What Is a Wire Transfer: All You Need to Know

Nowadays, moving funds between accounts quickly and securely is crucial for both individuals and businesses. Whether you’re paying suppliers or sending money to family abroad, wire transfer services have become a popular option.

But, what is a wire transfer and how exactly does it differ from a bank transfer?

In this blog post, you’ll find a complete guide to wire transfers and everything you need to know about them. We’ll explore how they work, their benefits and alternatives, and share some tips on reducing costs and ensuring security. 

What is a wire transfer?

A wire transfer, also known as a wire payment, is an electronic method of sending money from one account to another through a secure system. These transfers are facilitated by banks or payment service providers, which act as intermediaries between the sender and the recipient.

Wire transfers can be either domestic, where funds are transferred between accounts within the same country, or international, where funds are sent from one country to another.

To process these transactions, most financial institutions rely on the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network as one of the most widely used and trusted systems globally. This ensures secure and standardised communication between the parties involved, particularly useful for international transfers.

How does a wire transfer work?

Wire transfers may seem straightforward for users, but what actually happens behind the scenes?

The process is simple for the sender: they can initiate the transfer by visiting a local branch or using an online banking platform. All they need to do is provide the recipient’s account details and pay the amount upfront.

When the sender pays the amount to be transferred, the sending bank sends the payment information to the recipient’s bank. No physical money is transferred—only financial information. 

Unlike standard bank transfers, a wire transfer doesn’t involve a direct movement of funds between institutions. Instead, the transaction is processed through a secure payment network, such as SWIFT, CHAPS or Fedwire.

These systems transmit all the necessary information, including the recipient’s name, bank account number, address, routing number, and payment reference. Additional information may be required for international wire transfers.

Once the recipient’s payment provider receives the transfer details, it uses its own reserve funds to credit the recipient’s account. This ensures a near-instantaneous deposit, even though the actual settlement between the two financial institutions happens later on the back end.

The process is largely the same, regardless of the participating banks or payment service providers.

What’s the difference between a wire transfer and a bank transfer?

Despite the terms sounding very similar, both types of transfers differ significantly in execution and have their own pros and cons. 

Bank transfers are a type of electronic transfer just like wire transfers. Still, here the money is sent directly from one financial institution to another using an established communication system between the two banks. These transfers are typically used for domestic transactions, though sometimes international payments can be supported. 

Examples include BACS in the UK, SEPA in Europe and ACH payments in the USA.

Wire transfers, on the other hand, are often used for urgent or high-value payments because they are typically completed within a few hours or the same day. Bank transfers can take up to 24 hours or more.

However, bank transfers are generally more affordable, often free or low-cost, depending on the different locations and the transferred amount. In addition, bank transfers may allow for reversal in case of errors, offering a degree of security, whereas wire payments are typically irreversible once processed.

Types of wire transfers

Wire transfers can be domestic and international, depending on whether the money is moved within the country or across borders.

Domestic transfers

A domestic wire transfer is a payment processed between two financial institutions within the same country. These transactions are typically near-instant as they don’t require currency exchange and are often completed on the same day. 

Since domestic transfers don’t involve complex cross-border regulations, they require minimal information—usually just the recipient’s name, sort code and account number. Due to their simple execution, the associated fees are generally lower.

International transfers

An international wire transfer is a convenient way to move funds between financial institutions in two different countries. These transfers require additional information from the sender and steps from the financial institutions. 

Currency conversion and global trade restrictions further complicate international wires. Determining the exchange rate and adhering to international banking regulations lead to higher fees and longer processing time—anywhere from 2 to 5 business days.

Luckily, payment systems like SWIFT help simplify the process, especially for transactions within Europe.

Bank vs. non-bank transfers

You will also have the option to choose between traditional banks and credit unions or use the money transfer service of a non-bank financial institution.

Wire transfers through banks are often seen as the standard method for sending money securely. However, bank wire transfers typically come with higher fees and longer processing times, especially for international payments.

Non-bank financial institutions and payment service providers offer an alternative, often with more flexibility and cost-effective solutions. They are faster and usually at a lower cost than banks, making them appealing to smaller businesses and individuals seeking efficiency. 

How to do a wire transfer

Wire transfers are relatively simple for the sender. However, it’s important to know what information to prepare in advance. 

Below, we’ll share the steps you need to follow to initiate a wire transfer and what payment details you will need to provide.

1. Access your account or visit a branch: Log in to your mobile or online banking platform, or go to the local branch of your financial institution. 
2. Start the transfer: Navigate to the section for wire transfers, or inform the staff on site that you would like to initiate one. 
3. Provide the required details: You will need to prepare the following information in advance:
   • Recipient’s full name;
   • Recipient’s account number or IBAN (depending on the country);
   • Routing number (for domestic wires) or BIC/SWIFT code (for international wires);
   • Name and address of the receiving financial institution;
   • Payment reference (optional, but recommended for clarity).
4. Enter the amount: Specify the total amount you wish to send. The funds will be deducted from your account immediately after you confirm the transaction.
5. Review and confirm: Double-check all payment details and complete the transaction by following the on-screen instructions or confirming with the staff.

And that’s it—it only takes a few minutes. From there, the financial institutions handle the rest, communicating the payment details and settling the transaction.

How much does a wire transfer cost?

Wire transfer costs and fees vary depending on the financial institutions and the account type, as well as the destination of the funds and the amount being sent. 

Typically, the sender pays the wire transfer fee upfront along with the transfer amount. However, in some cases, recipients may also incur a small charge.

Domestic wire transfer fees

Wire transfers are generally not among the most cost-effective payment methods. Some financial institutions charge a flat fee for domestic SWIFT wire transfer, which can range between £15-£25 per transaction. Others prefer to charge a percentage of the amount being sent, usually between 3% and 5%.

The sender usually has the option to decide who will cover the fees. There are three common choices:

• BEN: The recipient covers all costs.
• SHA: The sender and recipient share the costs.
• OUR: The sender covers all costs.

International wire transfer costs

International wires generally incur fairly high costs due to factors, such as currency conversion and exchange rate margins. Banks often apply an exchange rate margin of 2–4% in the UK, using it as an excuse to secure extra profitability for themselves.

In addition, international transfers involve multiple intermediary financial organisations, which further increases the overall cost. 

In most cases, both the sender and the recipient incur fees for international transfers. In the UK, the fees for sending money abroad typically range between £20 and £40. Receiving money from abroad into a UK account can cost up to £7–£8.

Tips for reducing wire transfer costs

Nobody wants to pay fees for transferring money, but they are often unavoidable. While you may not be able to eliminate fees entirely, there are ways to minimise them. 

Today, there are numerous money transfer services available, many of which offer more competitive rates. Take your time to research and compare tariffs, terms and exchange rates, and choose the option that offers the best deal for you. 

Also, consider non-traditional financial institutions, such as online payment service providers, which often charge minimal fees.

Security and risks of wire transfers

Wire transfers are generally a safe and reliable way to send funds, but like any financial transaction, they come with risks. For small businesses, the thought of sending or receiving large payments can be nerve-wracking. 

The good news is that wire transfers use encryption and secure systems like SWIFT to protect your transactions. These systems ensure that your money is transferred securely between financial institutions and bank accounts. Still, it’s important to stay vigilant at all times.

Risks and fraud prevention

Banks and payment service providers play a huge role in safeguarding your personal details, but they can’t catch everything. Fraudsters are constantly coming up with new tricks, such as phishing scams, where they impersonate a trusted source to steal your payment information. 

To protect yourself, always verify the recipient’s identity before making a transfer and never share sensitive information via email or phone unless you’re certain you’re dealing with the right person.

What to do in case of wire transfer fraud

If something doesn’t feel right or you suspect fraud, you must act quickly. Report the issue to your payment provider immediately. They can help track and potentially reverse the transaction. 

You can also report wire transfer fraud to authorities or consumer protection bodies to prevent further damage. Taking these precautions can help protect your personal information and finances.

Advantages and disadvantages of wire transfers

Wire transfers are a popular choice for businesses and individuals alike, especially when dealing with significant sums or international payments. However, like any payment method, they come with their pros and cons. Let’s break them down.

Benefits

Wire transfers are particularly useful for large transactions or sending money abroad. 

Here’s why:

• Fast settlement: Funds are often processed within hours or a day, making wire transfers ideal for time-sensitive payments.
• Secure global transfer: Wire transfers rely on secure systems like SWIFT for cross-border communication, ensuring that moving money internationally is straightforward and hassle-free.
• Minimal risk of bouncing: Since the sender pays the full amount upfront, there’s no risk of the transfer failing due to insufficient funds.

Of course, wire transfers come with their own set of drawbacks, which can make them less suitable for certain types of transactions or scenarios.

Drawbacks

Wire transfers have their downsides, and cost is often the biggest pain point. But it’s not the only one.

Let’s take a closer look at the main drawbacks:

• High costs: Fees for wire transfers, especially international ones, can add up quickly, making them less appealing for smaller transactions.
• Irreversible: Once a wire transfer is processed, it’s final. Any errors, such as incorrect recipient details, could result in the loss of funds.

These challenges can be particularly prominent for individuals and small businesses working within tight budgets.

Alternatives to wire transfers

Wire transfers aren’t your only option for transferring money from one bank account to another. Considering some of their drawbacks, you might want to explore alternative methods. Fortunately, there are plenty of options available.

BACS payments

BACS (Bankers’ Automated Clearing Services) is a UK-based system for domestic bank transfers. 

It facilitates two types of transactions: Direct Debits, where you authorise a company or organisation to withdraw money from your account, and Direct Credits, where you deposit money into someone else’s account.

BACS payments are commonly used for recurring transactions like payroll or utility bills. However, they are not instant and typically take up to three business days to process.

ACH payments

ACH (Automated Clearing House) is a US-based payment system used to send funds. It is the American equivalent of BACS. While ACH is primarily domestic, it can also facilitate international transfers between the UK and the US. 

ACH payments are similar to wire transfers, but they are processed in batches and must be cleared before the funds become accessible to the recipient. This makes ACH a slower alternative to wire transfers. However, they are typically more cost-effective.

Instant payment systems

While bank transfers take longer to process, there are alternative options designed to speed up transactions. One example is Faster Payments, a relatively new and popular method to send and receive money in real-time.

This solution facilitates online, mobile, and standing order payments between two banks in the UK at any time of the day. Funds typically arrive in the recipient’s account within minutes. 

Non-bank options

Traditional financial institutions often involve cumbersome procedures and higher fees. Fortunately, there are plenty of alternatives that can save time and money, proving especially useful to small businesses.

Modern payment service providers, like myPOS, offer quick money transfer options, with transactions typically settled within seconds or a few minutes. These providers also offer online business accounts that enable you to send funds both domestically and abroad while managing and settling business expenses effortlessly.

Wire transfers in business contexts

Wire transfers are commonly used by businesses both small and large. Whether for paying suppliers, managing payroll or sending money across borders, they are the go-to solution.

How businesses use wire transfers

Settling business expenses on time is crucial for maintaining good relationships with partners and customers, and it ensures uninterrupted operations. 

Wire transfers allow for the swift movement of money, helping you meet deadlines without hassle. Similarly, when managing payroll, wire transfers offer a convenient way to ensure your employees are paid accurately and on time.

If your business is involved in international trade, wire transfers are indispensable. They enable you to send funds across borders in different currencies, meet compliance requirements and ensure your global partners are paid promptly.

Integration with payment systems

Managing finances can be challenging for businesses, but by optimising operations, you can reduce stress and increase efficiency. One effective approach is integrating your payment processes into a single platform.

Consider choosing a payment provider that offers a comprehensive suite of solutions, such as card machines, wire transfer services, online payment options and other essential features. Having everything in one place simplifies cash flow management and makes it easier to track payments, handle transactions and maintain accurate financial records.

If your business relies on multiple payment providers, explore solutions that allow integration between systems. Some platforms support this, allowing you to connect different services for a seamless workflow.

Conclusion

Wire transfers are one of the most reliable ways to send and receive money, both domestically and internationally. They are used by individuals and businesses alike for their speed, security and popularity. 

That said, not all wire transfers are the same. Costs can add up quickly, so it’s important to understand the process, the required documents and the settlement period. Take the time to evaluate your options, compare fees and explore alternatives that might better suit your specific needs.

For businesses, wire transfer services are particularly useful when paired with robust payment solutions that simplify managing expenses and international transactions. By choosing the right tools, you can streamline your operations, save money and focus on what matters most—growing your business.

FAQs

How long does a wire transfer take?

A wire transfer can take anywhere between a few hours to several business days. The processing times vary depending on currency exchange, financial institutions, the transferred amount and the used payment network. Domestic transfers are typically processed on the same day and can take only a few hours. For international wires, SWIFT payments can help speed up the process, but they can still take up to 5 business days. This is due to their complexity, including currency conversion and compliance with various regulations.

How do you send money via a wire transfer online?

Initiating a wire transfer online is easy and saves you the time of visiting a local branch. Simply log in to your mobile or online banking account and navigate to the wire transfer section. On different platforms, this option may be located in various places or named differently. Once you find it, enter the recipient’s details and transfer amount, double-check all information and confirm. Sometimes, authorisation of the payment may be required, where you’ll need to enter your password or use biometric authentication.

What is needed for a wire transfer?

Before you transfer funds, you will need to collect the followinginformation from the recipient:

• Full name;
• Bankaccountnumber or IBAN;
• Routing number (for domestictransfers) or SWIFT/BIC code (for internationaltransfers);
• Name and address of the receiving financial institution.

You may also be asked to provide a payment reference.