What is a payout?

A rebate is money that is sent from one party to another. Generally speaking, any payment of a bill or invoice can be called a discount. However, the term is most often used nowadays to describe a sum of money sent by a person working abroad to their family back home.

The term is derived from the word remit, which means to send back.

Key points to remember

  • A remittance is money sent to another party, usually in another country.
  • Typically, the sender is a foreign worker and the receiver is a relative in the receiver’s home country.
  • Remittances represent one of the most important sources of income for people in low-income and developing countries.
  • The sums paid often exceed the amount of direct investment and the international development assistance a country receives.
  • Intelligence agencies view remittances as a potential source of terrorist financing.

Understanding remittances

Remittances can be money sent in payment of a bill. However, most remittances involve sending money to relatives. They are often sent by foreign workers to stay with family members in their country of origin.

The most common way to make a transfer is to use an electronic payment system through a bank or an electronic money transfer service such as Western Union. People who use these options usually pay a fee. Transfers can take as little as ten minutes to reach the recipient.

Remittances play an increasingly important role in the economies of small and developing countries. They also play an important role in disaster relief, often exceeding Official Development Assistance (ODA). They help to raise the standard of living of people in low-income countries and to fight global poverty.

In fact, since the late 1990s, remittances have overtaken development assistance and, in some cases, represent a significant portion of a country’s income. gross domestic product (GDP).

According to the World Bank’s Migration and Development Brief report, $508 billion in remittances were sent to low- and middle-income countries in 2020. This was followed by $605 billion in 2021. In 2019, they hit an all-time high of $548. billion but subsequently declined due to the Covid pandemic.

Remittances to these countries are expected to reach $630 billion in 2022. This amount is greater than foreign direct investment and official aid funds sent to these countries (excluding China).

Remittances are also used to help people living in less developed countries open bank accounts, a trend that helps promote economic development.

How to send a transfer

Remittances are usually sent using an electronic payment system or service.

  • Individuals can visit a bank or credit union or go online to initiate a bank transfer or one ACH Transfer. Funds, in large amounts if needed, can be transferred and available the next day, but may take longer. Wire transfers cannot be reversed, so it’s important to make sure you’re sending money to the intended recipient. ACH transfers can be reversed, if needed.
  • If you are transferring money, be prepared to provide the recipient’s bank name, bank account number, and routing number.
  • Individuals can also use applications such as PayPal and WorldRemit to send money internationally.
  • Money transfer services can also provide assistance in sending funds overseas. This can be done in person or, usually, online. Online services include Western UnionWise (formerly TransferWise) and Xe.

Rebates may also be sent by US Postal Service money order. For international mandates:

  • Visit any US Postal Service location. You can send up to $750 per money order.
  • Be prepared to provide the payout amount in cash, debit card or traveler’s check. Credit cards cannot be used.
  • Complete the warrant.
  • Pay the dollar value of the money order plus the issue fee.
  • Send the money order by first class mail or parcel, or priority mail or express mail.
  • Keep receipts for your money order and shipment.

Remittance fees

Fees for sending money abroad vary by provider and service.

  • Banks and credit unions may charge up to $45 for outbound domestic transfers within the United States and $10 to $20 or more (eg, $50 to $65) additionally for outbound international transfers involving U.S. dollars. Beneficiary banks may also charge fees.
  • ACH transfers are generally an inexpensive option for consumers, much less expensive than wire transfers, especially when the remittance is paid directly into the recipient’s account. Check with your bank for specific details.
  • An international money transfer service provider such as Wise charges a small flat fee of $4.15 plus a variable percentage (currently 0.47%) of the transfer amount for currency conversion. Variable fees may also apply depending on the type of transfer.
  • PayPal’s fees for international transfers from a PayPal balance include a flat fee of up to 5.00% of the transaction amount when sending from the United States, as well as a currency conversion fee of up to range from 3.75% to 4% of the transaction. If you fund the transfer with a credit or debit card, an additional 2.9% finance charge and fixed fee will apply.
  • The US Postal Service charges an issue fee of $49.65 plus a processing fee that depends on the country a money order is being sent to.


The global average cost of sending a $200 remittance in the first quarter of 2021, according to the World Bank. It costs more to send funds through banks than through digital channels or money transfer services.

Financial impact of remittances

The 2020 economic crisis and COVID

The 2020 economic crisis and COVID-19 have had a severe impact on migrant workers and their families back home.

The World Bank estimated at the end of 2020 that remittances to family members would fall by 14% in 2020 compared to pre-epidemic levels. It predicted an increase in unemployment among migrants, a slowdown in new migration and an increase in the return of migrants to their countries of origin.

The high cost of remittances around the world is a concern, especially with the increasing trend towards global financial inclusion. To promote transparency, some countries limit remittances to bank transfers, but banks are the most expensive transfer channel, and wire transfers in particular are among the costliest, according to the World Bank.

In the first quarter of 2021, average transfer costs to the Middle East and North Africa fell to 6.3% from 7% a year earlier. In sub-Saharan Africa, costs averaged 8%, compared to 8.9% for the same period. In Latin America, costs averaged 5.5%, compared to 6% previously.

Examples of discounts

For low-income countries or those with struggling economies, remittances represent one of the main sources of income for the indigenous population. In 2015, for example, Mexicans abroad sent more than $24 billion home, more money than the country generated from selling oil.

The collapse of the Venezuelan economy has caused huge migration to other countries and a corresponding increase in remittances to family members left behind. In 2017, more than $1.5 billion in funds were sent to family members left behind in the beleaguered country.

The top countries receiving remittances in 2021 were India ($89 billion), followed by Mexico ($54 billion) and China ($53 billion).

Special Considerations

Money transfers and crime

Financial intelligence units are concerned that remittances are one of the ways in which money can be laundered or violent activities like terrorism can be sponsored.

The methodology countries use to record the amount of money people receive through remittances is rarely made public. While the majority of value transfers happen via the web or wire, where they can be easily tracked, a fair amount of money is transferred in ways that are harder to track.

The impact of Fintech on fees

Recent fintech (financial technology) waves of international money transfers drive down fees. Rising players include Payoneer, Wise and WorldRemit. Regulation and supervision continue to be strengthened to ensure safer movement of funds.

What is a payout?

A remittance is money sent from one person or entity to another. It can be money sent for the payment of an invoice, for example. However, today it is more commonly seen as money sent from a person in one country to relatives or friends in another.

How can I send a transfer?

You can send it by visiting your bank and requesting a Wire Transfer or ACH Transfer. Or, you can send it using a money transfer service that specializes in transfers, both domestic and international. You can use an app like PayPal to send a transfer to another country. These electronic services transfer money quickly, often within a day. If you prefer, you can still send a money order by US mail, but the time to arrive at your destination depends on the service you use (for example, first class international mail or express mail).

What is the difference between an installment and a payment?

Although a remittance can be a payment sent in response to receipt of an invoice, it is a term that is also used to describe funds sent overseas. For example, when money is sent by someone in the United States to family or friends in another country, they are sending money.

The essential

Remittances are sent all over the world in huge quantities. They play a very important role in the economies of various low- and middle-income countries, as well as in disaster relief. The amounts transferred each year can exceed the GDPs of some countries.

Remittances can be expensive to send. This is a concern for organizations such as the World Bank, as remittances sent by migrants “have largely supplemented government cash transfer programs to support families in economic difficulty”.

Reducing costs and encouraging the flow of remittances to households in the countries where they provide economic aid should be at the center of government policies around the world.

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