International wire transfers can be costly, slow, and complicated. There are many alternative ways to perform an international bank account transfer online, however, they all come with advantages and disadvantages.
Let's take a look at the most Frequently Asked Questions about International Wire Transfers and which options could be best for you.
What is a wire transfer?
A wire transfer is a way to send funds electronically. It can be done in person or via an online service, which is what most people tend to choose due to its convenience.
Furthermore, a wire transfer can be done by a person or entity, meaning that the mode is not limited to just banks.
Wire transfers are fast ways to send money, taking anywhere between 1-5 days.
The reason why payments aren’t instantaneous is that they must be processed in order to ensure legitimacy as well as other factors such as compliance with laws.
Because of this factor, wire transfers usually have a cost - investigations can not be done for free!
What are some ways I can make an international wire transfer?
There are several services used to make an international transfer, the most popular of which are: Transferwise, PayPal, and Western Union. Traditional banks can also be used to make international transfers (though it is not recommended).
In terms of the processes and cost of each service, it gets rather complicated as they tend to charge different fees and have different rates. However, when making an international wire transfer, most of the time the following information is needed:
- The recipient’s name and address (make sure that the address is the same one registered under their bank account!)
- The recipient’s account type (checking, current, savings, money market, and so on)
- The recipient’s bank as well as its address
- Finally, either a SWIFT or BIC code
What is a SWIFT or BIC Code?
“BIC” stands for “bank identifier code,” and in international transfers would be referred to as a SWIFT or “Society for Worldwide Interbank Financial Telecommunication” code. These are both the same thing and can be used interchangeably.
A SWIFT code is 8-11 characters long and consists of letters and numbers. The prefix, generally consisting of two letters, denotes the country that the bank is located in. (A useful tip to keep in mind).
What about IBAN?
If you are transferring to an individual located in Europe, an “IBAN” or “international bank account number” is needed instead of the traditional bank account number. This is another valuable factor to keep in mind, although your financial service of choice will likely ask for an IBAN when needed.
Finally, the last piece of information to keep in mind is the CNAPS or “China National Advanced Payments System.” The CNAPS is very similar to the IBAN, though it only applies to transfers taking place to China.
Once again, you will most likely be prompted by your financial service of choice to enter the CNAPS code, but it is good to keep in mind in order to be prepared for transactions to said countries or regions.
Is there a transfer limit?
Generally speaking, there is no transfer limit, however, banks may get suspicious when sending large sums of money overseas and may ask for your reasoning behind the transaction. You may then have to provide further details such as an invoice if making a purchase, or identification of the beneficiary (or recipient).
What’s wrong with a traditional bank?
Generally, making international transfers through a bank takes a lot of time, or around 1-5 working days for a single payment to be processed. Another factor to consider is that banks usually send the payment to other banks, who then pass it onto the beneficiary's bank.
Each of these ‘intermediary banks’ charges a fee - considering that there could be up to five intermediary banks, this method of transferring money can be very costly. Fees can also range depending on exchange rates.
How do exchange rates work, and how can they affect my international transfer?
In short, an exchange rate is the value of one currency in terms of another, for example, the Euro in terms of U.S. Dollars. As you may have guessed, exchange rates can affect the amount received by your beneficiary if the transfer is done in different currencies.
Exchange rates are continuously changing, meaning that the value of the U.S. Dollar in terms of Hong Kong Dollars, for example, will be different the next day (Or even in one second!).
When making transfers in different currencies, banks also tend to charge a fee, either in the form of a commission or through the spread, which is the difference between the buying and selling price of each currency pair.
Then what’s the cheapest way to make an international transfer?
This is a very tough question to answer, as it is very specific to the user making the transfer. To make your choice easier, the most popular financial services will be explored.
PayPal is designed to be an easy way for individuals or businesses to transfer money online. You can either make a business or personal PayPal account depending on its intended use. Credit and debit cards will also be saved, making transfers quick and easy.
In terms of cost, the service charges around 2.9% and a fixed fee based on the chosen currency for international transfers.
However, many have complained about PayPal’s lack of communication and poor customer support.
To some, this is a very important consideration, as business owners, for example, should be able to track payments/resolve transactions quickly and efficiently, thus making this service a potentially risky choice for business owners.
Transferwise is a very popular service in the UK. This is thanks to their ‘fair’ transaction fees as well as fast transfer times.
From an individual standpoint, Transferwise is very easy to sign up to, and based on the fees of 1-1.5% charged per transfer (significantly lower than PayPal fees), makes it a very effective method to transfer small to medium amounts of money. Each transfer usually takes about 2 days.
However, due to the fact that Transferwise charged a fixed percentage per transaction, it may not be suitable for large or business transfers.
Furthermore, if a Transferwise user sends a large amount of money, they will be prompted to provide documents such as business documents, invoices, and so on.
This can greatly delay business processes. If the business does not meet Transferwise’ compliance rules, their account will be frozen and funds will be sent back to the user’s business account, which can take a lot of time.
Statrys is one of the best payment services for SME’s. Instead of PayPal and Transferwise’ percentage fees, Statrys charges a fixed fee per transaction.
Each transaction, regardless of size, will cost the same amount. Furthermore, the service provides great customer support, allowing users to be updated each stage of the international payment process.
This option is thus highly suitable for businesses who rely on good communication and transact large amounts of money online.
Making online transactions has never been easier. Due to the widespread use of wire transfers, more and more methods are becoming available for use. Depending on the reason behind making a transfer, the mode or chosen service will vary from person to person.
For those who are interested in quick and easy transfers to friends and family overseas, PayPal is a great choice. However, because Transferwise offers the same benefits with substantially lower transfer rates, it would be best suited for individuals. SMEs might be a different story...
For those interested in making transactions and managing a business online, Statrys offers the above benefits for SME’s specifically. The financial service also provides great customer support and communication and fixed transfer fees (making large transactions far better), making it perfect for businesses. Sign up today and start your SME payments off the smart way with Statrys.