---
title: "Remittance"
url: "https://mahouse.world/glossary/remittance"
type: "glossary term"
topic: "Cross-border payments"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Remittance

A remittance is a cross-border transfer by a migrant worker to family in another country — small, regular, and in aggregate enormous: about $650 billion a year to low- and middle-income countries, more than foreign direct investment or aid. It moves through banks, money-transfer operators, fintechs and mobile-money networks; it costs an average of over 6%, which the G20 wants at 3%; and it is where AML rules meet the customers least able to bear their cost.

**Also known as:** Money transfer, International remittance, Migrant remittances

## Key facts

- **Used at:** the corridors from the US, the Gulf, Europe and Russia to India, Mexico, the Philippines, Egypt, Pakistan, Nigeria, Bangladesh and dozens more; the World Bank tracks flows and costs corridor by corridor
- **Binding:** money-transmitter and payment-institution licences in the sending country, often in each US state; AML and sanctions rules on both ends; the receiving country's rules on payout, FX and, sometimes, the exchange rate itself
- **Typical cost:** the World Bank's global average was about 6.4% for a $200 transfer in 2023 — banks the dearest (12%+), mobile money and fintechs the cheapest (3–4%); the cost is a fee plus an FX margin, and the margin is where most of it hides
- **Typical model:** the provider collects locally (cash, card, bank transfer, wallet), converts at its rate, and pays out locally (cash pickup, bank deposit, mobile wallet) from a pre-funded balance in the receiving country, so nothing crosses the border per transaction
- **Parties:** the sender, the recipient, the provider and its payout partners (banks, agents, wallets), the correspondent banks that keep the provider's accounts, and the regulators and screening systems on every corridor

## How a remittance works in practice

A nurse in London sends £200 to her mother in Manila. At a money-transfer app she pays by card; the app quotes a rate and a fee — say £2 and a rate 1.5% off the mid-market — and her mother's bank account, or her mobile wallet, is credited in pesos within minutes. The app did not send £200 across the border: it holds pesos in the Philippines from previous flows and its treasury rebalancing, and it paid out from that; the pound stays in London. Its cost was the card fee, the payout partner's fee, the screening, the treasury's FX at wholesale — and its revenue the £2 plus the 1.5% margin, about £5 in all.

The market's structure follows the corridors. Each is a licence in the sending country, a payout network in the receiving one, a treasury position between, and a compliance programme on both. Incumbents built agent networks for cash at both ends over decades; fintechs built apps that collect by card and pay out to bank accounts and wallets, cheaper because no agent takes a cut, and grew as recipients acquired bank accounts and phones. Mobile money — M-Pesa and its cousins — made the last mile a text message in East Africa and South Asia. The regulatory weight is the de-risking: correspondent banks that closed accounts of remittance providers after AML fines, which left whole corridors to informal channels.

For fintech M&A the corridor networks, the payout partnerships and the licences are the assets — Western Union's, MoneyGram's (taken private in 2023), and the fintechs' — and the compliance record is the diligence.

## Example

A remittance fintech runs 40 corridors from the UK and the EU with €4bn of annual volume at an average all-in cost to senders of 2.9% — €116m of revenue, of which €80m is FX margin and €36m fees. Its costs: €28m of payout-partner fees, €14m of collection costs, €18m of compliance (screening, onboarding, a team of 90), €9m of treasury and FX hedging, and €20m of marketing. Contribution €27m. A corridor to a high-risk jurisdiction produces a sanctions match the screening catches and reports; a correspondent bank asks questions and keeps the account; a competitor whose screening missed a similar match loses its euro clearing and its corridors within a month. A strategic buyer — a global operator wanting the fintech's app and its EU licence — pays €900m, and its diligence spends longer on the compliance files than on the app.

## Common mistakes

- Comparing providers on the fee and ignoring the FX margin, which is the larger cost.
- Building corridors on one correspondent bank's tolerance.
- Screening that catches the sender and not the recipient, or the name and not the transliteration.
- Treating remittances as a low-value, low-risk product; regulators treat the corridors as high-risk by default.
- Valuing a provider on volume without the corridor mix, the margins by corridor, and the licences each one needs.

## Related terms

- [Cross-Border Payments](https://mahouse.world/glossary/cross-border-payments.md)
- [FX Margin](https://mahouse.world/glossary/fx-margin.md)
- [Digital Wallet](https://mahouse.world/glossary/digital-wallet.md)
- [Sanctions Screening](https://mahouse.world/glossary/sanctions-screening.md)
- [Counter-Terrorism Financing](https://mahouse.world/glossary/counter-terrorism-financing.md)
- [Alternative Payment Method](https://mahouse.world/glossary/alternative-payment-method.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov