Why bank wires are lame
October 16, 2019
Sending money bank-to-bank is a task no business can avoid. And in this modern global era, doing business with only those nearby simply isn’t possible. Inevitably, you will have to send money around the world to your employees, suppliers, miscellaneous bills, and more.
And more often than not in these scenarios, a bank wire is the first thing that comes to mind. While bank wires and wire transfers are often used interchangeably, they aren’t synonymous.
There is a key difference between these money-sending methods. Essentially, a bank wire sends money bank-to-bank, whereas a wire transfer sends funds through a series of networks via a bank or third-party. Bank wires send your money exclusively through banks, while many private corporations and non-banks often wire transfer services.
Bank wires and wire transfers are both based off the same technology used to send telegraphs back in the day. In fact, in 1872, the first wire transfer took place using the Western Union’s telegraph network. At the time, wiring money became a popular way to send and receive funds due to its speed and convenience.
Since 1970, and the invention of the Society for Worldwide Interbank Financial Transactions (SWIFT) network, innovation around wire transfers has come to a standstill. When you send a bank wire or wire transfer today, you are using the same technology that dates back 50 years.
In the post-internet age, this once convenient method has become archaic, expensive and could cause you to lose money in fees or mistakes.
Let’s discuss some of the issues and the alternative (and better) methods you can use to send and receive money. Hint: Veem plug ahead.
Are wire transfers safe? Download our white paper to find out.
What is SWIFT?
As a small business owner, the first thing you should understand before wiring money is SWIFT.
SWIFT is a formalized messaging system that when first invented, created an easy, secure method of sending financial messages. But in today’s age, it’s anything but swift.
SWIFT utilizes a standard system of codes, defined by the institute, country, specific location and branch to securely transmit information.
According to Investopedia, nearly 10,000 SWIFT member institutions send around 24 million messages on the network. With that many messages being sent, it’s nearly impossible to trace money and it’s much easier to lose it.
The issue comes when clients using the SWIFT network don’t have access to all of the information. One wrong number and your money can be sent to the wrong side of the world, or just never show up. Tracking lost payments is expensive and time consuming. And when it arrives, is anyone’s guess.
With SWIFT regulations, if a bank doesn’t have a corresponding account, the money then bounces from bank to bank until it finds a link with its intended destination. For example, if your bank doesn’t have a relationship with your receiver’s bank, your bank will send the funds to a bank that does have a connection with your payee’s bank. With the introduction of more middlemen, there is a lack of ownership as your money bounces from spot to spot. What’s stopping criminal activity from interfering?
The process becomes extended and expensive as each intermediary bank takes a fee. There is usually a fee for the payee as well, simply for the privilege of receiving their money. Let’s not even discuss the expenses involved if a wire is international and requires a currency exchange.
The cost and lack of security of bank wires is a huge deterrent for small businesses as they look for the cheapest options to send and receive money.
What if there was a better way? (Hint: there is).
See how Veem can make your business payments simple. LEARN MORE
Why you should try Veem instead
The age of the internet re-introduced the spirit of innovation to the world of money transfers. With the click of a button, customers can now send and receive money hassle-free. Higher speed, trackable transactions, and streamlined processes are all advantages a traditional bank wire simply can’t offer.
Unlike wire transfers, Veem utilizes blockchain and unique multi-rail technology to help reduce cost and worry. With its simple, online transfer service, customers can keep track of their money end-to-end. Never have that awkward “where is my money” conversation again.
Veem also verifies both the sender and receiver, enhancing the security of the transfer and reducing potentials for fraud.
Sign up for a Veem account and start saving money on your payments.