Receiving Payments Via Remittance: Is it SAFE or NOT?

So you have this online business, right? You wouldn’t want your customers to hand their payments to you personally because that would kill the essence of having a shop online. Normally, buyers would use their credit cards as mode of payment because it’s both convenient and inexpensive. The problem though is, not everybody has one.

Only 7% of the Philippines’ population are credit card holders. Filipinos are still averse to using credit cards for their payments. This might just be the reason as to why Filipinos still use money transfer services when cashless payment is involved.

Remittance vs. Payment

Sending money and sending payments are two different things. If you receive money from someone without returning anything equal of value, then there is no trade. No trade means no sale. This is the nature of most, if not all, money transfer companies. In contrary, if you give or do something in return for that cash, then sale will take place. The money sent will then be classified as a payment.

For freelancers, it’s plausible to use money transfer companies to accept payments. It’s very accessible and does not require any legal paper or partnership terms. But for bigger businesses, that is hardly the case.

Money transfer services are not designed to collect large payments. They limit the amount of cash someone can send or receive mainly to prevent fraudulent activities like money laundering. This leads to the verdict that businesses that process hundreds, let alone thousands, of transactions everyday, cannot use money transfer companies to receive payments regularly.

Here are some other reasons,

Other than the volume limit, there are still other things that business should consider when receiving (or planning to receive) payments through money transfer:

• Convenience — Sending and receiving payments through remittance companies are never regarded as hassle-free. Basically, the sender has to go to a remittance center to fill-out and sign a form, then hand over the cash in exchange of a tracking number. The receiver, on the other hand, must go to the nearest branch of the same remittance company and use the tracking number, as well as provide a valid I.D, to claim the deposited cash. For a business with multiple transactions a day, that’s a lot of tracking number to keep an eye on.
• Safety — It’s difficult to keep track of payments when receiving them through remittance. A transfer must be verified first before it is classified as a payment. The receipt won’t also contain the product or service that has been sold since the remittance company will be the one to issue it and not the business itself. Meaning, the receipt might not be an enough proof to say that an exchange actually took place.
• Fees — Unless a partnership agreement was signed, receiving payments through remittance wouldn’t cost a business a penny. Instead, buyers would pay for their own remittance fee. Otherwise, transactions are subject to Merchant Discount Rate or MDR. In most instances, the business also has to pay for a set-up fee which may either be a one-time-payment or a monthly fee.
• Brand image — Using a money transfer service to bridge payments might sound a little sketchy to some. Scammers have dispersed around the internet posing as sellers, only to disappear when payments have been received. Most of these scammers use remittance companies due to its lenient accessibility. So an using a money transfer service as the only payment option may repel customers due to what have been already positioned in their minds.

What are the other options?

Using a money transfer service to receive payments is not bad per se, provided that it’s just one of the multiple options. Third Party Payment Processors, like Paypal can be very useful when online payment is involved. There are so many options to choose from in the Philippines alone, all of which process either local or international, some even both. It isn’t even hard to do a research since they can be easily found around the net.

So what do you think?

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