International Wire Transfers: Speed, Fees, and Regulations

Need to know the best method to transfer funds internationally between bank accounts? Paper checks are out of the question—they’re susceptible to a number of risks, including theft in the mail—so you’re left with a choice between payment methods: an international wire transfer or a direct deposit of funds using local bank networks, also called global ACH. In some cases, e-wallets or prepaid debit cards are an option, but these methods can complicate the process by adding multiple additional steps to transfer those funds in and out a bank account. Both wire transfer and local bank transfer essentially achieve the same thing, which is transferring money from one bank account to another, but each remittance or payment method has unique implications and requirements. For instance, the transfer fees (cost of the service), information needed, and the amount of time it takes to transfer money from one financial institution to another. So, which method is best for an international money transfer? Weigh them against these three factors—speed, fees (and limits), and regulations—to determine the payment method that best meets your needs:

1. Speed (International Transfer Options)

If you are in a rush to get funds from your bank account into the recipient’s account, there is a clear winner: international wire transfer. Typically, funds remitted through an international wire transfer only takes two business days to arrive because you’re sending the money directly from your account (i.e. a business checking or savings account) to the recipients account at the receiving bank. In other words, the banks (the sender and the receiver) are in direct communication with each other. You’ll need account numbers such as the SWIFT code or IBAN (International Bank Account Number) of the foreign bank to complete the international wire transfer.

The direct deposit transfer option (also known as local bank transfers, international ACH transfer, and global ACH) often takes 2 extra business days when compared with the speed of a wire transfer. Outbound wire transfer cutoffs times can vary from bank to bank and often depend on the time zone of the originating bank. Instead of communicating bank to a bank, the direct deposit leverages the clearing network in the country of the recipient’s bank. For example, the clearing network in the United States is NACHA (National Automated Clearing House Association), and in Europe, the clearing network is SEPA (Single Euro Payments Area). Funds transferred through the direct deposit method are processed in batches or groups with other transactions also using bank transfers, which means the process can range from a few hours to a few days to complete.

2. International Wire Transfer Fees

When sending money overseas, you’ll also need to consider the cost. International wire transfers can come with hefty transfer fees not only to send money (as much as $50) but also to receive the funds (as much as $10). Additional fees can also be accrued when doing a currency exchange from U.S. dollars to local currency. Also, consider that banks typically charge a fee to convert the dollars to the currency of the destination country. Global ACH or local bank transfer transaction fees can be as low as five dollars, a cost that’s significantly less than an international wire transfer.

While large financial institutions and banks can be an obvious choice for consumers needing to make one-off cross-border transfers, the transaction fees can add up for businesses. Online banking can remove some steps from the process for the consumer, but be aware that Bank Of America indicates that they charge $35 for outbound international wire sent in foreign currency and $45 for outbound international wire sent in U.S. dollars. These numbers do not necessarily include foreign currency exchange fees. Bank Of America advises that wire transfers sent in foreign currency will usually arrive sooner than funds sent in U.S. dollars.

3. Global Money Transfer Regulations and Limitations

When choosing between an international wire transfer or a local bank transfer, you’ll also need to consider the size of the transaction as well as the frequency of this payment. Each financial institutions like banks, credit unions, and money transmitters have different minimum and maximum limits on the amount you’re able to send. These institutions also have other restrictions on the frequency of overseas wire transfers or international direct deposits; frequency limitations include per day, per month, or per person. Global ACH is ideal for payments that occur in regular and high frequencies, such as paying a contractor overseas.

Consumers have federal protections for international wires and direct deposit transactions. Financial institutions are required to disclose the following information:

The exchange rate

Fees and taxes charged by the banks, intermediary institutions and other third-party agents

When the money will be available at the account destination

How to cancel transfers and correct errors

Financial institutions processing a direct deposit or international transfer service are required to follow the guidelines set by the Office of Foreign Assets Control (OFAC). The regulatory agency enforces economic and trade sections against specific foreign countries, banks or individuals based on US foreign policy. Banks are required to screen global ACH payments to ensure that the transaction complies with OFAC regulations.

As a component of the compliance, regulatory and screening process, sometimes more complicated or advanced information is needed to execute international wire transfers. Basic information for identification and bank details such as the recipient’s account numbers, SWIFT, and IBAN numbers are often needed as part of the screening process. While banks like Chase and Wells Fargo indicate that they require common identifying details such as SWIFT, IBAN, BIC or CLAB (for Mexico), Bank of America actually requires additional screening detail such as the “purpose of wire”. More advanced compliance procedures can, in some cases, require photographic identification to check against do-not-pay databases top assure that the funds being transmitted are not funding criminal organizations or violating sanctions.

We would be remiss if we didn’t at least mention that other less conventional options exist for cross-border payments. These range from mainstream remittance options such as Western Union, Moneygram, and PayPal to newer transfer services such as bitcoin (cryptocurrency or blockchain). The topic of blockchain could be an entirely different article, so we’ll refrain from going into the details of how those payments work. In short, many different options exist for sending money internationally. The right choice for you and your business depends on factors such as amount, frequency, and time-sensitivity.

As a company, choosing between sending money via an international wire transfer or a global ACH depends on factors that make the most sense for your business. You may want the money to arrive at the foreign bank the soonest possible, but it most likely will come at the cost of higher remittance fees. Institutions like Tipalti offer businesses other alternatives to sending money to cross-border accounts. Tipalti helps companies with mass payment needs save money by switching payments from expensive international wire transfer to global ACH (aka local bank transfer) in countries where that is an option.