From Family to Investment: The Motivations Behind International Money Transfers
In today's fast-paced and interconnected world, money plays an indispensable role in our daily lives, and as the borders between countries become increasingly blurred, the need for international money transfers has become more prevalent than ever before.
However, the question arises, what motivates people to transfer money internationally? Is it for personal or professional reasons, or are there other factors at play?
In this blog, we will delve into the various motivations that drive people to make international money transfers and explore the impact of these transfers on individuals and societies.
By understanding the reasons behind international money transfers, we can gain insights into the economic, social, and cultural factors that shape our globalised world.
The Most Popular Purposes of International Money Transfers
One of the primary reasons for initiating an international money transfer is to support family members who live overseas.
For example, to help them cover basic living expenses, pay for education or medical bills, contribute to special events like weddings or graduations, or simply provide financial assistance during challenging times.
With the advent of globalisation and the ease of international travel, more and more people are finding themselves with family members living in different parts of the world. International money transfers have become a lifeline for families who rely on remittances as a primary source of income.
For instance, migrant workers who are employed in developed countries often send money back to their home countries to support their families, who depend on their earnings to make ends meet.
According to the World Bank1, remittances to low- and middle-income countries amounted to $626 billion in 2022, highlighting the importance of international money transfers in supporting families and communities across the world.
Cross Border Shopping
With the rise of e-commerce, cross-border shopping has increased in popularity over the past few years.
While cross-border shopping provides many benefits, such as access to a wider range of products and competitive pricing, it also comes with its own set of challenges, including the need for international money transfers.
Cross-border shopping leads to international money transfers because purchases made in another country often require payment in a different currency.
For example, if a person living in Thailand wants to buy a product from a retailer in the UK, will need to convert their Thai baht into Pound sterling, which requires an international money transfer service.
Cross-border shopping can lead to international money transfers due to transaction fees, which is another factor to consider.
When making a purchase in a foreign country, there may be additional fees associated with currency conversion or international transactions. In some cases, these fees can be significant, especially for larger purchases.
To avoid these fees, individuals may choose to use an international money transfer service to make their payments directly in foreign currency.
Education has become more accessible worldwide, and more and more people are seeking educational opportunities outside their home countries.
The financial burden of these educational pursuits often requires significant sums of money, which leads to international money transfers.
The cost of education in many countries, particularly in developed nations, can be quite high. For instance, the cost of tuition in the UK can add up to 1.5 million baht per year. In such cases, families often rely on international money transfers to cover the costs of their children's education.
Another reason for international money transfers related to education is that students often need to cover living expenses while they study abroad. This can include rent, food, transportation, and other daily expenses. These costs can be especially high in cities with a high cost of living, such as London, Paris, or New York.
Many students also need to pay for language courses or tutoring before starting their studies. And even after graduating, students may need to repay student loans, which can require international money transfers to pay off.
There are other costs associated with studying abroad, such as travel, visa fees, and insurance. These costs can quickly add up and often require international money transfers.
In today's global economy, businesses need to conduct transactions with partners, suppliers, and customers from around the world. This requires the transfer of money across borders, which can be a complicated process.
For example, if a manufacturer in Thailand wants to purchase raw materials from a supplier in China, they need to pay in Chinese yuan. International money transfer service providers facilitate this transaction, allowing the Thai manufacturer to send money in Thai baht, which is then converted to yuan by the receiving bank.
To put it simply, this allows businesses to operate globally and access goods and services that they may not be able to obtain locally.
Some businesses need to pay employees and contractors located in other countries. As more companies are embracing remote work, they are also employing talent from all over the world.
When an employer in Thailand hires a freelancer from Singapore, for example, they need to pay them in Singapore dollars. International money transfers make this possible, allowing employers to pay their employees in their local currency, regardless of where they are located.
Another reason why business drives international money transfers is that it allows companies to expand globally. When businesses operate in multiple countries, they need to manage their finances across borders.
They may need to move money between different accounts in different countries, pay taxes in multiple jurisdictions, and comply with local regulations. International money transfers are essential for companies that operate globally, as they allow them to manage their finances efficiently and effectively.
Investment is a crucial aspect of modern-day finance. People invest their money in various instruments, such as stocks, bonds, mutual funds, and real estate, among others, to grow their wealth.
In recent times, the investment landscape has evolved significantly, and individuals and businesses can now invest in assets beyond their borders. International investments have become increasingly popular as people seek to diversify their portfolios and take advantage of global opportunities. This has led to a rise in international money transfers.
People who invest in assets outside their home country often need to transfer money to buy or sell those assets.
For example, a Thai investor looking to invest in stocks listed on the Tokyo Stock Exchange would need to convert his Thai baht into Japanese yen to buy those stocks. Similarly, an Indian investor looking to invest in a property in London would need to transfer money from their Indian bank account to a UK-based account.
International money transfers are not limited to individuals. Companies also transfer money across borders for various investment purposes.
For instance, a multinational corporation may invest in a subsidiary in another country or acquire a foreign company. These transactions often involve large sums of money and require secure and reliable international money transfer services.
However, investing in foreign assets comes with risks, including currency fluctuations, political instability, and economic volatility. Exchange rates can fluctuate rapidly, making it difficult to predict returns accurately.
Furthermore, regulations and taxes vary across countries, which can affect investment returns and cash flow. As a result, investors need to carefully consider the risks and benefits of investing in foreign assets and make informed decisions.
Wrap It Up
In conclusion, international money transfer has become a common practice due to various reasons such as family support, cross-border shopping, educational pursuits, business ventures, and investment opportunities.
The need for financial assistance in these areas has led to an increase in the number of international money transfers made by individuals and businesses alike. With the advancement of technology and the availability of online money transfer services, it has become easier and more convenient for people to transfer money across borders.
As the world becomes closer, the demand for international money transfer services is likely to continue to grow, facilitating greater financial inclusion and economic development around the globe.
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