Even before the internet existed there were companies other then banks who offered customers a fast, reliable and convenient way to send money to others – usually to family back at the home country of origin.
These companies are called remittance companies.
Western Union is the most famous for this, but there are many others. Traditionally these services had physical locations at both ends, but the internet has meant that payments at both ends can be made online or in person and some even offer to pick up your cash.
For sending a few hundred dollars back home these services can often be the best option – but if you want to send more than a few hundred dollars and your recipient has their own bank account, using a money transfer company will be cheaper.
Typically a remittance company charges between 6% and 9%, while a money transfer company charges around 1.5% and even less depending on the amount you send (this includes fees and exchange rates).
This extra cost is what you pay for the convenience and if you can do all your business online (you and the recipient have a bank account) a money transfer company is a much cheaper option.
As mentioned, some of these services offer several benefits such as cash pickup or even home delivery which can be a huge benefit to some people.
How to Send Money Overseas using a Remittance Company
Western Union is not a new company, it started back in 1851, when it offered telegraph service in the United States. However, in recent years, Western Union has emerged as a leading financial services company that includes instant money transfer and physical locations everywhere on almost any country in the world.
MoneyGram works similar to Western Union. Once the sender initiates the international money transfer, either from a MoneyGram outlet or online, they receive a “Reference Number,” similar to the Western Union. The sender needs to share this reference number with the recipient. Once the receiver has the reference number, they can walk into any MoneyGram location and get paid by presenting their identification document and the reference number. Fees for sending international payments with MoneyGram are relatively high compared to Western Union.
Founded in 2001, Xoom is a relatively new company that offers international money transfer service in 31 countries around the world. Unlike Western Union and MoneyGram, senders cannot go to a physical outlet of Xoom to initiate the international money transfer. Xoom only offers its services through its online portal, www.xoom.com.
However, the recipient has the option to pick the cash in their local cash pickup locations. Xoom also offers an international money transfer service where the fund can be deposited to receiver’s bank account, or the sender can choose to deliver the cash safely at receiver’s home or office.
Xoom charges the sender based on the chosen payment option.
Formally known as MoneyBookers, Skrill has emerged as a big player in international money transfer. Skrill offers Prepaid Mastercard to its European customers and has a range of local bank deposit options that costs significantly less than international wire fees charged by banks. Sending money with Skrill is fee free usually but of course they do make money on the exchange rate they offer to you. Receivers also have to pay a small fee to withdraw payments directly to their local bank account. This cost is relatively low at US$4.99 per transaction.
While using remittance companies can offer faster transaction times and competitive fee structures compared to traditional banks, these companies often have sending limits due to anti money laundering regulations.
However, sending large sums can turn out to be expensive due to the percentage based fee structure of these companies.
Anyone who is wanting to send money overseas from bank to bank account we highly recommend looking into money transfer companies as a much cheaper option.