Local vs. International Transfers for Canadian Businesses

As the gig economy continues to evolve, companies find more and more need to send payments to partners overseas. Due to this, local bank transfers are quickly becoming the international money transfer method of choice. 

Online marketplaces, affiliate systems, and advertising networks regularly send 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?

A local bank transfer refers to transferring funds electronically from one bank account to another within the same country or region. It is also a cross-border payment method where a deposit is made into a foreign bank account. A local bank transfer is also known as an international ACH or Global ACH. 

Local bank transfer payments are a type of EFT (electronic funds transfer), and they vary from country to country in terms of the conventions and processes. 

Local bank transfers are typically used for various purposes, including salary payments, partner commissions, business transactions, and more. They’re faster and more cost-effective than traditional methods like writing and mailing cheques or physical cash. The advent of mobile and online banking has created even more convenience, allowing users to initiate transfers from anywhere in the world.

How does a Local Bank Transfer Work?

The sender provides the necessary data to initiate a local bank transfer, like the recipient’s bank account details, bank name, and branch information. The sender’s bank will transfer money to the recipient’s account. 

Local bank transfers involve an intermediary bank or financial institution which operates between the transfer’s payer (or the originator) and the payee (or the receiver) of the payment. The intermediary acts as a clearing mechanism and helps process and settle the funds transfer within specific banking systems. 

In Canada, Electronic Funds Transfers (EFTs) are a standard process, governed by Payments Canada rules and processed through the Automated Clearing Settlement System (ACSS). 

Similar systems exist globally. For example, the United States uses the Automated Clearing House (ACH) system. This is where the payer issues the payment and then ‘cleared’ and settled by the Automated Clearing House before funds are accessible in the payee’s account. Unfortunately, domestic clearing systems like the ACH system generally can’t settle international bank transfers directly end-to-end. 

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 EFT or ACH transfers. India has several local bank transfer and foreign exchange mechanisms, including NPCI, ECS, and, more recently, NACH.

Scenario Example of a Local Bank Transfer

Let’s say there’s a company called ABC, Inc. based in Canada, and they need to make a payment of $4,000 CAD to their international partner, XYZ Ltd., located in the United Kingdom. Both companies have bank accounts in their respective countries. Here is how one type of bank transfer used for international transactions might unfold: 

1. ABC’s finance department prepares the payment details and gathers all the necessary data from XYZ, including the recipient’s bank account number, SWIFT/BIC code, bank name, and any other necessary details. 
2. AP initiates the local bank transfer through their online banking platform or by visiting their bank branch. 
3. They enter XYZ’s bank account details, including their bank name, account number, and SWIFT code. The transfer amount of $4,000 CAD is entered, and any applicable transfer fees are also taken into account. All data is reviewed to ensure accuracy. 
4. Any necessary authorisation, such as a secure token or an OTP, is provided. 
5. The bank of ABC, Inc. processed the local bank transfer and debits $4,000 CAD from the company’s account. 
6. The bank then converts the CAD to GBP (British Pounds) based on the prevailing exchange rate. 
7. The request is sent electronically to the recipient’s bank using the SWIFT network. 
8. XYZ’s bank receives the transfer request and verifies the recipient account data. 
9. The bank then credits the converted GBP to XYZ’s account. 
10. XYZ receives a notification from their bank and can now access the funds. 

In this scenario, ABC, Inc. is using this method to make an international payment to its partner, XYZ, Ltd. This involves initiating the transfer through their local bank in Canada, providing the necessary data, and relying on the international banking network to facilitate the conversion and deliver the funds.

Local Bank Transfers vs. International Wire Transfers

The key differences between local bank transfers and international wire transfers often lie in the network used and the potential for intermediaries. Unlike global wire transfers that may involve a corresponding bank (or several) when crossing borders, domestic local transfers operate within a country’s established clearing systems. 

While local transfers within Canada can be completed relatively cheaply, international wire transfers tend to carry hefty fees. Businesses often incur fees not just from their sending bank but also potential intermediary charges. While international wire transfers are typically more expensive than domestic local bank transfers, they tend to be more reliable and faster.

How Much Do Local Bank Transfers Cost?

The cost of a local bank transfer in Canada can vary depending on the bank and the specific type of transfer. Here are some common scenarios where businesses might evaluate costs:

In the Same Bank 

Many banks will provide free or low-cost transfers between accounts that are held within the same bank. These are often included as part of the services offered to the customer upon sign-up.

Different Banks in the Same Country 

Some banks will charge a nominal fee for transferring funds between different banks within the same country. The charges can range from a few dollars to a set percentage of the transferred amount.

Online Transfers 

Some banks provide online banking services that enable a business to make transfers electronically. Usually, online transfers within the same country are either free or involve much lower fees than in-person transfers.

Over-the-Counter 

Paper-based transfers happen when you visit a bank branch. There are typically higher fees associated with this service compared to the other methods. These fees will vary depending on the bank you use and the amount being transferred.

Note: For businesses operating in Quebec, bilingual banking documentation may also be required.

How Much Do International Wire Transfers Cost?

The cost of an international wire transfer will vary depending on the bank or financial institution involved, as well as the specific terms and conditions of the transaction. Common factors that affect the cost of international wire transfers include:

• Sending Bank Fees: The bank where the wire transfer is initiated may charge a processing fee, which varies depending on the bank type and account you hold.
• Intermediary Fees: A corresponding bank (or multiple banks) may charge fees for handling the transfer on behalf of the other two banks, which vary depending on the specific transfer agreement between parties. These can act as unpredictable hidden fees.
• Receiving Bank Fees: The recipient’s bank may charge fees for receiving an international wire transfer. These will either be deducted from the transfer amount or charged separately.
• Currency Conversion: If the transfer requires a currency conversion, additional fees may be associated with the exchange rate. Canadian banks often apply a margin or markup to the mid-market rate, resulting in more charges.

Fees for an international wire transfer can vary significantly between countries and banks. Some will offer flat fees for global transfer, while others charge a percentage of the transferred amount.

How Long Do Local Bank Transfers Take?

In Canada, domestic local bank transfers (like EFTs) are generally efficient for moving funds. The processing time for domestic transfers varies depending on several factors like the payment processing system in use (e.g., ACSS batches) and the banks involved. Generally speaking, funds processed via standard EFT are often available within the next business day.

However, when using local bank transfers as a method for cross-border payments (facilitated by platforms), timing can vary. While often faster than traditional international wires in final settlement, the end-to-end time depends on the destination country’s systems and banking practices. For example, transactions involving certain countries might take one to three business days, or potentially longer, depending on specific circumstances.

Factors affecting processing times include:

• Weekends and Holidays: Transfers started on weekends or public holidays will not be processed until the next business day. Banking holidays in sending and receiving countries may also affect processing times.
• Cut-off Times: Banks and processing systems usually have cut-off times. If you initiate a transfer after this time, it may not be processed until the next business day’s cycle.
• Interbank Transfers: Transfers between different banks may take slightly longer than transfers within the same institution, requiring processing through clearing systems.
• Processing Policies: Each bank has its own internal policies and procedures, including security checks or manual reviews, which can affect speed.

While local bank transfers within Canada are typically faster compared to international payment options, it’s important to note that processing times will still vary, especially for cross-border payments. To get the most accurate data about an expected timeframe for a specific international payment via local rails, consult with your payment provider. They can provide specific details based on your circumstances and the country where the transfer occurs. For standard domestic EFTs, consult your bank.

How Long Do International Wire Transfers Take?

The time it takes to complete an international wire transfer initiated from Canada depends on several factors, like the destination country, the banks involved (including intermediaries), and the currency. Generally speaking, estimates suggest it can take anywhere from three to five business days (or sometimes longer) for an international wire transfer to reach the recipient. Delays can occur, especially if intermediary banks are involved.

A few factors that affect how long international wire transfers take include:

• Banking Holidays: Banking holidays in either Canada or the receiving country can delay transfers. Transfers initiated on weekends or public holidays may not be processed until the next business day.
• Cut-off Times: Most banks typically have cut-off times for processing wire transfers. If you try to send a transfer after this time during the day, it may not be processed until the next business day. Businesses should be particularly wary of this rule on Fridays and Saturdays, as many banks have limited processing or are closed on Sundays, delaying payment even further.
• Time Zone Differences: International wire transfers may need to pass through multiple banks in different time zones. This can add to overall processing times, as global banks operate on different hours and business days.
• Compliance and Verification: International wire transfers are always subject to regulatory requirements and anti-money laundering (AML) measures. Banks may need to conduct additional checks and verification procedures, which can prolong processing times.

It’s best to contact your bank directly for the most accurate time frame estimate for a specific wire transfer.

Understanding SWIFT and Local Bank Transfers

SWIFT is short for the Society for Worldwide Interbank Financial Telecommunication. SWIFT is a secure global messaging network used by banks and other financial institutions worldwide to exchange financial data reliably. These details include instructions for international money transfers.

The SWIFT network provides a standardised format for communication and facilitates the instruction of funds transfers across different banks and countries. When it comes to global transfers, SWIFT is the primary network used for traditional wire transfers between banks in two different countries. This is typically how it works:

• Sender’s Bank: The sender initiates the transfer at their local bank (e.g., in Canada). The bank collects all necessary data, like the recipient’s banking information, the SWIFT/BIC code, and the amount to be transferred.
• SWIFT Messaging: The sender’s bank uses SWIFT to send a payment instruction message (e.g., MT103) to the recipient’s bank. This message includes all relevant data for the transfer, like the sender’s and receiver’s information, the amount, and any additional details.
• Corresponding Bank: If the sender’s and recipient’s banks do not have a direct relationship, an intermediary bank (a corresponding bank) must step in to facilitate the transfer. Payment instructions will pass through one or more correspondent banks to move the transfer along.
• Recipient’s Bank: The recipient’s bank receives the payment instructions via the SWIFT network and credits the recipient’s account with the transferred funds based on the provided instructions.

The time it takes to send an international wire through SWIFT will vary. Since the transfer typically involves several steps, estimates suggest it can take anywhere from one to five business days for the funds to be credited.

Why You Need Local Bank Transfer as an International Payment Method

Using local bank transfer networks internationally (often facilitated by payment platforms) can make paying vendors and partners easier and offers advantages over other options like traditional wires. If you run a large business making numerous international payments, you may find it highly beneficial. Here are a few reasons why this method works well:

Cost-Effectiveness 

Local bank transfers are often more cost-effective for sending money globally compared to traditional international wire transfers, helping businesses avoid high bank fees and unfavourable conversion costs.

Global Reach 

Many Canadian businesses, especially internet-based digital economy brands, and large corporations, rely on products or services from people outside the country. International suppliers, partners, remote employees, and independent contractors like receiving cross-border payments through a payment system that handles local transactions. Local bank transfers can reach pretty much anyone worldwide.

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.

Convenience 

Local bank transfers are a convenient way to send money worldwide. This is especially the case if you have a local bank account in the destination country. A business can initiate transfers online or through the local bank branch, making it a fairly straightforward process. Additionally, if you receive regular payments or send money consistently in the destination country, having a local bank account will streamline transactions.

Save Money and Time 

Automated mass payments using efficient rails 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.

Faster Processing Times 

Compared to international wire transfers, local bank transfers are much faster. They do not involve cross-border or intermediary banks, which means funds can be credited to the recipient’s account more quickly. This can also be beneficial if you need to make time-sensitive payments or require immediate access to the transferred funds.

Local Currency Transactions 

Local bank transfers enables a business to send funds in the recipient’s local currency easily. This can be advantageous to both parties, as the sender avoids currency conversion fees, and the recipient can receive funds directly, without having to convert them.

Lower Risks and Fewer Errors 

International wire transfers, especially those that involve SWIFT, can be a complex process with multiple steps and a multitude of details. The use of local bank transfers reduces the chances of human errors or complications that may occur in cross-border transactions. A company’s transfer remains within the familiar, local, and regulated government by utilising local bank systems.

Pros and Cons of Local Bank Transfers

Local bank transfers, particularly when used domestically in Canada (like EFT) or facilitated internationally via platforms, have advantages and disadvantages. Regulations can also play a role —  for example, within the Single Euro Payments Area (SEPA), transaction fee pricing for EUR payments is often regulated.

Pros and Cons of Local Bank Transfers

Take Control of Your Global Strategy

Before sending money across borders from Canada, every business should consider all the alternative international payment methods. Many factors affect the payment speed and the final amount the recipient receives.

Money transfer services, payment platforms, and specialized remittance providers often offer competitive rates and lower fees compared to traditional banks for international transfers. Unlike wire transfers initiated directly with a bank, these platforms can provide more cost predictability. Before choosing a final method, compare fees and exchange rates across different providers and platforms.

Platforms like Tipalti help Canadian companies automate global payments across 200+ countries. By using local rails where available, Tipalti helps reduce fees, improve payment accuracy, and ensure recipients get paid in their preferred currency—on time and with full transparency.

If you’re still managing multiple banking relationships or reconciling payments manually, it may be time to rethink your strategy. Automating global payouts through a trusted platform streamlines compliance, reduces risk, and frees up your team to focus on growth.

Learn more about simplifying your global payments through Tipalti Global Payments.