Wire Transfer

Wire transfer was first introduced by Western Union back in 1872. Western Union started it on its existing telegraph network. Since the telegraph technology was first used to make such transfers, hence the term ‘Wire Transfer’ was coined. An operator could transfer funds from one Western Union account to another using a set of codes and passwords.

Later, with the advent of technology and internet, more efficient means of money transfer were introduced but the term ‘wire transfer’ was used to differentiate them from intra-country transfers.

There are, basically, two types of wire transfers- bank wire transfers and wire transfers through global payment service providers like Western Union and Moneygram. Let us talk about these two methods of fund transfer in some detail-

1- Bank Wire Transfers

Lately, this type of wire transfer has become quite popular as it is efficient and takes lesser time to process. For example, when a party wants to send money from a foreign bank account into an Indian bank account, the account holder or a representative of the account will have to visit his local bank and communicate his wish to transfer money to an Indian account. Information like name of the receiving party, the currency in which transfer is to be made, bank account number, name and address of the bank, etc. needs to be furnished to make the transfer. There may be some specific criteria around wire transfers which differ from bank to bank.

Process-

• The sending party visits the local bank branch and provides the details of the party to which the amount is to be remitted.
• The bank then sends a message either directly to the receiving bank or to a correspondent bank. This is done through a secured system.
• The sender bank also provides the SWIFT code without which a global fund transfer cannot be made. Other settlement details are also included.
• The transfer of funds takes place between the two banks which ultimately results in the amount getting credited into the receiver’s bank account.

Bank wire transfers can be made within 1-2 working days. The bank also collects fee for the transaction from the sender. While remitting money to a foreign bank account, you must make sure that the information provided by you is correct. The currency in which the remittance is to be made should be clearly specified. Wrong details may result in cancellation of the transaction or the fund may land into a wrong account (although this rarely happens). Wrong details may also delay the transaction.

SWIFT Code

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication and is the most important part of a bank wire transfer. SWIFT is a network that sends and receives information about financial transactions across the globe. SWIFT code is a unique identifier which is in the standard Bank Identifier Code (BIC) format and must be provided at the time of making international fund transfers. The code lets banks communicate messages about international transfers.

SWIFT establishes a secure and reliable environment for international transfers. Financial institutions in more than 200 countries are a part of SWIFT and exchange millions of messages every day to carry out secure money transfers from one country to another. You should note that it is not SWIFT that does the clearing or transfers money; funds are transferred from the bank. SWIFT only sends payment orders through a set of codes which must be settled by the correspondent accounts for making payments.

2- Other Service Providers

Apart from the banks, there are other payment service provider companies functioning on a global level that let a party from one country transfer funds to a party based in another country. Western Union and Moneygram are the two most popular payment service providers across the globe. These companies have a wide network of agents in locations across several countries. One can send money through them either online or by directly visiting the agency.

Process-

• To send money through such service providers, one should visit any of the agent offices.
• Provide details of the receiver’s location and your own identification.
• Then, you will have to provide cash at the counter.
• After the transaction is approved, the receiver can visit an agent at his location and take the money in cash but only after filling a form and providing valid proof of his identity.

A fund transfer through these service providers is good in case the sender or receiver does not have a bank account. Despite the fact that sender and receiver will use cash mode, these service providers are included in the category of wire transfer because they use the electronic medium to transfer funds.

Besides bank transfers and global service providers, some third party applications also allow people to transfer funds across the globe. Paypal is one of the most popular ones. However, these applications only offer limited use.

The most preferred way of wire transfer is through the service providers like Western Union. They offer convenience to the sender and receiver as there is no need to provide any bank account details. Personal identification, however, is necessary. On the other hand, bank wire transfers require you to provide several details of the remitter’s bank account, SWIFT Code, etc.

One thing that is common in both these methods is the fee. Sending money through any of these entails some fees and charges. Currency exchange rate is another important thing to consider before you transfer funds to an international party.