As companies seek to send money around the world, they’re faced with a question: how? Getting money from one account to another across international borders isn’t as easy as domestic funds transfer. Thankfully, wire transfers have long been a staple that enables quick and secure transfers across borders.
For many small businesses, the concept of a wire transfer is intimidating. They associate it with big businesses and major transactions, and they may not even have authorization from their bank to initiate international wire transfers. Thankfully, wire transfers are simple enough to set up and execute, and great for those one-off transactions that might otherwise be difficult to send overseas.
If you’re new to wire transfers or curious about when and why to use them, here’s a quick guide about how to manage them.
What’s needed for a wire transfer?
Wire transfers are a double-edged sword when it comes to simplicity vs. security. While they’re incredibly secure and offer a great opportunity to move funds safely across borders, businesses need extensive banking information to facilitate the transfer. Here’s a look at the laundry list of information required to set up a payee and facilitate the funds:
- Issuing bank account
- Recipient’s name
- Recipient’s account number
- Recipient’s address
- Recipient’s bank or financial institution name
- Bank ABA routing number
Keep in mind that all this information leads up to an important conclusion: wire transfers happen between banked customers. While there are services that facilitate wire transfers without the need for a bank account, they often charge a fee or make it difficult for recipients to access funds. Wire transfers are best orchestrated in a bank-to-bank capacity.
How to execute a wire transfer
With the recipient’s banking information in-hand, setting up a wire transfer is easy. Here’s a quick step-by-step process:
- Select wire transfer from your bank’s digital payment options
- Enter the payee information and the fund transfer amount
- Confirm that the information is accurate and acknowledge the fee
- Confirm and initiate the transfer
There’s one caveat to wire transfers: businesses need authorization—especially when it comes to international funds transfer. Often, this is as simple as requesting the ability to send wires from the institution you bank with. Some banks may ask you to sign a waiver, which acknowledges the liability and fees that come with wire transfer processing, and warns against scams and incorrect transfers.
How long does a wire transfer take?
The biggest benefit of sending wire transfers is that they’re processed immediately. That means as soon as you hit the button, the bank begins the transaction. Most often, the processing takes under 24 hours, which means the funds are on their way almost immediately.
Most domestic wire transfers see funds landed within 24 hours. International transfers can take a bit longer, depending on the destination and the financial institution. Generally, most international wires see funds landed within 24 to 36 hours. In either case, this is typically faster than ACH transfers, which can take up to a week depending on destination and institution.
The rapidity of wire transfers comes at a cost, however. Wire transfers are one of the most expensive ways to transfer money globally. Fees can range from bank-to-bank, but they tend to make using wires frequently cost-prohibitive. Moreover, if there’s currency exchange anywhere in the transaction, there are added costs to worry about and there’s no guarantee you’ll get a prime exchange rate.
The framework behind wire transfers
Wire transfers have been around for decades. They’re part of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and other older payment rails, including Fedwire. As a result, there’s not a lot of transparency when it comes to how money moves from one bank to another.
The good news is that while the process behind moving money isn’t always transparent, wire transfers themselves are much more visible—hence the need for identifying banking information on both sides. That said, scammers often target wire transfers because the quick transfer of money allows them to take advantage of businesses before they can cancel the transfer.
Speaking of canceling, once wires are sent, that money is generally gone. In some rare cases, a bank can stop a transfer; however, companies need to cancel the wire almost immediately after executing it. The further from the execution, the less of a chance to cancel. Moreover, there’s often a fee for cancellation.
The bottom line on sending a wire transfer
Wire transfers are simple to set up and execute, and they’re a staple payment option for any business transacting across borders and around the world. That said, they’re best-used infrequently and for larger transactions to known recipients. The quickness, security and peace of mind that come with them are great, but companies will pay a price for them. For more frequent transfers and payments, consider digital payment options instead.