Remittances explained: How money transfers are changing

The definition of the word “remittance” is any payment of money between people or businesses, but in the broad economic and global context, it’s used to describe money sent by individuals working in a foreign country back to their family members in their home country.

The process relies on a complex, highly regulated global infrastructure. Every transaction should be secure, transparent and compliant with international laws designed to prevent money laundering and fraud. Modern technology continues to make these transfers faster, safer and more accessible, helping people stay connected across vast distances.

Remittances support households and drive economic development in receiving countries. Because family members spend this money in local markets — buying groceries, paying bills and purchasing supplies — the original remittance multiplies its economic impact.

This dynamic movement of money is exactly why global organizations like the World Bank closely monitor international remittance flows, and why the United Nations recognizes the International Day of Family Remittances on June 16. When people can send money safely and affordably, entire regions can prosper.

For many emerging markets, remittances received from people working abroad make up a substantial percentage of their GDP. In some countries, these remittances exceed the total amount of foreign direct investment and international development aid combined. In Nicaragua, Honduras and Tajikistan, for example, remittances made up about a quarter of their respective GDP in 2024, according to the World Bank.

Beyond providing for basic needs, this money can act as a catalyst for future prosperity. When parents use the money to pay school fees, they give their children access to better education. When families invest in health care, they improve their overall well-being and support the local health care industry. The money can serve as seed capital to start a small business, which in turn creates local jobs and stimulates a community’s economy.

A remittance transfer moves funds from sender to recipient through a series of coordinated steps involving financial institutions, payment networks and compliance checks. The process begins when a sender initiates a transfer through a bank, money transfer service or digital platform, providing recipient details and the amount to send.

The provider verifies the sender’s identity, performs the required compliance checks and converts the funds into the destination currency if needed. The payment is then routed through a combination of banking and payment network infrastructure, depending on the transfer method and destination. Finally, funds are delivered to the recipient through a range of payout options, including bank deposit, mobile wallet, cash pickup or payment cards.

The average global cost to send a remittance internationally was approximately 6% of the transfer amount in 2025, though that number has been slowly dropping and digital channels consistently deliver lower fees than traditional cash-based services. Lowering the cost of remittances is a goal of the United Nations and the G20, with a target of 3% global average to be reached by 2030.

High transfer fees and poor exchange rates can eat into the hard-earned money people send home. By streamlining the underlying technology and creating new cross-border payment networks, the financial industry is driving down these costs.

Traditional remittance corridors relied on correspondent banking networks with multiple intermediaries, each adding time and fees. Family members awaiting remittances used to have to travel to a bank branch or money transfer counter, wait in line and hope the funds had arrived. If they were delayed for any reason, that often meant a return trip — or two or three. And the lack of transparent pricing and exchange rates meant they had no way of knowing how much money they’d walk away with.

Digital infrastructure is transforming how remittances move globally, reducing costs, accelerating settlement and expanding access.

Real-time and near-real-time payment networks now operate in dozens of countries, enabling faster settlement for both domestic and cross-border flows. Card networks provide global reach and instant crediting to recipient cards. Mobile wallets and digital platforms expand payout options beyond traditional bank accounts, particularly in regions with limited banking infrastructure, enabling recipients to receive funds directly to their phones.

Near real-time settlement, transparent foreign exchange pricing and more automation are streamlining these cross-border payments and helping cut down on costs. In addition to speed and convenience, the modernization of remittances is also strengthening trust. Capabilities such as account validation help ensure funds are directed to the right recipient, reducing errors and giving senders greater confidence. At the same time, advanced fraud detection, anti-money laundering controls and sanctions screening are becoming increasingly sophisticated, with data and automation identifying suspicious activity in real-time.  

Collaborations are what bring new payment capabilities into everyday use. By integrating Mastercard Move, a global network with 17 billion endpoints, reaching more than 95% of the world’s banked population, MoneyGram, for example, is enabling fast, secure near real-time cross-border transfers. 

Stablecoins represent an emerging alternative for businesses comfortable with newer technology. These solutions can settle cross-border payments in minutes rather than days, though regulatory considerations and mainstream adoption remain factors to evaluate.