Remittance payments 101: How to Receive Funds Across Borders

Remittance payments are a huge part of the global economy. India alone received $135.4 billion in FY2024–25, the highest ever recorded for any country in a single year, and $137 billion in calendar year 2024 according to the UN World Economic Situation report.

India is the world’s single largest recipient of remittances, a position it has held for years. Globally, over 77 countries rely on remittances for around 3% of their GDP, making them a key force in driving corporate growth and supporting families worldwide.

What’s changed is where these flows come from. More than half of India’s inward remittances now arrive from advanced economies, the US accounts for 27.7% and the UAE for 19.2% (RBI Remittances Survey 2025).

A growing share of these remittances represents IT services exports, SaaS revenue, consulting fees, and freelance income from professionals working in the US, UK, and Singapore.

But the problem is there are multiple factors that throw a wrench in this drive towards growth like complex regulations, logistical barriers, and unpredictable currency fluctuations.

The solution? Modern remittance service platforms that enable a fast, secure transfer of funds.

In this article, we’ll discuss what remittance payments are, how they work, and how to manage them effectively while staying compliant.

• Remittance is money sent across borders from one party to another. Most often sent by migrant workers supporting their families back home, but increasingly includes business service payments, SaaS revenue, and export income. These payments reduce poverty and strengthen economies worldwide.
• The cross-border remittance process includes initiation, currency exchange, transfer, and settlement to recipients — through banks, wire transfers, money transfer apps, or digital platforms.
• The global average remittance cost is 6.49% of the amount sent (World Bank Remittance Prices Worldwide, Q1 2025), more than double the UN SDG target of 3% by 2030. Banks are the most expensive at 14.55% on average; digital platforms typically charge 1–3% all-in. Good remittance management means choosing low-cost, compliant channels and keeping accurate records.
• In India, every inward remittance for business income requires a Foreign Inward Remittance Certificate (FIRC) or e-FIRA as proof of foreign receipt. It’s quite important for GST refunds, export incentives, and income tax compliance under FEMA.

Remittance payments refer to international money transfers between individuals or organizations. They are mostly sent by immigrant workers to their families back in their home country. 

These transfers are either personal or business transfers, and they are crucial in sustaining households and strengthening economies in developing countries.

There are several reasons why remittance payments matter:

1. Global impact: Global remittance flows to low- and middle-income countries have hit around $669 billion in 2023. And that’s growing nearly 3.8% year-on-year (World Bank). India’s share alone crossed $137 billion in 2024, the highest ever recorded for any single country.
2. Poverty reduction: The funds received through remittances can be utilized by families for fulfilling their essential needs like food, housing, healthcare, and education. This way, remittances help in reducing poverty and creating opportunities within the host communities.
3. Corporate relevance: Corporations also transfer trillions of dollars annually through remittance channels but quite often have to face high transaction costs and complex compliance requirements.
4. Export income for Indian service providers: India’s remittance story has shifted a lot now. A big chunk of inbound flows now comes from IT services exports, SaaS subscriptions, consulting fees, and freelance income earned from clients in the US, UK, and Singapore. When earlier, it used to be just Gulf-based worker remittances.

India is the undisputed global leader when it comes to receiving remittances.

Key data points (2024–25)

• India received $135.4 billion in FY2024–25 (India’s Economic Survey 2025–26) — the highest ever recorded
• In calendar year 2024, India received $137 billion (UN World Economic Situation report, November 2025)
• India’s inward remittances have grown over 6,400% since 1991 (from $2.1 billion to $137 billion)
• India was the first country ever to cross $100 billion in annual remittance inflows
• Over half of India’s remittances now come from advanced economies — the US (27.7%) and UK/Singapore/Canada/Australia — per the RBI Remittances Survey 2025

What this means for Indian exporters

This shift, from Gulf worker remittances to income coming from advanced economies, basically reflects a bigger trend: more high-skilled Indian professionals in fields like IT, finance, engineering, and healthcare are now working in places like the US, UK, and Singapore.

In fact, a growing share of what we call “remittances” today isn’t traditional money sent home. It’s actually professional income like service payments, SaaS revenue, consulting fees, and export earnings. These are exactly the kinds of transactions Xflow is built to handle.

At the same time, remittances make up around 3.3% of India’s GDP. So yes, they’re significant. But they’re not something the economy depends on for survival. India receives these flows from a position of strength, unlike smaller economies where remittances are a lifeline.

The processing of cross-border remittance payments involves a series of steps - starting from initiation, transfer, and then settlement through various channels. 

Let’s see how this process works:

1.Initiation: The sender of remittance initiates the fund transfer through a bank, a money transfer service, or a digital payment platform like Xflow, Wise, or PayPal.. For payments to India specifically, the sender’s bank must also include an RBI Purpose Code. It’s a mandatory alphanumeric code that specifies the nature of the transaction (e.g., P0802 for software services). Missing or incorrect purpose codes can delay or block payments.

2.Transfer: The chosen service provider processes the transfer. The money can go through third-party banks or correspondent banking networks, which can increase the fee and may cause delays.

3.Currency exchange: The funds are converted into the receiver’s currency at the current foreign exchange rate.

4.Settlement: The recipient receives payment through bank deposit, cash, or mobile wallet.

5. FIRC / e-FIRA Issuance (India-specific): Once funds are credited to the Indian recipient’s account, the receiving RBI-authorised Authorised Dealer Category-I (AD Cat-I) bank generates a Foreign Inward Remittance Certificate (FIRC) or e-FIRA. It’s an official proof of the transaction. For Indian exporters and service providers, this document is necessary for GST refund claims, export incentive schemes, and income tax compliance under FEMA.

The payments can be transferred instantly through digital applications or take several days through traditional channels. The process also involves adherence to essential laws that one has to take care of, particularly in the case of growing organizations.

The key stakeholders in the remittance payments ecosystem play a vital role in ensuring remittance transfers remain safe, timely, and compliant. These include:

1.Remitters: People or companies who transfer funds overseas, usually consisting of migrant workers or small businesses across the globe. 

2.Beneficiaries: The recipients of the funds.

3.Banks: Offer accounts, clearing, and settlement services for international transactions. 

4. Authorised Dealer Category-I (AD Cat-I) banks (India-specific): For Indian inward remittances, AD Cat-I banks are a mandatory stakeholder. Under FEMA, only these RBI-authorised banks can receive foreign inward remittances in India and issue FIRC/FIRA documents.

5. Money transfer operators (MTOs): Non-banking institutions like Western Union, Wise, or Xflow that specialize in quick cross-border payments. 

6. Central banks & regulators: Oversee compliance, enforce KYC/AML rules, and maintain financial system integrity. In India, these regulations are governed under the Foreign Exchange Management Act (FEMA).

Cross-border money transfers can be classified into inbound remittances (receiving money from overseas) and outbound remittances (sending money overseas). 

Here are the key differences between inbound and outbound remittance:

Remittance channels refer to the payment methods or systems used in sending money across the border. Here are some examples:

1.Wire transfers: Direct bank-to-bank wire transfers are secure and fast, hence ideal for sending inter-border payments that have a high value.

2.International checks: Checks are not used a lot now for business remittances. Most countries have stopped accepting them or impose weeks-long clearing times. If you have to use it, it’s better to use them for payments that are not time-sensitive.

3.Forex brokers: Specialized companies offering currency exchange and transfers that are particularly useful for bulk or recurring payments, with cheaper rates and better fees than leading banks.

4.Money transfer apps: Cross-border payments are easily made via money transfer software like Xflow, Wise, or PayPal. They offer a convenient user experience and relatively lower transaction costs than other processes.

5.Cryptocurrency transfers: Digital currency transfers allow low-cost and high-velocity international payments across borders without going through the bank, but have varying levels of acceptance and regulation.

6.International money orders: Prepaid paper-based channels can be used for transfer of small amounts like sending gifts to relatives who may not have bank accounts or the facility to use digital payment methods.

7.Global payment networks: Internationally recognized networks like SWIFT enable secure, standardized bank-to-bank transactions. They are mostly used for institutional or business payments that need global reach, reliability, and regulatory compliance.

8.Open Banking / Account-to-Account (A2A) payments: Open banking APIs allow direct bank-to-bank transfers without card networks or SWIFT intermediaries, at a much lower price. Examples include the EU’s SEPA Instant, India’s UPI-PayNow international linkage (live for the India–Singapore corridor), and Brazil’s PIX. As these corridors expand, A2A is expected to become a primary channel for cross-border business payments.

While both remittance payments and international wire transfers involve moving money across borders, they do differ on several factors. 

Let’s look at this table to understand what those factors are. 

The following are some of the applications of international remittance payments across various industries:

1. Global procurement: Businesses rely on international payments to obtain goods and services from global suppliers.

2. Workforce compensation: Organizations pay their employees or contractors abroad, allowing them to hire worldwide and offering better remote-working opportunities.

3. Cross-border investments: Companies purchase physical properties or other businesses in different countries through global money transfers.

4. Financial obligations: Corporations pay dividends, interest, and overseas corporate travel expenses through international transactions.

5. Exporters and freelancers: Exporters receive shipment payments, and freelancers get paid by their international client through cross-border money transfers.

6. SaaS providers: Software service companies can accept international payments from their subscribers. This also gives them an opportunity to scale their business and diversify their revenue stream.

Receiving remittance payments can provide stakeholders with multiple benefits, including cash flow management, business scalability, financial stability, and maximized returns due to favorable forex rates. Let’s see how. 

1. Financial stability: Remittances are a stable source of income for the families of remitters, covering their essential needs and providing financial security.

2. FX gains: Favourable exchange rates may increase the value of foreign remittances, so businesses or recipients could make maximum returns.

3. Global expansion: International payment also allows local businesses to grow into international business establishments, as it opens doors to new market suppliers and customers.

4. Better cash flow: Households and businesses have better cash flow to make regular payments on bills, investments, and stabilize operations.

Despite multiple benefits, the full potential of cross-border payments can’t be realized because of high transaction fees, complex regulatory expectations, volatile currency exchange rates, and slow processing times. 

Here’s a detailed look at these challenges. 

1. High fees: Standard remittance payment channels usually charge high fees and include unseen expenses in the payment process, which leaves the receipt with a lesser amount.

2. Conversion delays: The processing time when exchanging currency slows the speed of overall transfers, particularly when transfers are conducted via numerous intermediary banks or clearing systems.

3. Regulatory barriers: Complying with laws related to AML and KYC norms can create complexities in the process, leading to further delays.

4. Currency fluctuations: Volatility in exchange rates can create uncertainty and sometimes reduce the actual amount beneficiaries receive due to unfavorable rates.

According to the World Bank Remittance Prices Worldwide database for Q1 2025, the global average cost of sending a remittance is 6.49% of the amount sent. That is almost double the UN SDG target of 3% by 2030.

Banks are the most expensive channel at an average of 14.55%, while international MTOs average 5.91%. Modern fintech platforms typically charge 1 to 3% all-in.

But the stated fee is rarely the full picture. Remittance costs tend to hide in three places:

• FX margin: The difference between the mid-market rate and the rate your provider actually offers you. FX margins account for roughly one-third of the cost of a $200 remittance globally.
• Correspondent bank lifting fees: When a payment routes through intermediary banks, as most SWIFT wires do, each bank along the chain may deduct a fee without the sender knowing. The recipient simply receives less than expected.
• Recipient-side fees: Some providers charge the recipient a collection fee on their end, reducing the amount that actually lands in their account.

Receiving remittances involves more than just collecting funds; it requires awareness of security issues, transaction cost, and compliance factors. 

Here are some best practices to stay safe and vigilant while receiving your remittance transfers:

1. Understand all fees: To avoid surprises, find out the full transaction cost, hidden charges, and intermediary fees.

2. Monitor exchange rates: Keep yourself updated on the latest exchange rates to minimize loss and maximize remittance value.

3. Ensure regulatory compliance: Follow local and international laws regularly to avoid penalties, sanctions, or administrative delays.

4. Keep detailed records: Maintain records of all transactions, including rates, amounts, and dates, in a detailed manner to ensure transparency. One may also receive payment remittance advice for reference.

5. Use secure channels: Rely only on trusted and secure payment channels to stay fraud-free and mitigate risks.

6. Obtain your e-FIRA promptly (India-specific): For every inward business remittance, download or request your e-FIRA the moment your funds are credited. Without it, GST refund claims, export incentive applications like EPCG and Advance License, DGFT filings, and income tax returns can get complicated quickly. If you use Xflow, your e-FIRA is generated automatically within 24 hours of each withdrawal.

7. Use the correct RBI Purpose Code (India-specific): Before the transfer is initiated, coordinate with your client and payment platform to make sure the right purpose code is applied. Getting this right upfront avoids delays in processing and keeps your compliance paperwork clean.

Integrating remittance workflows with your accounting and ERP systems helps you automate data flow, minimize manual errors, and improve visibility. It also allows significant cost savings, better control, and scalability for a growing business by eliminating the need to depend on third-party payment platforms.

Moreover, the real-time insights you gain through integration can help you with better decision-making and compliance, and even prevent fraud. With such integrations, any payments you receive gets instantly recorded in your workflow, which increases transparency and gives you the visibility for better financial management.

Remittance-facilitating institutions must meet strict regulatory guidelines. The key frameworks include:

1. AML/CFT norms: Anti-Money Laundering and Counter-Financing of Terrorism controls detect and prevent illicit financial activity.

2. KYC checks: Verifying customer identities reduces the risk of financial fraud.

3. Data privacy laws: Regulations like GDPR protect sensitive customer information from unauthorised access.

4. LRS (India): The Liberalised Remittance Scheme governs outward remittances from India, permitting residents to send up to USD 250,000 per year for permitted purposes.

5. US Remittance Transfer Rule: Requires remittance providers to disclose all fees, exchange rates, and the exact amount the recipient will receive before the transaction is finalised.

6. FEMA requirements for Indian inward remittances (India-specific):

• All inward remittances must be received through an RBI-authorised AD Category-I bank.
• A purpose code must be declared for every transaction.
• Records like FIRA, invoices, contracts, and bank advices must be retained for a minimum of 5 years under FEMA.
• Export payments must be realised and repatriated within 9 months from the date of export.
• Remittances from prohibited sources such as online gambling, lottery winnings, or illicit activities are blocked by banks and constitute a FEMA violation.

7. TCS on outward remittances (India-specific): Since the Finance Act 2023, Tax Collected at Source (TCS) at 20% applies on most outward remittances above Rs 10 lakh per year under LRS. Education and medical remittances attract lower rates. This applies to Indian residents sending money abroad for investments, travel, and other purposes. Funded startups and businesses repatriating funds should factor this into their planning.

The remittance industry is evolving rapidly. Key trends to watch:

• Instant payments: The G20 has set a target for 75% of cross-border remittance payments to credit within one hour by 2027. SWIFT GPI already enables 63% of cross-border payments to credit within 30 minutes, and the November 2025 SWIFT ISO 20022 migration is accelerating this further as it allows richer payment data that helps in avoiding delays.
• Decentralised settlement models: Blockchain and distributed ledger technology enable direct settlement between financial institutions without correspondent bank intermediaries, potentially eliminating a major source of delay and cost.
• Lower costs: Increased competition among fintech companies and regulatory reforms are pushing down transaction charges, making remittances more affordable.
• Enhanced compliance: AI-powered KYC and AML screening is reducing false positives and speeding up compliance checks as threats evolve.
• UPI Global / Cross-border UPI (India-specific): India's UPI is being linked with payment systems in countries like Singapore (PayNow), UAE, UK, France, and Mauritius. This means Indian exporters will soon be able to receive payments directly through UPI-linked wallets in these countries, making the process simpler for small businesses and freelancers.
• Digital Rupee (India-specific): The RBI's CBDC pilot is currently underway. If adopted at scale, the digital rupee could enable programmable, near-instant cross-border settlement with full compliance auditability.

A Foreign Inward Remittance Certificate (FIRC) or its electronic equivalent, the e-FIRA (Foreign Inward Remittance Advice), is the official proof that you received a foreign currency payment through authorised banking channels.

Why FIRC/FIRA Matters

• GST refunds on service exports: India does not charge GST on exported services, but to claim the refund you need to prove the payment was received in foreign currency. FIRC or FIRA is that proof.
• Export incentives and government schemes: DGFT schemes like the Advance License and EPCG scheme require FIRC as mandatory documentation.
• Income tax compliance: It serves as proof of foreign earnings for your Indian income tax return.
• Bank audits: If your bank queries a foreign receipt, FIRC or FIRA is your primary supporting document.
• AML compliance: It demonstrates the legitimacy of the foreign inflow.

FIRC vs. FIRA: What’s the difference?

Since 2016, the RBI moved to a digital system. Strictly speaking:

• FIRC is now issued only for investment-type inflows like FDI and FII.
• FIRA is issued for all export-related and service income inflows.

In practice, most people use both terms interchangeably and your bank will know what you mean. For Indian exporters and freelancers, FIRA is the document you will receive and need.

How to obtain your e-FIRA

• Traditional banks: Submit a formal request with transaction details and invoice. Pay around ₹200-₹800 per certificate. Then, you’ll have to wait 7-15 working days.
• Modern fintech platforms (like Xflow): e-FIRA is generated automatically within 24 hours of each withdrawal. You won’t even have to apply manually, nor pay any fee.

Every foreign payment coming into India needs an RBI Purpose Code. It tells your bank and the RBI what the payment is for. Without a valid purpose code, your bank cannot process or credit the payment.

Why It matters

• An incorrect purpose code can delay or block your payment from being credited.
• It determines what supporting documents your bank will ask you to provide.
• It affects how the transaction is classified for FEMA reporting and tax purposes.

Practical tip: Always confirm the purpose code with your payment platform before your first transaction. Platforms like Xflow automatically apply purpose codes, reducing the risk of delays from mismatches.

Managing remittance payments can be challenging due to delays in cross-border transfers and limited visibility, coupled with compliance complexities. A business dealing with incoming remittances in India requires a quick and highly scalable solution. That is where Xflow helps it stay ahead.

Xflow simplifies remittance processing by offering smooth systems integration, fair and easy-to-understand prices, and compliance-ready products designed with Indian businesses in mind.

Key features of Xflow include:

• Transparent flat-fee pricing with no surprise charges 
• Free e-FIRA issued within 24 hours of every withdrawal 
• Settlement in just 1 business day
• Unlimited transaction size 
• Payment processing in 25+ currencies from 140+ countries 
• Fast and paperless digital KYC onboarding 
• Seamless API integrations with accounting tools like Zoho