Did you know that the bank wire method for transferring funds is based on decades-old technology? This is one of the reasons it’s slow and cost-intensive.
The good news is that there are alternative payment methods that use modern infrastructure to transfer funds with low transaction fees and faster processing times.
Let’s take a look at why bank wires are outdated and how your business can benefit from alternate methods of domestic and cross-border payments.
Bank wire vs wire transfers
Companies frequently do businesses with entities located in geographically distant locations, be it remote workers, suppliers, or utility service providers. Sending funds from bank-to-bank is therefore a regular business activity. Most business owners use bank wires to transfer funds.
Many people often confuse bank wires and wire transfers though they’re different in more ways than one.
The main distinguishing factor between the two is that a bank wire involves the transfer of funds from bank-to-bank whereas a wire transfer is used to send money through a number of networks using a bank or third-party. In bank wires, funds are transferred only through banks. On the other hand, many non-banks and private corporations frequently offer wire transfer services.
Both bank wires and wire transfers are based on the same technology that was used to send telegraphs many decades ago. In fact, the first wire transfer was sent back in 1872.
However, there haven’t been any noteworthy advancements in wire transfers since the establishment of the Society for Worldwide Interbank Financial Transactions (SWIFT) network in 1970. This means transferring funds using a bank wire or wire transfer today is no different from what it was 50 years ago!
The traditional ‘fast and convenient’ way of money transfer has now become outdated and costly. The bank you use to send or receive a bank wire normally charges a fee for their services that both the sender and the receiver pay.
Wire transfer fees are based on different factors such as whether the funds are incoming or outgoing or whether they’re domestic or international.
Correspondent banks act as a middleman to facilitate the issuing bank and the receiving bank. This banking system has made bank wires slower and more expensive than ever before.
What is SWIFT and how does it work?
SWIFT is the world’s largest electronic messaging system that was originally designed to securely and easily transmit financial messages.
It’s essentially a bank-to-bank messaging network that uses a standard system of codes showing where a fund transfer is coming from, where it is going, and how it will get there.
According to 2018 estimates, SWIFT facilitates the exchange of an average of 31.31 million messages a day. The high volume of daily message transmission makes it almost impossible to trace fund transfers. Tracing lost fund transfers is costly, takes a lot of time, and there’s always a chance that you won’t recover your money.
The SWIFT regulations state that if a financial institution doesn’t have a correspondent account, the funds will be routed from bank to bank until it reaches the required destination. For instance, if your bank doesn’t have a connection with your beneficiary’s bank, it will have to loop another bank that does have a relationship with your bank – the correspondent bank – to complete the fund transfer.
In addition to this, SWIFT and other intermediary financial institutions charge different fees for their services. The payee has to pay a fee when receiving their funds. You also have to pay additional fees for international wire transfers that require currency exchange.
Two better ways to transfer money
Here are two alternatives to bank wires and SWIFT networks that are better in terms of security, processing times, and cost-effectiveness.
ACH (Automatic Clearing House) transactions offer a fast, secure, and cost-effective transfer of funds between banks. ACH transactions work in a batch process, unlike bank wires which involve the transfer of money from one bank to another.
When a money transfer reaches a bank, it’s stored on that day and sent on the next day. This way, these money transactions cost less than wire transfers. However, ACH transactions are slower than wire bank transfers and can take around 2 to 3 business days to complete.
Ablii is a business payment solution that lets you send and receive domestic and overseas payments. You’ll be able to transfer funds online directly between bank accounts. Moreover, both parties (sender and recipient) will receive real-time status updates on payments in transit.
This payment solution enables you to send payments using data saved in your accounting software including contacts and invoices. Ablii also allows you to manage a searchable payment history through an easy-to-use interface.
Alternative payment methods like ACH payments and Ablii offer fast and secure ways to transfer funds. They are also more cost-effective than bank wires, making them a better option for businesses.
Ready to implement a fast and secure payment system for your business? Get Ablii today!