International Wire | B2B Finance Glossary
What is an International Wire transfer?
An international wire transfer is a wire transfer that is sent from a sender who resides in one country to a receiver who resides in another. Even if both the sender and receiver share the same bank, these types of payments are still considered international wire transfers and require a SWIFT code to be initiated. Additionally, international wire transfers must remain compliant with international payment laws.
When is an International Wire Transfer Used?
International wire transfers are used for international payments. They can be used to send business-to-business (B2B), consumer-to-business (C2B), and consumer-to-consumer (C2C) payments from anywhere in the world to any other location in the world with a settlement period of only a few days.
When an international wire transfer is sent from the US, it’s monitored by the Office of Foreign Assets Control – an agency that’s part of the US Treasury. This agency makes sure that the money being sent via an international wire transfer is compliant with AML/CFT laws and that the wire transfer itself is not being sent to territories that are currently sanctioned by the US government. If the wire transfer violates these rules, the financial institution from which the funds are being sent can keep the transfer from going through.
Here are the reasons that a wire transfer might be flagged and blocked:
- The wire transfer is attempting to be sent to a non-account holder
- The incoming and outgoing wire transfers are of the same dollar amount
- The wire transfer is a large amount wired by a cash-only business
- Frequent wire transfers are being made for no concrete reason from the same account
- The wire transfer is being made to a safe-haven country
What is the Difference Between Domestic Wire Transfers and International Wire Transfers?
Domestic wire transfers are sent between two financial institutions in the same country. In order to send a domestic wire transfer, the sender needs either the SWIFT code or the bank branch number that the wire transfer is being sent. Domestic wire transfers usually cost between $0 and $35 and are typically processed as same-day payments.
International wire transfers differ from domestic wire transfers because, instead of being sent from one financial institution to another in the same country, they are sent from a financial institution located in one country to another financial institution located in a different country. International wire transfers will always require a SWIFT code and usually take a few days to be fully processed and for the funds to be transferred from the sender to the receiver. International wire transfers usually cost between $35 and $50.
What are the Advantages and Disadvantages of an International Wire Transfer?
International wire transfers are the preferred payment method for international payments because they are much faster than sending a paper check through the international postage system. They are also very secure since they require the sender to have specific information from the receiver before being able to make the transfer.
At the same time, international wire transfers have high fees, so small payments like C2C transactions don’t always make sense. That’s why consumers tend to use options like Venmo or PayPal instead. Additionally, for B2B payments, international wire transfers can sometimes be inconvenient since they take a few days to settle, so payees might want to look into ulterior digital payment options with faster settlement times.
How Does an International Wire Transfer Work?
To send an international wire, the sender will need certain information from the receiver:
- The recipient’s full name
- The sender’s full name
- The recipient’s address
- The recipient’s bank name
- The recipient’s bank information
- The recipient’s account number
- The recipient’s phone number
- The sender’s phone number
- The recipient’s BIC or SWIFT code
- The amount that the wire transfer is for
The wire transfer is initiated once the sender provides this information to his or her bank. The fee for the transfer is debited directly from the sender’s bank account, and the sender’s bank sends a message to the receiver’s bank through a secure system. Then, the recipient’s bank deposits its funds into the recipient’s account. Finally, both banks settle the full amount of the payment between them on the backend once the funds are completely transferred over.
Wire transfers are used for payments that must be made quickly and securely, so they are often used for international payments. While financial firms can and do limit the amount of money that can be wire transferred at any given time, the caps tend to be very high. So, international wire transfers are often chosen for large transactions such as investments and B2B payments between businesses in different countries.