How wire transfer fees can impact your bottom line

5 minutes
How wire transfer fees can impact your bottom line
In this article

A wire transfer is a common payment method for businesses as well as individuals. Although the transaction happens electronically, its name dates back to the days when telegraphic cables were used to ‘wire’ information from bank to bank. That’s why this form of credit transfer can also be known as a telegraphic transfer, as well as an electronic transfer or simply a wire.

Wire transfers involve sending funds across a network of banks or financial institutions, often using the SWIFT network. They can be done quickly and remotely, removing the need for cash or a cheque.

There are benefits and drawbacks to using wire transfers, as opposed to other payment methods. In order to protect your company’s bottom line, it’s important to assess these and actively choose the method that works best for each transaction. 

The real cost of wire transfers

When sending funds electronically using a wire transfer, there are multiple service fees that are applied. Some of these are clear, others are hidden.

First, banks charge a sending fee upfront. In the US, it has been found that the industry average rate is $26 for outgoing domestic transfers and $44 for outgoing international transfers. When you are running a company that is routinely sending money for business transactions, these costs can quickly add up and make a serious dent in profitability.

The currency exchange trap

When sending funds internationally using a wire transfer, fees are charged by banks to exchange the money from one currency to another. Part of this may involve flat currency conversion fees. The other part involves the foreign exchange (FX) rate applied by the bank.

Banks lend to each other at standard ‘interbank’ FX rates. When dealing with customers, however, financial institutions usually inflate the rate, often by multiple percentage points. This hidden foreign-exchange markup can hit businesses with international clients and suppliers hard. These companies can be forced into a two-way currency conversion, paying fees when accepting customer payments from overseas and again when paying overseas suppliers.

This is particularly frustrating when businesses have suppliers and customers that use the same foreign currency.  

The middlemen eating your profits

When you send money using a wire transfer, the money doesn’t necessarily travel straight from your account to the recipient’s. It may travel through intermediary banks as it is routed through the global financial network, and each intermediary charges a fee for their services.

The more transactions you carry out, the more these extra fees stack up, especially if you are dealing with a lot of cross-border payments. As with FX fees, financial institutions are not always transparent about applying these fees, which means the costs may catch you by surprise. This can have a negative impact on your bottom line.

The unseen costs to recipients

Suppliers receiving payments via wire transfer may also be hit with receiving fees from their bank. Negotiating who is responsible for these fees can be tricky. If you absorb these costs, your profit margins will take a hit. If you ask suppliers to take on incoming fees themselves, it could negatively impact the business relationship. Either way, these fees should be factored into your financial planning.

Time is money

Standard wire transfers typically take one to two business days to be completed, while international transfers can take up to five business days or even longer. Sending a wire on a weekend or a weekday evening can slow down the process. 

To speed up the wire transfer process, it’s possible to pay extra fees for an expedited service. This is typically higher the faster you need the payment completed. There may be additional charges for international payments and for extra features like tracking, confirmation receipts or specific delivery times. Timeliness is a crucial factor in B2B payments. If they are late, there can be cash flow issues and a negative impact on supplier relationships. 

How fees vary and why it matters

Every bank and financial institution has their own fee structure, FX rates, and settlement times. It’s important to calculate both the upfront and hidden costs as much as possible so that there aren’t any surprises.

It may also be worthwhile to look into newer methods of transferring funds. There are online payment platforms that differ from legacy institutions and may deal with payments in a more streamlined way. Understanding these variations can help in choosing the most cost-effective methods for different types of transactions.

Airwallex offers a better way to manage global money movement

Airwallex is a global payments and financial platform with its own proprietary local payments network. We provide businesses with a faster, more cost-effective, and transparent alternative to legacy banking.

Airwallex lets you operate like a local business from anywhere in the world. Open multiple currency accounts with local bank and branch codes in minutes. Avoid costly currency conversions when collecting payments from overseas customers, and make high-speed global transfers in a few clicks. If you do need to convert currencies, you’ll be able to do so at interbank rates.

Here are just some of the advantages of using Airwallex to manage global money movement:

  • Airwallex global transfers are fast. 77% of payments settle on the same-day.

  • Transfer to 150+ countries in 46+ currencies.

  • In 90 countries Airwallex uses local payment rails rather than the SWIFT network, making payments faster and more cost-efficient.

  • Use batch transfers to send funds to up to 1,000 recipients around the world in one go across countries, currencies and transfer methods. 

  • Manage each step of paying an invoice - from uploading and approving bills to making payments - within the Airwallex platform with Bill Pay

  • Customise transfer approval workflows for your business based on specific transfer amounts. 

  • Connect Airwallex to your accounting software to automatically reconcile transfers and close your books faster each month. 

  • Collect payments from global customers in their preferred currency, then spend in the same currency, eliminating unnecessary conversion fees. 

  • When you do need to convert currencies, benefit from market-leading FX rates.

Ready to take control of global money movement and boost your bottom line? Switch to Airwallex today for transparent, cost-effective international money transfers. Say goodbye to hidden fees and hello to smarter financial planning. Click here to get started.

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