Wire transfer vs. bank transfer: What is the difference?
- Money transfer
- International payments
What’s the difference between a wire transfer and a bank transfer? At first sight, these terms sound familiar, but the cost factor is significant. While bank transfers allow businesses to pay like a local, wire transfers require between $25 and $50 transfer fees. In this article, we are going to show the differences and how companies can profit from both processes.
What is a wire transfer?
A wire transfer is an electronic transfer of money between two entities via a secure network. In theory, it can refer to both domestic and international money transfers, but wire transfers are much more commonly used for transfers abroad, as local bank transfers are the superior options in terms of time and cost savings.
“Wire transfer” is often synonymously used for the SWIFT network. If you are a European company conducting business in the US, you most likely have already used the SWIFT network before. SWIFT is a secure network that can be used by banks and payment platforms to enable companies and individuals to conduct payments in most currencies.
The problem: SWIFT takes hefty charges, which may vary between $25 and $50, depending on the amount as well as location and business relationship of the sender’s and recipient’s bank.
The sender can choose who bears the fees:
- BEN: The recipient bears all costs, which means the received amount is lessened by the SWIFT fees.
- SHA: Recipient and sender share the costs.
- OUR: The sender bears all costs.
Compared to local bank transfers, the money doesn’t flow directly from one bank to another, but goes through a chain of banks, as there is often no direct commercial relationship between the sending and receiving bank. Therefore, similar to international flights, the SWIFT network calculates an itinerary of intermediary banks with direct commercial relations, where the money needs to go through until it reaches the recipient’s bank.
For a SWIFT transfer, the sender needs the following information:
- Recipient’s full name
- Recipient’s account number
- Payment reference
- Recipient bank’s BIC (SWIFT) code (if applicable)
- Bank’s name (if applicable)
- Bank’s ABA code (if applicable)
Find out more about how to send money internationally.
How does a wire transfer work?
SWIFT enables companies to make international payments in almost any currency, while USD, EUR, GBP, CNY and JPY are the top 5 currencies used by the network. Compared to local bank transfers, the money doesn’t flow from one bank to another, but goes through a chain of banks as there is often no direct commercial relationship between the sending and receiving bank. Therefore, similar to flight itineraries, the SWIFT network calculates an itinerary of intermediary banks with direct commercial relations, which the money needs to go through until it reaches the recipient’s bank.
As already mentioned, SWIFT fees can go up to 5% of the transferred amount, which mainly depends on the amount of banks involved. The sender can choose who bears the fees:
- BEN: The recipient bears all costs, which means the received amount is lessened by the SWIFT fees.
- SHA: Recipient and sender share the costs.
- OUR: The sender bears all costs.
For a SWIFT transfer, the sender needs the following information:
- Recipient’s full name
- Recipient’s account number
- Payment reference
- Recipient bank’s BIC (SWIFT) code (if applicable)
- Bank’s name (if applicable)
- Bank’s ABA code (if applicable)
Find out more about how to send money internationally.
What is a bank transfer?
A bank transfer is an electronic money transfer between two banks, sending money directly from one bank account to another. While wire transfers usually refer to the SWIFT network, the term “bank transfer” is commonly used to describe local payment routes, such as ACH or SEPA.
Bank transfers are the most popular payment option, particularly among B2B payment methods, as the time and cost factor is usually just a fraction compared to the SWIFT network. ACH payments are cheaper, as there are only two corresponding banks involved:
- Originating Financial Depository Institution (ODFI) from the sender (or originator)
- Receiving Financial Depository Institution (RDFI) from the recipient
The problem: If you want to profit from the American ACH network, you need a bank account in the US. For European companies, it is virtually impossible to quickly set up a US bank account on their own if they don’t already have a local presence.
If you want to make a transaction via ACH, you can choose between direct deposits (initiated by the payer) or direct payments (initiated by the recipient) to exchange funds.
For a small business ACH payment, you need to provide the following information:
- Bank routing number
- Account number
- Account type: Checking or savings
- Recipient type: Individual or a business
Wire transfer vs bank transfer: Differences
When comparing wire with bank transfers, it’s essential for businesses to look at the user scenarios first. While SWIFT allows domestic and international transfers, bank transfers are more restrictive and depend on the local payment scheme. ACH is limited to the US, SEPA payments are mainly limited to the Euro area, with a few exceptions.
Speed, costs and risk are the main reasons companies opt for bank transfers. ACH usually takes 1 business day, while transaction costs can be as low as 1 USD. On the other hand, SWIFT may take several days and involves a hefty fee of usually between $25 and $50. SWIFT payments can’t be disputed, while senders using ACH still have options to reclaim their money in case anything went wrong.
| Wire Transfer (e.g. SWIFT) | Bank Transfer (e.g. ACH) | |
|---|---|---|
| Domestic/International Payments | Both domestic and international | ACH only allows domestic payments. Other local schemes, such as SEPA, allow international transfers. |
| Automatic/Manual | Mainly employees of sending, receiving and intermediary banks | Mainly automatic |
| Send/Request | Send funds | Send and request funds |
| Costs | Approximately between $25 and $50 | Free for the receiver. Sending fee varies and can be as low as $1 |
| Speed | Can take up to 5 business days | Usually 1 business day |
| Risk | Once transferred, the funds cannot be disputed | Once transferred, the funds can be disputed |
Wire transfer vs bank transfer: Speed
Speed is another key factor in choosing between wire and bank transfers. Domestic bank transfers through ACH or SEPA are relatively quick, usually settled within one business day. SEPA Instant allows for near real-time transfers within Europe.
Wire transfers, however, may take up to several business days for international payments that pass through multiple intermediaries.
- ACH: Around 1 business day
- SEPA Instant: Under 10 seconds
- SWIFT: Usually several days depending on banks involved
Wire transfer vs bank transfer: Risks
Both wire and bank transfers carry risks, but the nature of these risks differs. With wire transfers, once funds are sent, they are nearly impossible to recall. This makes them risky if the recipient is unknown or untrusted.
Bank transfers offer more protection for the sender, as disputed payments can sometimes be reversed. Therefore, businesses often prefer local bank transfers for recurring or routine payments, while wire transfers are typically reserved for non-frequent international transactions with trusted partners.
- Wire transfers: Irreversible, limited recourse
- Bank transfers: More options for reversal and dispute resolution
Get access to wire and bank transfers with amnis
With a digital payment platform such as amnis it is possible to make the best of both worlds. With its multi-currency account, amnis enables your business to send and receive money in over 20 currencies. Even better: When local payment options are available, amnis makes sure you can profit from the most cost-efficient payment solutions.
If there are no local payment schemes available, amnis enables you to pay via the SWIFT network. Therefore, you can make use of both bank and wire transfers and will always find the best option for your monetary needs. Also, check out the added convenience of an amnis business debit card for enhanced payment flexibility.
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