Telegraphic Transfer (TT): Explaining What It Is & How It Works

For businesses that regularly manage overseas payments—whether it’s paying suppliers, processing large purchases, or compensating employees across borders—choosing the right and most secure payment method is crucial for smooth and efficient operations. 

Whether you’re looking to send or receive funds abroad, one option you may have heard of is Telegraphic Transfer (TT). 

In this article, we will explain what telegraphic transfer is, how it works, and how you can utilise this method to transfer money. We will also look into the pros and cons of telegraphic transfer to provide you with the facts to help you make the right decision for your business.

Let’s dive into it.

Telegraphic transfer (TT) is a method of electronically transferring funds from one bank account to another. While TT transfers can be used for both domestic and international transactions, they are most commonly associated with international transfers.

In the past, "telegraphic" referred to messages sent via telegram or telegraphy, which involved transmitting written communications through cables using coded signals. Transfers were often arranged through the 'Telex' network, a system of teleprinters that enabled text-based communication.

With advancements in technology, banks have replaced telegraph lines with their own dedicated networks for financial transactions, making the process faster, more convenient, and more secure. Despite these changes, the method is still referred to as a telegraphic transfer.

TT transfer is one of the most popular ways to transfer money globally due to its convenience, speed, and security.

What makes a telegraphic transfer complicated is not the technical part but the terminology used between countries to capture this type of international transfer.  

In essence, a "telegraphic transfer" is a broad term that generally refers to the electronic transfer of funds from one bank account to another. A wire transfer is also a general term that encompasses any electronic transfer of funds between financial institutions. While these terms are frequently used interchangeably to describe the electronic movement of funds, "telegraphic transfer" is typically associated more with international transfers.

In the UK, Australia, and New Zealand, the term "telegraphic transfer" is more commonly used, whereas in the US, a "wire transfer." is preferred. 

SWIFT (Society for Worldwide Interbank Financial Telecommunication), on the other hand, is not a type of transfer but a communication network that supports these transactions, whether referred to as TT or wire transfers. While TTs don’t have to be processed through SWIFT, they often are, leading to a strong association between the two. Due to common usage, people sometimes use the broad term "TT" when they are referring specifically to transfers using the SWIFT network. Therefore, while SWIFT and TT are not the same, they are related, and often used interchangeably.

The usage of the term "telegraphic transfer" also varies by region. For example, In the UK, TT may refer to CHAPS payments or SWIFT transfers, while in Hong Kong, TT may denote SWIFT transactions for international transfers or CHATS for domestic transfers.

Here are some alternative terms that are often used instead of "telegraphic transfer."

• SWIFT payment or transfer
• International bank transfer
• Telex transfers
• International money transfer (IMT) (common in Australia)
• International wire transfers

In the past, telegraphic transfers relied on telegraph cables and Morse code to send detailed instructions for moving money from a sender to a receiver. With technological advancements, this method has been transformed into an efficient electronic system, such as cable networks or cloud-based apps that connect banks and financial institutions globally.

Here’s a breakdown of the process:

1. Initiation of Transfer: The sender provides their bank with essential details like the recipient's account information and the amount of money they wish to send.
2. Message Transmission: The sender's bank initiates the transaction by sending a message through a secure network, detailing the amount to be transferred. In an international context, this typically involves sending an MT103 message via the SWIFT network to the recipient's bank.
3. Security Measures:  The bank implements a range of security protocols to safeguard the funds and personal information involved in the transaction, such as encryption and authentication. 
4. Exchange Rates and Fees: For international transfers or transactions in different currencies, the transferred amount may need to be converted. Each bank, including intermediary banks, applies its own exchange rates and other fees, impacting the final amount received. Depending on the arrangement, fees may be paid by the sender, the recipient, or shared between both.
5. Completion of Transfer: The recipient's bank, upon receiving the instructions, credits the recipient's account with the transferred amount. While the process is generally efficient, the total time can vary, typically ranging from one to several business days, depending on the bank’s processing times and policies.

It's important to note that TT transfer fees can be high due to the involvement of multiple banks and the potential for currency exchange. However, their reliability often justifies the expense, particularly in business transactions.

In general, payments take 1-5 business days to reach the recipient's account. Nonetheless, delays may occur due to factors such as time zones, bank cut-off times, and fraud prevention measures.

Telegraphic transfers can be suitable for:

• Businesses Involved in International Trade: Companies that import and export goods or services frequently use TTs to pay international suppliers.
• Those Making Large Payments: Individuals or businesses transferring large sums—such as for real estate transactions or significant investments—often prefer TTs due to their security features and ability to handle substantial amounts of money.

Although TTs are highly effective for these purposes, it's important to consider the associated fees and processing times, which can vary depending on the banks, currencies, and countries involved.

To initiate a telegraphic transfer, specific details are required to ensure the funds are delivered correctly to the recipient. Here’s a summary of the key details you’ll likely need when initiating a TT transfer with your financial institution.

• Recipient’s Details: The recipient’s full name (as registered with the bank), their address, and the full name and location of their bank.
• Recipient’s Bank or Branch Codes: You’ll need codes that identify the recipient’s bank and branch. The code varies depending on the country and whether the transfer is domestic or international. For instance, in the UK, a sort code is used for domestic transactions, while in the US, a routing number is needed. For international transfers, a SWIFT/BIC Code is needed. In some cases, an IBAN may be required, especially for transfers within the EU.
• Recipient’s Bank Account Number: This is the account where the funds will be deposited. If you're using an IBAN, you may not need to provide the account number separately, as the IBAN already includes it.
• Amount and Currency: The exact amount and currency of the transfer. 
• Purpose of Payment: Some banks require a brief description of the payment, especially for large or international transfers. This is often needed for compliance reasons.
• Fee Arrangement: For international transfers, you may need to specify who will pay the transfer fees that incur along the way—whether it's the sender, the recipient, or shared between both.
• Additional Information for Specific Countries: Some countries may have unique requirements or codes for processing transfers. It's advisable to check with the bank for any country-specific information needed.

The requirements may vary depending on the domestic or international network used for the transfer. Additionally, further details might be requested for security verification and to confirm the sender's identity.

Sending a Telegraphic Transfer (TT) involves a few steps, which can vary slightly depending on your bank:

1. Check with Your Bank: While most major banks offer TTs, it's not always guaranteed. Contact your bank to confirm if they provide this service and inquire about their available options.
2. Collect Recipient Information: Once you know your bank offers TTs, collect the necessary details about the recipient. This includes their full name, account number, and the bank’s code such as BIC/SWIFT code if you are sending international transfers.
3. Specify Transfer Details: Decide the amount and currency for the transfer. Be mindful of exchange rates and possible conversion fees if sending in a foreign currency.
4. Initiate the Transfer: Depending on your bank's offerings, you can start the transfer in various ways. Many banks provide the option to complete the transfer through their online banking portal or mobile app. You can also visit a branch in person to initiate the transfer.
5. Fill in Payment Information: Enter all necessary transfer information, and check if additional details are required for larger amounts or for international transactions.
6. Review Fees and Confirm Transaction: Be aware of all associated fees, including any charges for currency conversion, before finalising the transfer. Domestic transfer fees are often straightforward, while international ones are more complex. For example, using SWIFT may involve intermediary banks, and the fees for these services may be unpredictable.
7. Track and Record: Use the provided reference number to track your transfer.

When transferring funds with a telegraphic transfer, various fees are involved. Here are the key components that determine the overall expense.

• Sending Bank Fees: A service fee charged by the bank initiating transfers. This can be a fixed or a percentage of the transfer amount. This fee typically ranges from GBP 15 to GBP 40 or USD 10 to USD 50. 
• Receiving Bank Fees: Often deducted from the amount transferred, which can affect the total sum received. However, senders can choose to pay for this fee instead.  
• Intermediary Bank Costs: If your transfer is routed through intermediary banks, each of these banks might apply their own fees. On average, fees typically range from USD 15 to USD 30 (approximately GBP 12 to GBP 24).
• Currency Conversion Fees: When transferring money in a different currency, banks apply a conversion fee. It is often not a direct charge but is included in the exchange rate. This is usually around 1% to 5%
• SWIFT Network Fees: Additional charges for utilising the SWIFT network may be applied. 
• Extra Services: For instance, sending large amounts of money may come with an extra cost. 

Domestic telegraphic transfer fees may be much lower or even waived, depending on the financial provider.

In the context of international telegraphic transfers, where various unexpected fees may arise along the way, the allocation of these fees is determined by charge codes. 

The main charge codes are: OUR (sender pays all fees), BEN (recipient pays all fees), and SHA (fees are shared between sender and recipient). You may have the option to choose one of these codes when initiating the transfer with your bank, or you might need to contact your bank to inquire how these charges can be arranged, as some banks may have a default setting in place.

Telegraphic transfers often take 1 to 5 business days to process. In rare cases, it may take a week or more. The exact time depends on whether the transfer is domestic or international, as well as the method used.

Domestic Transfers:

Depending on the method and banks involved, these may be completed on the same business day. The faster processing is due to the absence of intermediary banks and currency conversions.

International Transfers:

These usually take 2 to 5 business days. The processing time is influenced by factors such as:

• Destination Country: Transfers to countries with advanced banking systems are typically processed faster than those sent to regions with less developed infrastructures.
• Currency Conversion: If a currency exchange is required, there will be additional processing time. The currencies themselves also affect the time as some currencies are less liquid or more volatile than others.
• Intermediary Banks: The involvement of multiple correspondent banks can cause delays.
• Bank Processing Times: Each bank has its own cut-off times and processing schedules, which can also affect the transfer time.

Despite the potential for delays, TTs are faster than international bank drafts and cashier's checks, which often take weeks or even months. 

When you need to make a telegraphic transfer, there are two sets of rules that you need to follow: those of your bank and the SWIFT network policies. These rules determine the advantages and disadvantages of making a transfer.

Sending and receiving money electronically has become the new norm, and so is using traditional banking alternatives such as virtual banks and payment service providers. If you own a business in Asia or are considering entering the Asian market, consider Statrys.

Statrys is not a bank, but a licensed Money Service Operator in Hong Kong that provides financial services and solutions to businesses incorporated in Hong Kong, Singapore, and the BVI.  With a Statrys Multi-currency Business Account, you can hold 11 major currencies, easily send and receive funds internationally, and convert when exchange rates are favourable. 

The Statrys platform also offers FX options and local payment solutions in 12 currencies, allowing you to pay like a local with lower fees.

For more information, check out the details below.