Amount Being Sent

It is essential to verify the amount of money you are sending. Ensure the amount you entered is correct.

4. Record Every Transaction

Always document each transaction carefully. This will make it easier to track and verify transactions if needed.

5. Understand the Transaction Speed

Know the estimated time for money transfers. Understanding the transaction speed helps you plan your activities or needs accordingly.

6. Know the Transaction Fees

Before sending money, be sure to understand the fees involved. Make sure you are aware of all costs associated with the transfer.

Remittance Service Fees

According to information from the Financial Services Authority (OJK), the fees for remittance services generally consist of two main components: transaction fees and commission fees, as explained below:

Transaction Fees

These are the fees incurred for providing the money transfer service, which varies between different money transfer services.

Commission Fees

These are the fees related to the buying and selling of foreign currency involved in the remittance transaction.

When you perform a remittance transaction, the fees will vary. Remittance fees are influenced by factors such as the amount of money sent, the destination country, and the speed of the transfer. 

Nominal Limit on Number of Delivery

Each country has regulations regarding the maximum amount of money that can be sent. In Indonesia, there is a limit of up to IDR 100,000,000 per customer each month. 

If the transaction amount exceeds this limit, supporting documents (underlying) are required according to the regulations set by the Financial Services Authority (OJK)..

For the transfer limit using Easylink, you can contact us directly here. here. 

Delivery Time Period

The time required for a transfer varies depending on the service provider, ranging from instant receipt real-time receipt, same-day transactions (same day) , to a maximum of 3 days after the transaction is made, as stated by the Financial Services Authority (OJK). 

Conclusion

Remittance is a critical aspect of the banking world that facilitates international financial transactions. Therefore, security is a key factor that should be considered when planning to send money abroad. 

For fulfilling international money transfer needs, Easylink is a reliable solution! Easylink not only simplifies the money transfer process with high security but also offers convenience and speed. Additionally, Easylink can send money to over 170 countries , using both local currencies and USD Global.