What is the key difference between a funds transfer and a remittance?

The key difference lies in the nature and context of the transactions. A funds transfer typically refers to the process of moving money directly from one bank account to another, often within the same financial institution or between different banks. This type of transaction can involve various amounts and purposes, including personal or business-related actions.

On the other hand, remittance is more specifically focused on transferring money to individuals, often across borders, typically for personal use. Remittances are frequently sent by individuals working abroad to support family and friends in their home country. While remittances can indeed be processed by financial institutions and may sometimes involve smaller amounts, the essential distinction is that a remittance is a payment made by an individual to another individual, often with a personal or humanitarian intention, rather than a straightforward transfer of funds between accounts for commercial purposes.

Understanding this distinction helps in recognizing how different transactions function within the broader payments ecosystem, as well as the roles that various players (individuals, banks, and other financial entities) enact in either scenario.