In the age of digital payments, wire transfers are one of the old staples for transferring money between accounts. Many businesses rely on wire transfers to quickly and conveniently move large sums with peace of mind, thanks to their secure nature. Also called money wires, bank wire transfers or simply “transfers,” they’re a mode of payment any business needs to be familiar with—especially in the modern age, where cross-border and international payments are becoming more common.
Wire transfers can seem intimidating if you’re not familiar with digital funds transfer. Thankfully, they’re simple to execute, provided you have the right information and have established the ability to send wire transfers with your bank.
Assuming your business has wire transfer privileges, executing a transfer is as simple as logging in and selecting a payee. You’ll need the banking and identification information of the payee and the destination bank. Once this information is entered and the transaction is executed, the bank will process the funds transfer immediately. This happens through a payment rail such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire.
It’s important to understand that while processing often happens instantly, funds may not land for several days when it comes to international wire transfers. Funds will leave your bank and arrive in the destination account in anywhere from 24 to 36 hours, depending on the bank and destination.
Many businesses choose wire transfers because of their exceptional security relative to other payment methods. There’s no risk of losing a check in the mail or having a wire transfer get rejected like an international ACH transfer might. Wires are secure, point-to-point transfers that facilitate convenient exchange of funds.
The instantaneous nature of wires also makes them advantageous to businesses. When sending large sums to vendors or partners, businesses need the peace of mind that comes with a quick transaction. Wires process immediately and land shortly thereafter, as opposed to waiting the better part of a week for funds to become available.
Finally, wire transfers are widely accepted around the world. This makes them one of the most reliable methods for paying global partners (assuming they’re traditionally banked). It’s the method of choice for most large business transactions.
The biggest drawback of wire transfers is their high cost. Compared to other digital payments and credit transactions, wire transfers are much more expensive. This makes frequent wires cost-prohibitive and can make sending small sums more expensive than they need to be. Wires are best-reserved for one-off transfers of large sums or situations where companies are willing to pay a premium for the quickness and security these transfers offer.
Another drawback to wires is that once they’re sent, they’re sent. While it is possible to cancel a wire, banks can make it difficult. Usually, there’s a cancellation fee. This is especially important to remember when sending money to someone for the first time—the bank may not cancel your wire just because you mistyped the account information and send funds to the wrong place!
Speaking of mistaken information, wire transfers are often the subject of scams because they’re so difficult to reverse. Make sure you’re sending funds to the correct recipient—an entity you know or have agreed to transact with.
Not sure when to use a wire transfer to send funds across borders? While there are much better options for frequent or recurring payments, wire transfers still hold an important role in business funds transfer. Here’s when to use a wire to send money:
When it comes to wire transfers, quickness, security and convenience are hallmarks of the process. That said, these benefits come at high costs and require more information than you might have about the recipient of funds. Wires are best-reserved for occasional high-dollar transfers. For everything else, digital payments are quickly emerging as the best way to send money regularly.
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