Local bank transfers are quickly becoming the international money transfer method of choice for businesses that make mass payments. Online marketplaces, affiliate networks, and advertising networks regularly execute mass payment batches to their partners. Local bank transfers can be executed quickly and at scale while having the advantage of low fees and local currency.
What is a Local Bank Transfer?
Local bank transfer is a cross-border payment method where a deposit is made into a foreign bank account. Local bank transfers are also known as an international ACH, Global ACH, or eCheck. A type of EFT (electronic funds transfer), the convention and process by which local bank transfer payments are made varies from country to country.
How Does a Local Bank Transfer Work?
Local bank transfers involve an intermediary organization or financial institution which operates between the payer (or the originator) of the transfer and the payee (or the receiver) of the payment. The intermediary acts as a clearing mechanism and helps to process and settle the transfer of funds.
In the United States, the most common process that involves this type of intermediary is called an ACH transfer. The payment is issued by the payer and then ‘cleared’ and settled by the Automated Clearing House before being available in the payee’s account. Unfortunately, the domestic ACH system can’t settle international money transfers.
Many other regions around the world also have clearing mechanisms that function like an ACH transfer. Europe has developed the Single European Payments Area (SEPA). SEPA uses local bank transfers with similar ease to domestic ACH transfers. India has several mechanisms for local bank transfers, including the NPCI, ECS, and more recently, the NACH.
Local Bank Transfers vs International Wire Transfers
The difference between local bank transfers and wire transfers is the role of the network or intermediary. Wire transfers utilize a direct link between the banks on both sides of the transfer. While local bank transfers can be completed at a relatively low cost, international wire transfers tend to carry hefty fees. While international wire transfers are more expensive than local bank transfers, they tend to be more reliable and faster.
Why You Need Local Bank Transfer as an International Payment Method
Local bank transfers can make paying vendors and partners a lot easier for your company. It has many advantages, which other options may not give you. So if you have a large business, you may find using it beneficial. Here are a couple of reasons why you want to use local bank transfers, eCheck, as a global payment method.
Global Reach
Businesses have a global reach. Their international suppliers, partners, and independent contractors like receiving cross-border payments through a payment system handling local bank transfers.
Local bank transfers can reach pretty much anyone worldwide. Many businesses, especially internet-based digital economy brands and large corporations, rely on products or services from people outside the country.
If you use this service to pay your suppliers or partners, you can automate the global payments workflow. The result is reducing accounts payable workload by up to 80%. Instead of having multiple banks in different countries to make payments to, you can automate and consolidate your global payments into a single batch. With accounts payable automation, you or your staff can focus on growing your business.
Save Money and Time
Mass payments can save money and time. Rather than requiring a staff of accounts payable specialists to process payments, your payments can be grouped into one payment run. Your business will leverage the efficiency of automation. Besides the time it takes to process invoices and execute payments, extra steps are required for global payments. A robust end-to-end mass payment solution takes the manual steps out of your accounts payable workflow, helping to save money and time.
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Pros and Cons of Local Bank Transfers
Local bank transfers have advantages and disadvantages, although the pros outweigh the cons. For SEPA payments in euro (EUR), transaction fee pricing is regulated to be the same as domestic transfers. The U.S. doesn’t have similar online banking regulations for local bank transfers.
Pros
The pros of local bank transfers are:
- Safety and security of the transaction to a local bank account at the receiving bank
- Less risky than an international wire transfer
- Costs are much lower than bank wire transfer fees
- Recipients are paid quicker in their local currency
- Payer exchange rate fees from US dollars (USD) to local currency are reasonable
- Local bank transfers can be used for global mass payments
Cons
- A local bank transfer can take several business days to reach recipient’s bank account
- Often slower than international wire transfers
- May be somewhat less reliable than international wire transfers
- Intermediary banks and electronic transfer fees may be charged to payer and payee
How Long Do Local Bank Transfers Take?
Local bank transfers (cross-border electronic transactions) often take longer than domestic bank transfers. A local bank transfer usually takes from one to three business days. It can take more time, depending on the countries and banks involved. For example, local bank transfer transactions with China can take up to five business days.
