The Concepts of Payment and Remittance are both basically used in the financing System,they are both concepts centred on finance,but can be used in the financial System for the better explanation of different terms in finance.
WHAT IS PAYMENT?
A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods or services, provided by them or to fulfill a legal obligation. The party making the payment is commonly called the payer, while the payee is the party receiving the payment.
POSSIBLE WAYS IN WHICH PAYMENT CAN BE MADE:
1.MONEY,
2.CHEQUES
3.DEBIT
4.CREDIT
5.TRANSFER OF VALUES(Barter system)
6.BANK TRANSFERS
For instance Bank Transfers, whether through mobile payment or otherwise,As has been the order of the day in Nigeria,ever since the Naira notes limited supply in the country.
Many Nigerians have resulted to making bank transfers for the payment of the smallest and even cheapest commodities in the market such as Biscuits,water, pepper etc.
WHAT IS REMITTANCE?
since the late 1990s, remittances have exceeded development aid and in some cases make up a significant portion of a country's gross domestic product (GDP).
According to the World Bank's Migration and Development Brief, $508 billion in remittances were sent to low- and middle-income countries in 2020. This was followed by $605 billion in 2021. In 2019, they reached a then, all-time high of $548 billion but declined thereafter due to the Covid pandemic.
Remittance therefore is money that is sent from one party to another. Broadly speaking, any payment of an invoice or a bill can be called a remittance. However, the term is most often used nowadays to describe a sum of money sent by someone working abroad to their family back home.
UNDERSTANDING REMITTANCE
1.Remittances can be money sent as payment for a bill. However, most remittances involve sending money to relatives. They are often sent by foreign workers to family members in their home countries.
2.The most common way of making a remittance is by using an electronic payment system through a bank or an electronic money transfer service such as Western Union. People who use these options are generally charged a fee. Transfers can take as little as ten minutes to reach the recipient.
3.Remittances play an increasingly large role in the economies of small and developing countries. They also play an important role in disaster relief, often exceeding official development assistance (ODA). They help raise the standard of living for people in low-income nations and help combat global poverty.
HOW DOES A PAYMENT REMITTANCE TRANSACTION WORK?
There are different ways a remittance payment can work. Circumstances for choosing a payment path include bank account access, payment preferences, desire for quick transaction, or the cost of the transaction. No matter the method, transactions take a basic route to complete the payment cycle.
When executing a remittance, funds of the remittance amount must be present in the sender’s bank account. After the transaction has been issued, the funds will be transmitted to the recipient’s bank for processing. Once the money is at the bank, a foreign exchange rate and banking fee are applied. The funds are now available as local currency, minus the fees, for the recipient to access.
CAN REMITTANCES BE TAXED?
Yes, though different countries have different rules. This is especially true for businesses remitting payment, though individuals are subject to taxation as well, cited as a “non-business tax remittance” according to the OECD. Since the remittance is a form of income, whether compensation or a gift, it must be noted on federal tax returns. The percentage and stipulations will vary between nations, so whether you’re transferring money or accepting the transaction, both parties are responsible for documenting the exchange. It’s important to keep up with current tax laws for countries involved in potential remittance in order to file properly.
HOW TO REMIT PAYMENT AND SEND MONEY ABROAD
Most remittance transactions are sent by wire transfer, however, electronic transfer is common as well. There are many options for wire transfers, though popular choices are Western Union and Society for Worldwide International Financial Telecommunication (SWIFT). Remittance senders must ensure their bank works with the same transfer companies as the recipient’s bank. On occasion, the recipient’s bank cannot directly receive a transfer. In this case, an intermediary bank will accept the incoming funds, and then deliver them to the recipient’s bank, and, of course, change a fee for their service. Because of this process, wire transfers tend to take up to 5 business days to process.
An alternative to the wire transfer is an electronic funds transfer (EFT). This is a much more efficient process, often completed in just one business day. EFTs are done through phone and tablet apps and internet sites through a computer network, eliminating the paperwork that a wire transfer or other payment methods may require.
Money transfer services may have lower rates and faster transfer times, depending on the service you choose and the countries involved in the transaction. This is an option best used for a person you know, according to the U.S. Federal Trade Commission, as scam artists commonly use this system.
REASONS YOU MIGHT SEND MONEY OVERSEAS:
There are many reasons a person or business may want to remit money overseas.
A common need is to financially support family in one’s home country. In this global economy, individuals will work abroad for better work opportunities in order to provide for their family. Money is transmitted to loved ones through remittance payments. Fees can be quite high for these transactions.
Other reasons include hiring a contractor abroad. Because business today is often internationally focused, many companies will hire a professional in a foreign country to assist on a temporary or project basis, and the best way to compensate the contractor is through a remittance payment. This case typically involves a company issuing remittance to a person.
It can come to pass that an individual will want to pay an organization through international remittance. This scenario typically comes in the form of a charitable donation or gift for a purpose, like a disaster fund. In many cases, remittance payments are made to developing countries in the form of financial aid.
WHICH PAYMENT METHODS CAN I USE FOR MAKING A REMITTANCE?
There are several ways to send a remittance payment. The most popular method is through a traditional bank transfer. This simple process requires two bank accounts. The transfer may necessitate a third party or partner bank, in which case an additional fee will be applied to compensate their involvement. Bank remittance typically comes in the form of ACH payments and wire transfers.
Checks and money orders are a common method of remittance. The process is slow and involves many steps for banks to complete. Currency exchange rates and fees will apply with this type of transaction. However, this is likely the cheapest money transfer, outside direct cash remittance.
As mentioned above, money transfer services are a great way to electronically pay for a remittance. Funds are exchanged through linking accounts, which includes options for credit card or debit card payments. Credit cards are an expensive but reliable remittance method. It is possible to go to the service provider in person with cash or a card, if desired. This is a good method for those without bank accounts.
Other options include blockchain and remittance apps. Paying through an app is convenient and likely the way of the future. Security is an issue for electronic exchanges, however, the processing is instant and can be confirmed through text message and other immediate confirmation methods.
CONCLUSION
The Concepts of Payment and Remittance are the same,just that the latter( Remittance) can be a payment sent in response to receiving a bill, it's a term that's also used to describe funds sent internationally.
