Confused about payment vs. remittance? You're not alone! Discover their differences and how to use them with the Bitnob App
Money has always been designed to move and the means of its exchange has been given different names over the years. From days of barter to the present day of electronic means. Also, in the world of financial transactions, different words have different meanings. An example of such is what we’re about to dive into.
Have you ever used the words ‘payment’ and ‘remittance’ interchangeably, or have you wondered if they have the same meaning? Payment and Remittance are related concepts but with distinct differences. The core function of payment is settling a debt or acquiring something in exchange for money while remittance focuses on the transfer itself, and this might be international or non-commercial.
Although payment and remittance are both terms for transferring money, there's a subtle difference in how they're used. So, in this article, we’ll dive deeper into the difference between payment and remittance and specific situations where you should use both.
What is Remittance?
The word ‘remittance’ is originally taken from the word ‘remit’ which means - to send back. According to many other meanings, the remit is to send money in payment of a demand, account, or draft, so in essence, any payment of an invoice or a bill can be called a remittance. Remittance is a sum of money transferred from one party to another, typically abroad.
Remittance specifically refers to transferring money, often internationally. The most common use case you mentioned is workers' remittances, where someone working abroad sends money back to their family in their home country. These transfers can be a significant source of income for developing nations.
Remittances can also mean non-commercial transactions like gifts, alimony, or tax payments, but the international transfer aspect is what truly sets it apart from a general payment.
Examples of Remittances
Sending regular money for family support: This is the classic example of a worker's remittance, where someone working abroad sends money back home to help their family with living expenses like rent.
Paying bills or invoices at home: If you're abroad and paying bills back home (via checks or other methods), that's a remittance since it's an international transfer of funds.
Transferring emergency money: Sending money on a prepaid card for emergencies abroad falls under remittances because it's a cross-border transfer.
Paying service providers for your family abroad: If you're overseas and covering bills for service providers in another country for your family, that's an international money transfer and qualifies as a remittance.
Sending a one-off gift abroad: While not as typical, even sending a one-off gift (like a wedding present) internationally can be considered a remittance, especially if using money transfer services.
International students using money transfer services: Students studying abroad who rely on money transfer services to receive funds from their home country or send money back are part of the remittance picture.
What is Payment?
Payment is a broad term for any exchange of money for goods, services, or debts. You make a payment when you settle a bill, buy something at a store, or tip a waiter. It's the most general term.
Payments are not limited to personal transfers but can involve businesses, governments, and other entities making or receiving payments for goods, services, or other obligations. Payments can be made through different channels such as cash, checks, bank transfers, credit/debit cards, mobile payments, and online payment platforms.
Difference Between Payment and Remittance
| Medium | Remittance | Payment |
Meaning | It refers to transferring money, often internationally. | The exchange of money for goods, services, or debts. |
Channels | Using banks, money transfer operators, payment services institutions, and mobile money platforms | Cash, debit, cheques, and electronic transfers |
Transfer Speed | Instant payment method with expedited money transfer | Also instant but it depends on the chosen channel |
Transaction Fees | Usually, lower fees compared to bank transfers. Fixed fees depending on the booking region. | Subject to fees and exchange rates. Also, it may be influenced by the amount being transferred |
Bitnob: Your All in One
Having established that payment is more like a large circle which means all financial exchanges while remittance is a smaller circle within the bigger one representing a specific type of payment (international transfers).
Bitnob lets you send money directly to bank accounts and mobile money wallets in 8 African countries. This aligns with how remittances often work, sending money to support people in another country while you can also do bank transfers and a virtual debit card for payment.
Transactions on Bitnob are known for their speed, meaning you receive funds quickly. Ready to give it a trial, and take your payment to the next level? Download Bitnob to get started.