As the global economy continues to expand, sending money to businesses and individuals abroad is more common than ever. That’s why it’s important to understand the basics of international wire transfers. A quick, secure and reliable method of moving money electronically between banks, wire transfers make it easy to do business across borders. According to World Bank data, roughly $719 billion was wired between countries around the world in 2019—and that figure is growing by leaps and bounds. Here’s what businesses need to know about international wire transfers.
How an international wire transfer works
International wire transfers are also known as remittance transfers. These transactions are often handled by banks, but can also be facilitated by credit unions and other financial service companies. Banks, credit unions and other traditional financial institutions are usually the best options for infrequent transfers across borders.
Executing an international wire transfer is simple enough, and works like most other forms of digital funds transfer—simply log in, input recipient information and process the transaction. That said, to execute a wire transfer takes no small amount of information, including the recipient’s complete banking information. Moreover, most banks require wiring privileges when it comes to executing international wires.
International wires get processed through a payment rail like the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire. The transaction is processed instantly; however, it can take anywhere from 24 to 36 hours for the funds to land, depending on the bank and destination.
Wire transfer essentials
- Issuing bank account
- Recipient’s name
- Recipient’s account number
- Recipient’s address
- Recipient’s bank or financial institution name
- Bank ABA routing number
The benefits of international wire transfers
Sending money through wire transfer has some real advantages—especially when it comes to businesses transacting internationally. Here are a few pros of making cross-border electronically using a wire:
- Speed: Even when sending money to another country, the recipient won’t need to wait long to receive the funds. It usually only takes a few minutes to initiate an international wire transfer, and because banks process them quickly, the funds are generally en-route to their destination within the day.
- Security: Particularly if you use an established financial services provider, you can feel good about the security of an international wire transfer. There’s a degree of reliability when it comes to this mode of payment, and transfers won’t bounce like checks or decline like ACH transfers might.
The drawbacks of international wire transfers
There are some potential negatives businesses need to keep in mind when considering an international wire transfer. here are a few of the drawbacks that come with sending money through a wire:
- Fees: There’s no getting around it—wires are expensive. Fees vary from bank to bank, but they’re usually large enough to make frequent wire transfers prohibitive. Moreover, these fees can compound if there’s any sort of currency conversion that happens between the origin and destination accounts—which is often the case when it comes to an international wire transfer.
- Tough to Cancel: Although certain situations allow you to pull money back after it’s wired, it can be difficult to reverse an electronic transaction. Make sure you read all the fine print before going forward with a wire transfer of any amount. It’s important to be aware of scams and to only wire money to entities you know and trust. Moreover, prepare to pay yet another fee for cancellation if the bank is able to stop the wire.
When to use a wire transfer to send money abroad
Some financial transactions are ideally suited for wire transfers. Sending a one-time large sum transfer is a prime example. For business owners, wire transfers are common when it comes to paying monthly or quarterly invoices. This mode of payment is also applicable for one-off payments—especially if they require expedited delivery or you’re moving a large sum. The best instances for using an international wire transfer include:
- If you need to make a large purchase or transfer, a wire transfer is your best option.
- When security is paramount for a one-time funds transfer, wires are the gold standard.
- When dealing with a one-time B2B transfer, wires will expedite a safe, secure transfer.
- If you need to send money internationally, a wire transfer is a quick and easy method.
- When you have all banking information readily available, wires are convenient.
All that said, remember that wire transfers require the recipient’s complete banking information. International wire transfers are a great way to send large sums of money overseas on an occasional basis. When it comes to smaller sums or more regular transfers, other forms of digital payment are often more applicable.