How Does Remittance Even Work?

Sending money home from Thailand doesn’t sound like it should be a particularly complicated process, right? You have money here, you want it to be somewhere else - how difficult can that be? You’ve sent packages and postcards home so sending money must be a breeze in this Digital Age we live in. Well, if you’re reading this, you’ve probably already discovered that it really isn’t that easy.

Fortunately, there’s remittance. It is without a doubt the simplest, fastest and cheapest way to get around the huge amount of suspicion that banks and governments have when it comes to people moving money around the globe. How it works is frankly kind of bizarre, but the important part is that it does work.

What is remittance?

Be honest - before you started investigating how to send money home from Thailand, you hadn’t even heard the word ‘remittance’, am I right? And yet, it’s a word that has been in surprisingly frequent use since the mid-1700s. The word literally means “to send money”, though it’s a somewhat old-fashioned way of saying it. It has a couple of other definitions - the act of putting off repayments and a task officially assigned to a specific person or organisation - but it’s the act of sending money that we’re interested in.

However archaic the word for it is, remittance was used for sending US$689 billion from one country to another in 2018 (according to the World Bank) and the amount continues to steadily increase each year. It’s worth noting that the word ‘remittance’ can be applied to any process of sending money overseas. This can include anything from bank transfers to stuffing cash in an envelope and sticking a stamp on it. However, the term is increasingly being applied specifically to remittance services like Western Union, TransferWise and DeeMoney.

Remittance services - or Money Transfer Organisations (MTOs), to give them their official title - have some significant advantages over the alternatives. They are safer than sending the money by post, cheaper (and more practical) than taking the cash home in person and quicker than using the old SWIFT system.

What is SWIFT?

SWIFT is the Society for Worldwide Interbank Financial Telecommunication, which was formed in 1973 to handle the need to send money directly from a bank in one country to one overseas - for example, expats sending money from Thailand to their bank in the UK, US, Australia, India and elsewhere. The problem is that the system hasn’t really changed that much since the ‘70s and it certainly hasn’t become any quicker or easier.

Despite its name, SWIFT is anything but swift. In fact, a typical transfer can take up to three days under the best circumstances and over a week in the worst. And that’s not even factoring the time it takes to fill in the forms just to start the transfer in the first place. The paperwork involved is about as complicated as it can get because you’re not only going through your bank’s own procedures, but also the banking regulations of your country of residence and those of the place you’re sending the money to.

The reason SWIFT takes longer to send your money home from Thailand than it would take you to fly there is simple: banks don’t trust each other. They worry that the bank your money is going to might miss some important information in the transfer or that they will not use enough security to protect the money and information being sent. A certain amount of paranoia is understandable when you’re dealing with trillions of dollars and the financial security of millions of people, but that’s not a great comfort when you’ve got a bill that needs to be paid back home and you have to wait a week for the money to get there.

It would be more of a comfort if the system was at least infallibly secure, but it can’t even claim that. In 2016, hackers broke into the SWIFT system and flooded the Federal Bank of New York with wire transfer requests from the Bangladesh Bank. Most were blocked, but enough made it through to cost the bank US$101 million. Less than a fifth of the money has since been recovered.

It’s also worth noting that this system isn’t even guaranteed to work. Plenty of banks just refuse to process international transfers because of the procedural and legal hurdles involved. This is particularly true in Thailand, where the banking regulations are especially restrictive when it comes to money leaving the country.

Fortunately, there is the aforementioned alternative which, while a little complex in theory, is significant simpler in practise.

How does a pre-fund/matching process work?

Remittance services like Western Union, TransferWise and DeeMoney use a system of pre-funding and matching to move money across the globe. They dodge the complexity of sending money overseas by simply not moving the money anywhere. Instead, you pay the MTO in one country and they pay you back from their accounts in the destination country. The value is moved instead of the money.

I did warn you that it’s a little complex.

Let’s start with some simple definitions. What is ‘pre-funding’? Well, it’s exactly what it sounds like: funding in advance. You give the MTO the money you want to send home from Thailand, with a certain degree of faith that they will honour their side of the deal and release the value of that money overseas - the “matching” part of the process. That money you have paid in advance goes into the MTO’s bank account in Thailand. As this is a purely domestic transfer, you can complete this part of the transaction using a simple cash deposit or an even simpler online transfer.

Back in your home country, the MTO will follow your instructions to return the value of the money you sent home from Thailand to you, minus a small service fee. Depending on the MTO or the service you requested, this could be issuing the funds to a named individual in cash or transferring it directly into your own bank account. Once again, the process is entirely domestic - a simple transfer from the MTO’s account in that country to your account in that country. This means that the banks don’t have to deal with overseas institutions or international banking regulations, so they don’t have to use the SWIFT system. The whole process can be completed instantaneously, not over the course of a week.

In all likelihood, the money will eventually make the journey to the destination country via SWIFT in order to maintain the supply of funds in the MTO’s matching accounts there. However, that transfer can be completed at the company’s leisure, perhaps waiting for a number of transactions to be completed so they can transfer funds in bulk to save time, cost and complexity. You, meanwhile, have your money immediately, to use as you require. This is where the true meaning of the term ‘pre-funding’ comes in: the money is released long before it has actually been transferred, days before the transaction has actually been fully settled.

What makes DeeMoney so special?

Western Union is to remittance what Biro is to ballpoint pens and Google is to online searches - they are so synonymous that the brand name is practically the verb for the process. Between them and their competitor, MoneyGram, it’s possible to send cash from virtually anywhere in the world to virtually anywhere else in the world. You’ll even find Western Union offices in many tiny rural towns in Thailand.

These companies are fantastic at what they do - you don’t get that popular by being bad. However, what they do is a little limited. You will often need to send cash to a named individual, who will need to go into their local Western Union office to collect it. That’s great if you’ve got someone to send money to back home, but what if you need to deposit the funds into your own bank account? Unfortunately, this service is not always available from Western Union.

The added convenience of putting your money directly into your account is what has made TransferWise so successful. They’ve risen from being the new kids on the block to one of the biggest names in remittance in a handful of years, largely by being entirely online-based. Without offices to maintain and so many wages to pay, they can keep their costs down and keep their fees to a minimum. However, this added convenience comes at the cost of having to abide by local banking regulations. As has already been stated, Thailand’s regulations are unusually strict, to the extent that TransferWise are currently unable to send money out of Thailand.

That’s where DeeMoney comes in. We offer the same convenient service as TransferWise but, having started in Thailand and having dealt with the Thai banking code from the onset, we are able to transfer your money from Thailand directly into overseas bank accounts using the pre-funding/matching process.

This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from Google PlayStore or the Apple Appstore to get started.