The world of finance can sometimes feel like learning a new language. Words like “remittance” and “disbursement” are often used interchangeably, but they aren’t the same. These words represent two different money transfer processes. Understanding the difference matters for anyone sending or receiving money internationally. Remitly is here to help demystify international money transfers. Understanding the difference between remittance and disbursement will help you make informed decisions about your money transfers and avoid confusion. In this article, we’ll define both terms, look at the differences between them, and help you better understand the available money transfer methods.
What is a remittance?
A remittance is money sent by someone to their family or friends across international borders. Remittance tends to be personal, like some cash to help someone pay bills or a gift for a birthday. The term is often specifically used to refer to money sent by migrants to loved ones back home. By definition, a remittance is noncommercial.
This might sound like small-time stuff, but remittances like this play a huge role in the global economy. It’s estimated that more than 800 million people around the world receive cash transfers this way, adding up to $781 billion in 2024.
That makes people helping each other more than three times more valuable than all the foreign aid that’s distributed by governments around the world.
Remittances look like:
- Migrant workers sending some of their earnings home to support parents, spouses, or children.
- International students receiving money from their families to help with tuition and living expenses.
- Families providing emergency assistance to the people they love during a crisis.
“Remittance” is a financial term, but what lies behind it couldn’t be more personal. These cross-border payments maintain connections, support needs, and keep people close together even across distances.
What is a disbursement?
A disbursement is the distribution of funds from an organization, institution, or government body to an individual or group. Fund disbursements take place in a business or institutional context, and they follow structured procedures to ensure accuracy, accountability, and compliance.
Typical examples of disbursements include:
- Loan distributions that banks send to borrowers.
- Insurance payouts to policyholders once a claim gets approved.
- Payroll processing, where a company disburses wages to employees.
- Government benefits, including pensions, tax refunds, and unemployment assistance.
Because fund disbursements are made by companies and organizations, they usually require a hefty paper trail of documentation. There will be approvals, receipts, and transaction records. These processes exist to help prevent fraud, provide accountability, and make sure that the funds go where they’re supposed to.
In other words, a disbursement is not just a simple money transfer. It’s a regulated financial process supported by documentation and oversight.
Key differences between remittances and disbursements
As you can see, the main difference between money remittance and disbursement comes down to who’s doing it. When a private individual sends a payment, that’s a remittance. When a company or organization does it, it’s a disbursement.
But there are other differences between the two types of payment. Let’s look at some of the things that set them apart.
Purpose and intent
- Remittances: usually personal, sent by individuals to support family members and loved ones. These transfers often help cover daily expenses, education, or emergencies. They can also be gifts.
- Disbursements: These are usually business or institutional obligations. Paying employees, giving back rental property deposits, or paying out insurance claims all qualify as fund disbursements.
Who is involved
Remittances are person-to-person transactions, from one individual to another. The term is usually used when money is sent across borders.
Disbursements go from an organization to an individual or to another organization. That means they are overseen by an organization and usually involve more rigid processes.
Process
The process of sending a remittance can be quite straightforward. Often carried out through money remittance providers and easy-to-use apps for international payments, sending a remittance transfer can be as simple as a few taps on your phone screen. Because it’s just one person sending their own money to another, there is no need for a complex paper trail.
The bigger the organization making the disbursement, the more elaborate the process. Disbursements from government organizations in particular tend to require formal approval processes, detailed documentation, and strict compliance with financial or legal standards.
Businesses and organizations have to answer to accounting departments for every penny they spend, so any fund disbursement will be accompanied by receipts and documentation to prove that it is legitimate.
Also, organizations like banks, the government, and insurance companies need to fight against fraud. A robust paper trail is one way that they can keep track of where the money is going and make sure it isn’t being disbursed to the wrong people.
Amount and frequency
Although this varies, remittance transfers tend to be smaller and are often recurring amounts. For example, think of the migrant worker who’s sending money home to support their family.
Disbursements are often larger than remittances. Frequently, they’re tied to a set schedule. Think of monthly payroll, annual insurance payouts, or monthly benefits. However, disbursements can also be one-off payments, as in the example of an insurance claim.
Regulation
Remittances are usually regulated under money transfer and anti-money laundering laws.
Disbursements, however, must also comply with the rules of the organization making the payment as well as sector-specific regulations. Often, they may also be regulated by law, especially in the case of benefit payments and employment wages.
When to use each term
Because both these terms are about moving money, it’s easy to get them confused. Here’s when to use each one correctly.
- Use “remittance” for personal transfers. These are person-to-person transfers, usually meant for cross-border family support, emergencies, or gifts.
- Use “disbursement” in a business or institutional context. So when a company pays employees or a bank releases a loan as part of their financial services, they are making disbursements. These are fully regulated processes, require documentation, and often happen on set schedules. But what truly makes them a disbursement is that they are being paid by an organization, not an individual.
Many people think that any money transfer can be called a remittance. But remittances are specifically tied to personal support networks, while a fund disbursement is more about organizational obligations. Understanding the differences is about more than correct terminology. It also clarifies the requirements and processes involved.
Choosing the right service for your needs
Knowing the difference between remittance and disbursement can help you choose the right service for your situation.
If you are planning to send money to family or friends abroad, a remittance is what you’re doing. Remittance services like Remitly focus on affordability, speed, and convenience, offering multiple payout options. For example, you can choose to have money reach your recipient via bank deposit, mobile wallet, or cash pickup. The cost of these services is usually lower than a bank wire transfer, and remittance transfers can arrive in minutes.
Disbursements are better suited for managing payroll, government benefits, or supplier payments. Often, they’re integrated with business systems and offer bulk payment options. The process is usually slower and more formal, and it’s designed to ensure accountability and proper documentation.
Key features
- Costs. Remittance transfer services usually charge lower fees and offer competitive exchange rates. Disbursements tend to be more expensive because they require more administration.
- Speed. Remittances can be almost instant. Disbursements often follow scheduled cycles and may require several business days to be processed correctly.
- Security. Both methods of payment are regulated. Remittance services focus on fraud prevention and customer security, while disbursements also require strict internal controls for accountability.
Knowing which word to use will help you choose the right service for your needs. If you’re looking to send money abroad to a family member or loved one, you need a remittance service, and Remitly is here to help.
FAQs
What’s the main difference between remittance and disbursement?
The main difference is in who is sending the payment. Remittances are usually person-to-person money transfers, often sent across borders. Disbursements tend to be payments from companies or large organizations, including the government.
Are remittances always international?
Technically, a remittance is any sum of money sent in payment or as a gift. However, the word is usually used to refer to international payments rather than domestic ones.
Do disbursements require more documentation than remittances?
Usually, yes. Disbursements are made by organizations like companies, banks, and governments. Accounting departments want to see a paper trail so they can make sure the payment is being made properly.
Which is typically faster—remittances or disbursements?
Usually, a remittance will be faster. A good remittance company can send a remittance in as little as a few minutes, while disbursements often take several business days or longer. Partly, that is because they have greater requirements for documentation.
Can businesses send remittances?
Usually not. Although you may sometimes hear the term “business remittance,” it’s likely a misuse of the term. The word remittance is used for personal transfer to individuals, often abroad. While businesses do send money abroad, these transactions are generally considered disbursements.