Why is it Always Better to Receive Your Money through Banks than Bus Drivers?

According to the latest estimates, almost the same number of Bosnians and Herzegovinians live abroad as at home. We know that family values are important to our people, so relationships with loved ones are not broken, but built, despite the distances. Most of them help their family and friends financially, which, all together, collectively greatly influences the economic trends in the country.

It is certain that the inflow of remittances from abroad is measured in billions. The amounts are approximate, since there are no exact indicators, because a large part of the funds in BH is delivered through intermediaries, via popular bus drivers and other similar ways.

The Central Bank of BH produces data on remittances, also containing amounts of remittances from abroad. Data are produced on a quarterly basis and published on the bank's website www.cbbh.ba.

As part of the Remittances and Payments Program, the World Bank, with the support of the Swiss Government, recently completed a survey on the financial habits of remittance senders and recipients in our country. The research was conducted on a limited sample, but still provides insight into financial behaviour, the level of financial literacy and inclusion, and indicates that remittances are regular and significant sources of income for many citizens in Bosnia and Herzegovina.

Remittance users and financial habits

The results of the research warn that financial involvement is not at a satisfactory level. All banks in BH offer international payment services through an open account. However, most of our citizens receive remittances from abroad in cash.

Although the majority of the population owns mobile devices and has an Internet connection, mobile and Internet banking are used relatively little in our country, despite the obvious benefits. We pay from the comfort of home, with lower fees, without wasting time and exposing ourselves to the health risk. There is a growing trend of using these services all over the world.

As prime reasons why they choose the intermediaries, the responding citizens stress insufficient transparency in the way these services are being provided, followed by reluctance to change habits, fear of new technologies, as well as, lack of information.

It is time to change that.

Research has shown that price, speed, security and accessibility of money transfer services are key factors in choosing the way in which money will be sent. Even though 70% of respondents have stated that regulated channels have more advantages than unregulated ones, 50% have said that they do not use banks and services regularly.

However, the circumstances that have risen due to the COVID 19 pandemic impose the need to reconsider previous habits and attitudes.

Restriction of movement and impact on money transfer

Situations of limited or suspended movement at the international level, as it is today due to the effects of the pandemic, has depicted the shortcomings of unregulated channels of money transfers from abroad and imposed the need for financial education and raising the level of remittance users’ inclusion.

As a large number of our fellow citizens depends on remittances from abroad, we believe that comprehensive financial education is a priority on a personal and collective level.

Being financially informed means being responsible.

With the support of the World Bank project, here we will contribute to education through various contents and activities intended for citizens - remittance users and senders.

Frequently asked questions and answers

What are remittances?

Remittance is the amount of money that is most often sent somewhere abroad. There are several ways to send money: the safest option is certainly through international payment transactions, bank accounts or money sending services (regulated shipping methods), all the way to personal delivery (unregulated).

According to available data, in 2019 the amount of remittances in BH amounted to close to KM 2.7 billion. If we compare this with the relative ratio to GDP (Gross Domestic Product), remittances make 8% of the GDP of Bosnia and Herzegovina.

I want to send money in regular way. What should I do?

The first step is to open an account in one of the banks. After opening a bank account, you will get the possibility to do international money transfers, enabled by IBAN, which is used for unique identification of the opened account.

It is important that the recipient of the remittance receives a foreign payment instruction from the commercial bank in which he or she opened the account. The sender should be informed of those instructions, so that he can make the payment in the bank of the country in which he is located.

What a foreign payment instruction via bank account should include?

In order to make a correct payment, it is necessary for the funds recipient to request and obtain instructions for foreign payments from his or her commercial bank where he has an account to forward those instructions to the sender. The sender goes to a bank abroad, where he has an open account and makes a payment according to the data from the instruction. The instruction for foreign payments should contain the following information:

• Name of the commercial bank in which the recipient has an account and its address
• SWIFT of recipient bank
• Recipient's IBAN
• Name and surname and residence address of the recipient

To reduce unnecessary costs, find out which foreign correspondent bank is the bank where the recipient has an account. With this information, payment can be made cheaper and faster.

What do the money sending costs consist of?

The cost of remittances depends on several factors. In general, in the case of banks, they consist of the following fees: fees charged by the bank through which the money is sent, fees charged by the bank through which the money is received, currency conversion costs (if paid in different currencies) and other administrative costs of banks.

Costs are also affected by whether the services of a correspondent bank are used, and whether the payment is made using digital financial services. In the case of a money transfer service, the fee usually depends on the amount being sent, but also the country to which it is being sent, so there are different rates. In addition, in terms of cost bearing, there are different options, so the sender determines through the payment order the costing option. Tags that can be offered are:

• OUR - costs are covered by the sender of funds
• SHA - costs are covered by both sender and receiver (shared costs) or
• BEN - all costs are covered by the recipient of funds

Precisely in order to better understand costs, it is important to be adequately financially educated and to know the meaning of certain terms.

What is a correspondent bank?

Correspondent bank is a foreign bank that performs contracted operations abroad for the account of your bank in BH. The advantages of correspondent business are ultimately the speed of transfer and significantly lower commissions for sender and recipient. Most banks in BH have their correspondent banks in countries such as Austria, Germany, Croatia, Italy, Serbia, the United States, Switzerland and others.

Why is correspondent banking important?

This flow chart shows how to process orders with and without an intermediary bank:

Recommendation: Together with payment instructions also ask for information about the correspondent bank in the country from which the sender sends the money. Inform the sender about the information provided in order to choose the best option together.

Banks in Bosnia and Herzegovina have a list of correspondent banks available and it is advisable to find out about it.

Conclusion: Ask, read on the bank's website, and consult with the person to whom you are sending or from whom receiving money. A little effort can mean a big difference in quality, speed and price of service.

What are digital financial services in money transfer?

Digital financial services are supported by modern technologies. The internet is used as a distribution channel through which users perform banking and / or financial transactions. Therefore, it is not necessary to go to the bank. Most commercial banks offer digital services, with different options and at different prices. What everyone has in common is time and money saving. In addition, digital transfer fees are significantly lower.

It is important that you have an Internet connection, a mobile phone (mobile banking) and a computer (Internet banking). Financial management skills are mastered in a very short time and are simple. If you use your mobile phone successfully, you will quickly master mobile banking.

The activities of financial education of remittance users and senders are implemented by the Central Bank of BiH in cooperation with the Remittances and Payments Program implemented by the World Bank with the support of the Government of Switzerland.