28/ 04/ 21

3 Factors to Consider Before Remitting Money Cross-Border

The amount of money remitted globally has been on the rise in the recent years. A report by Reuters from data collected by Central Bank of Kenya states that in 2020 Kenya’s remittance grew by 11% up to 3.09 billion dollars. This increase was mainly pushed by the technological innovations meant to facilitate sending money and, in this case, played a big role in adjusting to the tough economic times caused by the coronavirus.

Whether you are sending money for family support, investments, business, making purchases or debts repayments, there are certain factors you need to do enough proper research on before sending money to another country. Handling money is entirely a crucial task that is sensitive such that any wrong move leads to unexpected inconveniences and losses.

These factors we are about to point out should influence your choice in the type of money transfer services you use, the timing of your remittance and how much money you choose to transfer cross border.

  1. Service Charge/Processing fees

Processing fees are costs charged to a client for the service they receive. Notably, different channels that offer money remittance services have different processing charges. Banks charge relatively higher than money transfer agents. It gets more expensive for you as the sender when you remit small amounts on a regular basis. So, it is always wise to compare such remit rates to strike the right balance between what is best for you as sender and what you require.

  1. Exchange rates

While it is a whole lot easier to let the remittance service providers do the currency conversions on your behalf, it is best for you to have basic knowledge and understanding of how forex rates work. You will be in a better position to compare foreign exchange (FX) rates where two different currencies are involved. With this you are targeting the best rates on your transfers that will save you large amounts of money that you stand to lose to banks and online remittance companies.

Foreign exchange rates are determined in the foreign exchange market as real time forex rates. Where the benefit of having this knowledge comes in handy is when you know that remittance service providers add on profit margins to the forex rates. This means that you will send more money when you can send less by failing to do your proper background research on exchange rates.

At the end of the day, you save more money through remittance when you use service providers that convert your money using real time FX rates or with smaller profit margins.

  1. Mode of payment

The various products that money transfer services offer include cash pickups, bank deposits, mobile money and bill payments that serve convenience and speed to the users. The mode of payment you choose to remit via will be dependent on:

  • Location of the recipient

Before sending money to another country, you need to consider the geographical location of the recipient.  Remitting to remote areas where the remitting company has not set base may be cumbersome to the receiver. Cash pick up method is suitable for people who cannot access internet connection therefore choose to pop into the nearest money remittance branch to pick up cash.

  • Availability of the recipient

It is always important to find out how available the recipient is to determine what method of money transfer you will use. For cash pick up method the receiver needs to have access to the money transfer company. If this is not the case the option of mobile wallet transfer or bank deposit is the swiftest and more convenient option.

  • Amount of money transacted.

Regulations have been put in place to control how much money you can transact in a day. Taking M-PESA as an example, the following are the transaction limits on the recipient:

  • An M-PESA recipient will receive up to a maximum of KES 150,000 per transaction.
  • An M-PESA recipient will receive up to a maximum of KES 300,000 daily.
  • An M-PESA recipient will receive up to a maximum of KES 1.5 Million monthly.
  • An M-PESA recipient will receive up to a maximum of KES 18 Million KES yearly

In Kenya, the Central Bank of Kenya has set transactional limits that every bank in Kenya must abide by. The limit per day is 1 million shillings so both the sender and recipient need to do their calculations and plan their remittance accordingly.

  • Urgency of the money transfer

All the above methods of money transfer are designed to be swift and instant. Unlike mobile money which immediately avails the money at your disposal for use, bank deposits require more processes that include withdrawing cash from an ATM or transferring the cash from bank to your mobile wallet. In this situation the recipient has no choice but to wait a while longer to access the money for use.

So, for the best remitting experience and results that will not cost you time and money, you need to analyze your situation and determine what works best for both the sender and the recipient.