As the world becomes increasingly globalized, citizens from different countries regularly do business with each other. The act of moving money from the UK to an external source is known as money remittance. In standard terms, 'Money Remittance' simply means money that is moved from one party to another. Most commonly, this happens via electronic means with a bank transfer or through another financial system.
Considering the movement towards international business, coupled with the growing trend for home working that has allowed employees to go completely remote, money remittance is now an everyday fact of life. In fact, even back in 2020, the World Bank suggested that the total value of remittances bordered around 0.3% of the country's entire GDP.
While that may not seem like a huge portion, upwards of 20% of UK citizens that will send some form of money remittance payment at least once every month. While the UK has a lower portion people making money remittance transactions compared to the United States' 25% a month, this is still an impressive figure.
In this article, we'll be breaking down money remittance, exploring what it is, who does it, and how it works within the UK economy. Let's get right into it.
How often do UK citizens engage in money remittance?
A core part of money remittance is the quantity of money that's sent abroad. For one reason or another, over 12% of UK citizens regularly send money abroad. Breaking this down further, it comes to light that a large portion of users will send money regularly.
- Once a month - 20% of UK Citizens
- Once every 2-3 months - 21%
- Every 4-6 months - 18%
- Once every 7-12 months - 12%
As you can see, the vast majority will engage in money remittance at least once a year, which makes this an important aspect of financial movements to understand.
How much do UK citizens normally send abroad?
While the distribution of payments varies incredibly, one thing that is more uniform is the amount of money that UK citizens tend to send abroad. The majority of them (54% of those who send money abroad) will transfer less than £500. Of this 54%, only 28% will send between £100-£499.99, which means that the vast majority of them will be sending a payment of under £100. This points to the purpose of the transfer, which we'll discuss shortly.
Only 18% of UK citizens will send over £1,000 internationally, with a lower percentage of 15% falling in the middle category of £500-£999.99. With amounts moving to the lower end of the spectrum, money remittance appears to be less about business transactions and more about the personal movement of cash.
This considered, let's dive into the statistics about why people are sending money abroad.
Why are UK citizens engaging in money remittance?
When asked why people are sending money abroad, many people instantly think of business transactions, paying international freelancers, or sending transfers to team members that are located in remote places. However, this is actually far from the truth. Typically, the overwhelming reason that UK citizens send money abroad is to send money to family members living in a different country.
Roughly 43% of all money remittance payments are for this reason. The most common locations money is sent to are India (14.7%), Nigeria (15.4%), and France (6.7%).
Apart from sending money to family members, other commonly cited reasons for sending money abroad are to save money (18%), to pay other bills (17%), to take advantage of foreign exchange rates (14%), and to take advantage of better interest rates (10%).
How do UK citizens send money abroad?
When it comes to international money transfers, there is a range of different methods that UK citizens will use. Due to the demand for this service, new platforms have sprung up to facilitate international money movements.
The simplest method of conducting an international transfer is through a bank-to-bank transfer. By giving the sender the recipient's international bank account number (IBAN), their name, address, and any other details the bank requires, they're then able to initiate a transfer directly through their bank systems.
Alternatively, popular services like PayPal have become well established in the industry. PayPal is used by 39% of UK citizens that make international transfers, often being cited as one of the easiest methods of transferring money. As you only need an email address to get started with PayPal, this is a great method of transferring money around the world.
However, PayPal has recently come under fire for the poor exchange rates it offers in addition to the sizeable cut it takes on international payments. For these reasons, users are likely to be better off using their bank account or seeking a more effective solution when sending large amounts of money abroad.
Businesses have started using solutions like Wise (previously known as TransferWise), which provides much more flexible rates for money remittance payments. However, unlike PayPal, users must sign up with their business details, so this isn't an option for that large percentage of UK citizens who are making personal international payments.
Money remittance is a central part of our modern world. Whether it's a business with an international list of workers that need to be paid from the UK or an individual that's sending money to their family members located in a different country, money remittance is now incredibly common.
With the rising need for an international system of exchanging money, services like Wise and PayPal have become incredibly popular. By facilitating the movement of money, users are able to use these services to rapidly transfer money around the world.
Copyright 2022. Featured post made possible by Yotam Dar.