Outward Remittance Meaning in Banking

Canada is one country that is known for having its remittance outflows running into billions of dollars. Essentially, these statistic shows that Canada is a major contributor to remitted funds globally. As a Canadian resident, you are probably familiar with the term outward remittance by practice because it simply refers to the process of sending money from your domestic account to an international foreign account.  This article walks you through outward remittance meaning in banking and other details you should know about it.

Outward remittance meaning in banking

Outward remittance meaning in banking is simply the process of sending money to another country. This money is usually transferred via foreign exchange from a business or worker to another country. Interestingly, outward remittance greatly contributes to most recipient countries' GDP.

The process of outward remittance generally involves transferring money internationally via authorized traditional banks. Although banks handle the majority of these transfers, there are other reputable operators that also handle international transfers. These operators include MoneyGram, Western Union, as well as Ria. They function across hundreds of countries globally.

Outward Remittance Explained

Outward Remittance is a fund transfer, from your country of residence to a recipient residing in another country. It is also called foreign remittance. When the recipient of the funds receives the money, they have received a foreign inward remittance.

For instance, you send money via a bank or any international transfer operator to someone living in another country. The bank/operator sends the details of your transaction to a bank, business, or agent in your recipient's country. This other bank/agent/recipient will then give the money to the person you are sending it to. Depending on the type of service, the funds can be given as:

• Cash
• A credit to the recipient’s credit card, prepaid card or debit card
• A deposit into the recipient’s bank account

Benefits of Outward Remittance

Outward remittance enables you to quickly send funds to your friends and family living abroad instantly. Also, the transaction process is executed on a secure banking network and this helps to limit fraud. Essentially, you can send money internationally and be rest assured that your transaction is very fast and very secure.  

When to use outward remittance

You can execute international (outward) remittance for any of these purposes:

• Cover educational costs
• Pay for travel outings taken
• Cover the living expenses of your family member
• Buying assets abroad
• Medical treatments
• Gifting or making donations to any individual or organisation

What is the process involved in outward remittance?

Nowadays, it is very easy to transfer money internationally, all thanks to technology and international cooperation among banks globally. The outward remittance process just involves only three steps. Here are the processes listed below:

1. Choose the most suitable remittance service

As stated earlier, there are various International money transfer outlets in Canada. If you don't want to use an authorised bank, you can use an international transfer operator like Western Union.

First check for if there is any transaction fee or hidden cost attached. Once you find out the amount, compare it to transfer operators. Go for a remittance outlet with an affordable transaction fee and quality customer care services. Lastly, go through the terms and conditions of the remittance outlet before making any final decision to use their services.

2. Collect the recipient’s important details

After selecting your preferred remittance service, the next step is to provide details about the recipient. Hence, you will need to obtain details, such as your recipient’s full name, account details, bank address, etc. Also, you need to provide details about yourself to the remittance service. Note that an outward remittance proposal can fail if you don't provide the correct details. So this is the most important part of the process.

Step 3: Complete the transaction

Digital banking has made the process of outward remittance very easy and fast. Just visit your bank’s website to execute the transaction in no time. The sending process may vary depending on the remittance service you use. So if you are a bit confused, just contact the customer care service of your remittance outlet. Technology has made this step as easy as possible.

Setting up an international money transfer

Depending on the remittance service you select, they may allow you to set up the international funds transaction in various ways, such as:

• Online
• By email
• By telephone
• In-person

You may also be able to make payment through:

• Cash
• Credit card
• Cheque
• Debit card
• Money order
• Prepaid card

If you make use of a credit card to send the funds, the transaction may be categorised as a cash advance. This may make it far more expensive to transfer money.

What is the cost of outward remittance?

The number of fees your outward remittance transaction will attract will vary depending on the remittance outlet you use. Essentially, bank charges will be different from a regular international transfer operator. Some financial institutions may even charge a flat fee for transferring cash. While others can charge several fees depending on how much money you want to send. Also, charges can vary depending on your preferred payment method.

In certain cases, they can give a discount for any repeat business. Some financial institutions can also offer you a reduced fee if you transfer a large sum of money.

Usually, you will be charged less if there is a bank that has locations in both Canada and your recipient’s country. The bottom line is simple. Compare rates before you select any remittance outlet.

Why is the cost of remittance high?

Remittance fees are high for numerous reasons. These reasons include:

• Underdeveloped financial infrastructures
• Regulatory obstacles
• Limited competition
• Lack of instant access to the banking sector
• Difficulties obtaining the mandatory identification to join the financial mainstream.

Another important factor that can affect the price of remittance is the exchange rate. Some remittance outlets make a profit on fund transfers by billing a higher than the normal exchange rate. Ask around about their exchange rate and make sure you compare it to the exchange rate of other currency exchanges to check if it's reasonable.

The exchange rate can also greatly affect the final amount of money the recipient will get. Make an inquiry if the amount of cash the recipient will get will depend on the exchange rate when:

• You pay a token for the transfer
• The recipient receives the money

Other factors that are responsible for price variations include (but are not limited to):

• Type of bank account of both the sender and recipient
• Details of the transaction
• Regulations in both the sending and receiving country
• The foreign exchange (Forex) margins
• Upfront bank charge

According to the World Bank, a lack of transparency in the market is the most crucial factor that causes the high cost of remittance.

How much time does it take for an outward remittance to get to its destination?

The amount of time it will take for the funds you sent to your recipient to arrive at the destination country varies from just a few minutes to a couple of days. It largely depends on the speed of your remittance outlet.

However, you may be given the option of transferring the money faster, however, this option costs more. Just consider if paying extra for quicker delivery is worth it.

Bottom line

Outward remittance meaning in banking is a general term for the process of transferring from your home country to a foreign country. This process is very quick, easy, and secure from fraud. Also, outward remittance is one of the major contributors to the GDP of developing countries.

This is why it is very important for economic growth. If you are hoping to send money internationally, just go through the information below to guide you through the process.

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