Online Money Remittance: Is It Safe?

The classic definition of remittance is ‘a sum of money sent as payment or gift,’ though it is more commonly known as the sum of money that foreign workers or expats send back to their home countries. Remittances comprise an industry worth $600 billion worldwide and that’s growing steadily.

Remittances fuel the national economies of many developing nations. Remittance services create employment avenues for thousands and have a deep impact on the quality of lives of millions across the planet.

This remarkable growth in the magnitude of worldwide remittances is largely due to the use of digital methods for sending money across borders, otherwise known as online remittances.

A short history

The earliest recorded examples of remittances date back to the nineteenth century when European emigrants depended on in-person transfers of physical currency. It was a crude, inefficient and risk-prone mode of sending money. With advancements in banking, it became possible to use banks to send international remittances. The earliest remittance treaties were signed between nations in the late twentieth century.

However, the cost of remittances remained high for decades. The transactions also took a long time to come through. It was common for international checks to be credited into a recipient’s bank account only after several weeks. The introduction of credit cards in the 1920s and wire transfers about half a century later progressively simplified remittances. The popularity of the internet and the adoption of online banking practices by big banks eventually revolutionized the domain.

The current state

Nowadays the use of checks and other conventional means for sending remittances is nearly extinct. Electronic transfers through banks, and increasingly through a large number of small and specialized International Money Transfer (IMT) service providers, are prime examples of fast and convenient online remittances today. Some IMT services have become so efficient that they can transfer remittances almost instantly.

Safety and reliability

Online remittances are one of the safest and most transparent modes of sending money from the perspective of both sender and recipient. The transaction can easily be tracked at every stage. In the rare case of a failure the amount is automatically refunded. Small IMT service providers eliminate most middlemen, which ensures that there are fewer points of possible failure.

The primary security issue with some forms of remittances is their potential to be used to sponsor illegal activities such as trafficking and terrorism. This is not a concern when remittances are sent through formal channels which governments can track. The potential for problems arises when remittances are sent through informal means such as friends, family, and other non-banking channels that handle physical cash. Similar issues also exist with cryptocurrencies. However, financial institutions are working to resolve these.


Online remittances are among the most cost-effective methods of sending money internationally. The average cost of sending international remittances was nearly seven percent in 2017.

Although this statistic is less than the previous decade, it remains a concern for the people who use remittances the most – residents of mid and low income countries. A 7% transaction cost remains an issue for someone who wants to send money to India, Nepal, The Philippines or another developing nation.

There are ongoing efforts by governments to reduce the costs associated with remittances because they have taken note of the fact that remittances have a significant impact on national economies, and that the high cost of remittances remains a limitation. The first organized attempt to reduce the worldwide cost of remittances was the establishment of a Remittance Prices Worldwide Database by the World Bank in 2008. Reducing remittance costs was also on the agendas of the 2008 G8 summit and the 2011 G20 summit.

Many financial institutions such as Ria Money Transfer and governments recognize that simplifying the use of digital currencies and mobile banking can make remittances cheaper, while also making them more accessible to a wider range of people living in remote areas. With the issue being systematically addressed on an international stage, online remittances are sure to become much more cost effective, which will allow then to expand at higher rates of growth.

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