Are Wire Transfers Safe?
February 4, 2020
Are wire transfers safe? How can businesses transfer funds safely abroad?
Sending an international wire transfer requires a lot of time, energy, and most importantly, trust.
After all, you trust your financial institution to send your funds to your intended recipient. You (most likely) don’t have a clue how these transfers work, or how safe they are, and it’s your money on the line. Money that your small business has earned through hard work and dedication. No wonder you want to ensure your wire transfer arrives safely to the correct destination.
In general, banks like to project an image of robust, safe, and honest institutions. Unfortunately, this image may not be strictly true.
How safe is your money when you send it abroad via a traditional bank wire transfer? To make an informed decision about how to send wire transfers safely, you need to learn about the basics of international payments.
International wire transfers in a nutshell
An international B2B payment can be defined as any transfer of funds across different borders for commercial purposes, for example sending money to your overseas business partners. Here’s how the international wire transfer process works:
- Sending international payments requires the initiator to enter quite a bit of data about the receiver, including their legal name, IBAN, BIC code, and SWIFT code.
- When you confirm an international transfer, your bank deducts the funds from your account.
- Then it notifies the recipient’s bank and creates a route for the transfer. This route involves other banks and financial institutions that are connected through an international network called SWIFT (Society for Worldwide Interbank Financial Telecommunication).
However, SWIFT only handles information like account numbers, and not the actual funds. Those are processed by the banks involved in the wire transfer transaction. This means that your money travels through various middlemen, all of whom represent a possible security threat, and a definite increase in fees.
Think of sending your money on vacation, and the intermediary banks are connecting flights (there are very few direct flights in the SWIFT universe). Unfortunately, each one of these layovers is going to cost you more in fees.
After all, no bank wants to handle your transfer for free.
Wire transfer safety
Although the SWIFT network is considered a safe messaging system, there are numerous vulnerabilities in the process of traditional wire transfers.
First of all, given the sheer amount of data you’re supposed to provide about the recipient, it’s no wonder that you (or an employee of any bank involved) can make mistakes. If a wrong number is entered in a bank account or a digit of the SWIFT code is forgotten, the whole transfer gets sidetracked.
So, now what?
Lost or misplaced bank wires are notoriously difficult to track down. It would take weeks of tiresome work to recover your money, and you may not even get the whole amount back.
But nobody finds out about this until the last stage, when the funds are supposed to be deposited into the recipient’s account. Why? Nobody contacts the recipient to double-check their information.
Because the tiny mistake is hidden until the very end of the process, your funds can easily get lost somewhere along the way and you’d never know (until your recipient contacts you to demand their money). Even though your funds haven’t reached the recipient, the banks have still handled them, levying their fees and charges left and right.
And what if the funds do land in somebody’s account, just not in the intended recipient’s? Trusting a complete stranger somewhere in the world to return your money seems like a shot in the dark.
Worse, if you were to mistakenly send an international wire transfer to a recipient involved in shady or even criminal behavior, you may be liable thanks to anti-money laundering and anti-terrorist funding laws.
On top of that, delayed payments are quite harmful for your relationship with your overseas suppliers. Nobody enjoys the inherent awkwardness of a “where is my money” phone call, which can damage the trust that strong business relationships rely on. Chasing your money and dealing with lost or missing payments takes time away from managing your business.
“Hacking” international wire transfers
Another problem is malicious intent. Although bank information is encrypted, hackers can find a way. And since your money doesn’t have a direct route but has many “layovers” in various banks, the number of transactions keeps growing. Anybody can do the math: the more transactions, the more vulnerabilities.
What’s telling is the fact that if you ask your bank where your transfer is, nobody will be able to give you a straight answer.
The truth is, your bank has no idea where precisely your funds are at any given time.
Your funds may be parked in the UK because of a bank holiday, or processed in Zimbabwe en route to Sri Lanka to end up in Japan. Nobody knows for sure.
Do you want your business’ hard-earned money to travel like that?
The cost of an international wire transfer
A lost international wire transfer can be devastating for a small business. Depending on your bank and the wire transfer destination, you may be able to recover your money, but it will take precious time. SMB owners are especially busy, and don’t have time to spare in endless lines at a bank.
Protect your cash flow from lost wire transfers
If cash flow is tight, lost wire transfers pose a serious risk to your business. Often, SMBs don’t have the luxury of waiting around for money to finally arrive via wire transfer. Waiting for lost wire transfers to be refunded or resent isn’t an option for small businesses with bills to pay, supplies to purchase, employees to pay, and clients to satisfy. Short term loans (and their fees) are an additional expense that many SMBs cannot afford. Simply put, cash flow is the lifeblood of your business, and a lost wire transfer is like a clogged artery: it puts everything at risk.
Lost wire transfers, lost relationships
When it comes to business, everyone knows money talks. And missing money talks loudly. Nothing damages a business relationship like a missing payment. Lost wire transfers can ruin the trust and goodwill that productive partnerships rely upon. If you’ve ever had to make ‘where is my money’ phone call, you know how awkward it can be. Missed payments due to lost wire transfers can irreparably damage valuable relationships, and potentially cost your business repeat customers.
Missing wire transfers also hurt a relationship every SMB owner relies on: their employees. When employees, contractors, or freelancers aren’t paid on time, they likely won’t work for your small business for long. Too many missed or lost payments due to wire transfers can cause your business’s reputation to tank, making it difficult to attract and hire the top talent you need to succeed.
A safe and low-cost alternative to traditional wire transfers
We don’t want to scare you away from doing business internationally. In fact, we know that going global is the only way forward for many US small businesses. Globalization is bringing more opportunities to entrepreneurs and SMB owners everywhere; especially for small businesses, going international to capitalize on new markets and trends is a must in today’s global economy.
But losing money, time, and manpower while chasing international wire transfers is not an option. Small businesses need a secure method to send wire transfers safely.
With Veem, your international wire woes are no more.
Veem is the next generation global B2B payments platform. Using unique multi-rail technology (including one of the safest technologies on Earth, the blockchain), Veem allows you to send international transfers quickly, securely, and as easily as sending an email.
Our relationship-based payment network brings disintermediation to the international payment process. Instead of relying on middlemen, Veem creates a direct connection between sender and recipient. No middlemen means no hidden fees and no unexpected delays.
Veem’s shared network means you never have to worry about a misplaced digit or banking error derailing your payments. We verify the recipient before actually sending the funds, putting an end to all misrouted payments. Greater visibility for everyone means mistakes don’t have a chance.
As both parties are connected via the Veem network, the sender and recipient are responsible for verifying their own information. This eliminates the need to share sensitive banking information with foreign business partners, bringing further security and peace of mind to global business payments.
Veem allows both parties to track funds through the dashboard. At any time, either party can look up precisely where the money is and when it will land, bringing transparency and trust to international business relationships.
As the only payment network built with the needs of SMBs in mind, Veem is trusted by hundreds of thousands of businesses in hundreds of countries around the world.
Sign up for a free Veem account and enjoy international payments of the future.
Simplify your business payments with Veem.