Thanks to digital technologies, sending funds to India is now a quick and affordable process for the NRIs. But things weren’t as quick, convenient, or cost-efficient in the past. In this post, we will peek into the history of the remittance industry and how it has evolved over the years.
The internet now plays a crucial role in our lives. Be it shopping, ordering food, or sharing a presentation with a colleague, a large number of our day-to-day activities can now be done online.
Digital technologies have also abundantly impacted the lives of NRIs all over the world. With the help of online money transfer services, they can now send funds to their families in India conveniently and affordably. But remittance services were not as simple, fast, or affordable in the past.
Let us peek into the history of the remittance industry to get a brief idea of the evolution that brought us here-
The Introduction of Wire Transfer
While several informal international money transfer systems, like Hawala, have been in existence for hundreds of years, it was around the 19th century that the remittance industry was formally established. When the world started moving towards globalization and industrialization, a new form of money transfer, wire transfer, was introduced around the 1870s.
In the initial years, wire transfers made use of telegraph networks and thus, were also known as telegraphic transfers. While wire transfers used to take several days, within five years of its introduction, they were already being used to transfer more than $2.5 million every year.
The Role of Credit Cards
In the early 1900s, money transfer involved the exchange of physical cash. In the early 1920s, some oil companies and departmental stores started offering “courtesy cards”, which could be used by the customers at their establishment. The customers used to get the card punched every time they made a purchase at the issuing store and then cleared the balance in full at the end of the month.
It then took around 30 years for this credit-based system to come up with credit cards. Visa cards were later introduced in 1958, followed by Mastercards in 1966. The role of credit cards is critical in the evolution of the remittance industry as it is with the help of credit cards that the world was first introduced to the idea of transferring money without actually exchanging cash.
Formation of SWIFT
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) was established in 1973. SWIFT completely revolutionized this credit system in the remittance industry and laid the foundations for online remittance. Initially, SWIFT was made up of only seven banks but fast forward it to the present, and there are now thousands of global banks in the SWIFT system.
It is with the help of the SWIFT network that thousands of banks in more than 200 countries can receive and send details regarding financial transactions taking place on a global scale. The network makes use of SWIFT codes for sending payment orders to banks within its network.
Current State of International Money Transfers
Over the years, the remittance industry has grown by leaps and bounds. The technologies powering money transfers have evolved, and there are now several ways of sending remittance to India. While traditional methods like wire transfer and offline agents are still available and are fairly popular too, an increasing number of NRIs prefer online transfers.
As compared to other modes of money transfer, digital transfers are known to be faster, safer, affordable, and more convenient. Some of the Indian banks now also have mobile apps that can be used by the NRIs to send money to India instantly.
The Future of Remittance Industry
Just like all the other industrial sectors, the remittance industry is expected to continue evolving as well. Technologies of the future can make international remittance faster and more convenient for the users. With people switching to online transfers, there can be a significant rise in the number of money transfer service providers in the future.
NRIs looking for a money transfer service provider to send funds to India should do adequate research before making a selection. Reputed Indian banks offering online money transfer services are a preferable option for their security, cost-efficiency, and convenience.