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What is Remittance?
A remittance is simply when money gets sent from one location to another.
Running an online shop or working with international customers means you’ve likely dealt with these payments in your system at some point. The person sending the money could be in one country while the person receiving it is halfway across the world.
The way remittance payments work is actually pretty different from standard credit card transactions. When a customer decides to use a remittance service to pay for your products, that money has to take a bit of a winding path before it finally reaches your account. Usually it passes through a few banks or financial services along the way. That means the whole process can take anywhere from a few days to a few weeks to finish.
Those extra parts of the process create some problems for merchants. Every remittance service has its own policies about disputes and refunds and the variation can be large. Some services give customers a few months to file a complaint about a transaction and others have much shorter windows. Once you’ve figured out which service actually processed the payment then you’ll know what your rights and responsibilities are in any given situation.
Cross-border remittances bring even more complications into the mix. Every country has its own laws about how money transfers can work. That means a payment coming from Europe might need to follow one whole set of laws while a payment from Asia has to follow a different set. All these laws have a direct effect on how fast you can access the funds and what kinds of fees you’ll pay on each transaction.
Something to remember is that your payment system won’t always show remittance payments in an obvious way. Sometimes they look just like normal bank transfers or card payments in your system. That can make them a bit hard to find.
Keep an eye out for unusual processing times or unfamiliar payment codes that might mean you’re looking at a remittance transaction instead of a standard payment.
How It Works
When a customer wants to send you money through a remittance service they have quite a few ways to go about it.
Maybe they’d walk into their local bank branch and take care of it in person, or they’d go to a money transfer operator like Western Union or MoneyGram. Some customers would like to just pull out their phone and use an online platform to get it done – it tends to be faster and saves them the trip. Once your customer starts that payment, the money has to make its way through a whole network of banks and payment processors before it gets to you.
The sender’s bank or the transfer service will take that payment and push it through at least one in-between bank (and sometimes through a few of them) and each bank along the way is going to verify that everything checks out and looks legitimate before they hand it off to the next one in the chain.
This whole process leaves behind a fairly detailed paper trail and it looks quite a bit different from what you’d see with a standard credit card payment and each remittance payment gets its own reference number that you and your customer can use to track where that payment is at any given time. Your records will also show you the full information about the sender and what the reason for that payment was.
If your customer sends the money in a different currency compared to what you’ll receive, the conversion will happen at some point along the way. The exchange rate you’ll get can depend on when and where that conversion takes place along the path. There will also be some transfer fees that get taken out somewhere in the process and those can change quite a bit depending on which service your customer decided to use. As far as time goes, most remittance payments will settle in about 2 to 5 business days, though international transfers might take a bit longer to actually land in your account.
When the payment does finally arrive, it’ll show up as either a wire transfer or as an electronic deposit – this will look pretty different from your usual card transaction deposits that usually batch together and arrive at the end of each business day.
How it Affects Chargeback Prevention
Remittance payments have a set of chargeback problems that create issues for merchants. The dispute process on these transactions doesn’t work the same way as it does with common credit card payments. Timelines can vary from one case to the next and you’ll likely find that your rights as a merchant are more limited than they are with standard card transactions.
One of the biggest problems with remittance transactions is that they usually move through multiple payment systems before they’re finished. A customer might start their payment through a money sending service. That makes it much harder to track down the right records when a dispute comes up. In some cases, you’ll need proof from three different businesses just to show that the payment was legitimate.
The time lag between the start and completion is another big issue to watch for. Standard card payments usually settle within 1 or 2 days. But remittance payments can take 1 week or longer to finish up. At that point, you’re left to prove the delivery for a transaction that technically finished after the goods were already in your customer’s hands.
Currency conversion can make the dispute situations even tougher. A customer might claim that they paid one amount. But after the conversion fees are applied, you receive something different on your end. These disputes can be hard to resolve because each side can be technically correct about what they paid or what they received.
Example Scenarios
When a merchant accepts a payment from overseas they face a different type of danger. In some cases, an online electronics store sells a laptop to a customer in Brazil who pays through an international wire transfer. The payment seems to go through just fine and the funds come through without any problems. But the merchant has no way to confirm if the person who sent that money actually owns the bank account that it came from. Maybe someone else hacked into their account or maybe they got ahold of some stolen credentials and used those to send the transfer. Two months go by and the account owner finally sees the charge and files a dispute. At this point the merchant is stuck with a chargeback for a laptop that’s already been shipped halfway across the world.
Subscription businesses have to work through issues around international remittance payments. A software company could have customers in India who pay their monthly fees through bank transfers instead of with credit cards. When these customers want to cancel they’ll sometimes dispute their past payments instead of going through the normal cancellation process. The merchant then has to go back and prove that they actually delivered the service for each of the months. What international disputes require depends on the country and the payment strategy that was used. What counts as proof in one location might not mean anything in another.
B2B transactions bring another layer of difficulty to the table. A wholesale supplier might receive a large remittance payment from an overseas retailer for a bulk order. Commercial disputes don’t work the same way that consumer ones do. The merchant needs to have buy orders and delivery confirmations that line up. Even minor mismatches can lead to disputes a few months after the delivery has already happened.
Requirements and Timeframes
Remittance payments have a different set of compliance obligations compared to your standard payment processing. The big one is reporting and most countries make you report remittance transactions over a set dollar amount. In the United States, that number is $3,000 per transaction. When you hit that amount, you’re responsible for collecting customer information and submitting reports to the financial authorities on time.
Records are another area where remittance payments demand more from you and each remittance transaction needs to be kept on file for at least 5 years. We’re talking about the sender’s ID, the recipient’s information and the exact amount that moved between them. Standard card payments usually only need to be stored for 3 years. But remittance payments get more attention because governments want to see the money moving across international borders.
Chargebacks also work differently when remittance payments are involved. Standard credit card chargebacks usually give customers 120 days to file a dispute. With remittance payments, that window changes depending on the payment network and the origin country. Some networks extend the dispute period as high as 180 days after the transaction. Others cut it down to just 60 days.
Response time matters with remittance disputes. When a customer files one, you usually get just 10 days to submit your response. Miss that deadline and the dispute automatically goes in their favor – that’s a much shorter window than the 14 to 21 days you’d get with other payment disputes. Your records need to be well-organized so you can get to them fast because when you receive a dispute you’ll have to act fast.
Frequently Asked Questions
Are remittance chargebacks different than credit card chargebacks?
Remittance chargebacks are rare and bank-initiated - credit card chargebacks are consumer-initiated and are common.
Remittance payment disputes are a different beast from credit card chargebacks, and the reasons behind them are pretty specific to cross-border money transfers. Most disputes happen because the recipient claims they never received the funds, or that the amount that showed up was incorrect.
Cross-border payments tend to pass through three or four different financial institutions before they land in the recipient's account. These institutions are spread across multiple countries, and each one operates under its own set of standards and processing timelines. Remittance disputes wind up being far more tricky than a standard domestic payment dispute because of all these moving parts.
The paperwork and proof needed will change quite a bit depending on how you send the money and which countries are part of the transaction. Wire transfers have one set of standards. Money services have different standards. Different countries also have their own laws about who gets protected in a dispute - some lean toward the sender's rights, and others favor the recipient. Local banking laws and inter-bank agreements play a big role in how everything works out.
Another issue that merchants need to watch for is that there's very little seller protection in remittance disputes. Remittance providers usually take a neutral stance on these matters and that means merchants could wind up with limited options if a dispute doesn't go their way. Cross-border payments work under a different framework with different standards and expectations.
What documentation should merchants keep for remittance transactions?
Transaction records, customer ID and authorization confirmations.
Merchants who accept remittance payments have to hold onto a lot more paperwork than they would with standard transactions. The transfer receipts are important, and you'll also want to hang onto copies of sender identification for each payment that comes through. You'll also need to record why the person sent the money.
All correspondence with customers should be saved. Delivery confirmations, authorization proof and any messages that show the customer approved the payment - these all matter. When disputes pop up later, these records can make or break your case.
Remittance transactions have stricter record-keeping standards compared to standard card payments, and this is all about compliance. Different countries have different laws, and the payment amounts can trigger extra steps. Some regions will ask you to report transfers to government agencies. Others need proof that you verified who sent the money.
A dedicated folder for each transaction does the job - just put everything related to that payment in one place. Electronic copies are totally fine as long as you back them up on a set schedule. 3 months from now when a regulator or a payment processor requests records, you'll be happy you put in the work to stay organized. You don't want to scramble through old files to find a receipt that validates your process - it's frustrating and you can avoid it.
Are remittance payments higher risk for chargebacks?
Not really - they're usually at a lower risk than credit cards.
Remittance payments have their own risks and these are worth paying attention to if you process them. One of the biggest problems is the extended processing window - it gives customers more time to second-guess their choice and file a dispute. A customer might send money to a family member in another country, then wake up three days later with buyer's remorse. Well now you have a chargeback that could have been avoided with faster processing.
Cross-border transactions add a few layers of problems to fraud prevention. It's much harder to verify a cardholder identity when the person is located on the other side of the planet. If fraud does happen, your ability to resolve it right away is really limited. Even the fraud detection tools that work well for domestic card payments might not work as well for international remittances.
Remittance fraud also follows different patterns than regular card fraud. Criminals might use stolen card information to send money abroad, then vanish before anyone sees the fraudulent activity. Others exploit the fact that international disputes can go on for months without a resolution. Your fraud prevention strategy needs to account for these specific behaviors if you want to catch them early.
Remittance payments are still a valuable product to have. These transactions serve a legitimate need for millions of customers and can generate solid revenue for your business. That said, you should watch for red flags that point to possible fraud. A sudden increase in transfers to one particular country or unusually high amounts from brand-new customers - these signs deserve a look.
Can merchants refuse remittance payments?
Yes, merchants can refuse any payment method.
Remittance payments can be very helpful for your business. But only if you understand how to balance the opportunities against the risks. Cross-border transfers help you tap into international markets and bring in steady revenue and it's great for growth. At the same time, you'll need to keep careful records and to stay ahead of possible disputes. The regulations around remittance providers are getting tighter and they create some issues for merchants but they also add a layer of protection when you deal with these payment types.
Most businesses can pick and choose which payment methods they want to accept (unless there's a contract that says otherwise). Turning away remittance payments might cut down on some of the chargeback issues. But you'd also be turning away international customers who depend on these transfers to make purchases. Your industry or location may have laws around which payment methods you can refuse, so it makes sense to look into your local laws before you make any firm decisions.
Remittance advice documents are important because they work as thorough payment notifications. Each one shows which invoices or purchases that a payment is meant to cover. This type of transaction-level detail gives you strong ammunition when a customer claims that a charge was unauthorized or incorrect. The best strategy is to ask for these records for every remittance payment and to keep them on file. They make your chargeback defense much stronger because they prove what the customer intended to pay for and they break down how the money was distributed across different purchases.