What is a wire transfer and how does it work?

Key takeaways

• A wire transfer is an electronic "push" payment that moves funds directly from one bank account to another – the sender initiates it, unlike a "pull" payment such as a direct debit.

• Domestic wires settle quickly on national payment rails (RITS in Australia, Fedwire in the US); international wires typically route through the SWIFT network and a chain of correspondent banks, which is why they're slower and more expensive.

• International wires take one to five business days and carry flat bank fees plus FX markups; digital platforms such as Airwallex settle faster and cheaper by using local payment rails instead of the SWIFT correspondent chain.

A wire transfer is an electronic "push" payment that moves funds directly from one bank account to another – the sender has to actively start the process. In Australia, banks call this exact product a telegraphic transfer (TT), so the two terms are functionally interchangeable. For a business paying overseas suppliers, the transfer method you choose has a real impact on cost, speed, and security.

How does a wire transfer work?

A wire transfer only moves once the sender authorises it – there's no equivalent of a direct debit pulling funds automatically.

The "push" payment mechanism

Unlike direct debits or automated card charges, which pull money from your account, a wire transfer requires you to push the payment out. Senders must manually authorise each transfer and provide verified banking details to their financial institution before it starts. This makes wires secure against unauthorised debits, but it puts the responsibility for accuracy on your finance team – a typo in the recipient's details can delay the payment or send funds to the wrong account.

Domestic vs international wires

The path your money takes depends on whether you're sending it locally or across borders. Domestic transfers stay within Australia's banking system and usually clear the same business day. International transfers cross borders through global networks and correspondent banks, which adds processing steps, currency conversion, and compliance checks.

What you need to send one

To set up a wire transfer, gather this checklist of details for your bank:

1. The recipient's full legal name and physical address (banks can't accept PO Box addresses).

2. The recipient's bank name, branch address, and routing code.

3. The recipient's bank account number or International Bank Account Number (IBAN), standard across Europe and the Middle East.

4. The recipient bank's SWIFT/BIC code, an 8- or 11-character identifier that routes the payment through the global messaging system.

What are the types of global wire transfers?

There are two broad categories of wire transfers: domestic and international transfers.

Then there are various types of wire transfers, such as bank-to-bank transfers, online wire transfers, and cash office transfers, which vary depending on the region or country. For example, in the United States, the Automated Clearing House (ACH) system is commonly used, whereas in Europe, Single Euro Payments Area (SEPA) transfers are prevalent. In Australia, we use the Bulk Electronic Clearing System (BECS).

Here, we’ve outlined four different examples of wire transfers – SWIFT, BECS, ACH, SEPA, and FPS – making it easier to select the most appropriate method based on specific business needs.

*The SEPA region comprises the 27 European Union (EU) member states along with four non-EU countries (Iceland, Liechtenstein, Norway, and Switzerland) that have adopted the euro as their currency. These countries collectively form the SEPA zone where standardised euro payments can be sent and received.

What happens to a wire transfer behind the scenes?

The SWIFT network doesn't move physical cash – it sends secure instructions between banks.

The SWIFT messaging network

When you approve an international wire, your bank sends an encrypted SWIFT message – usually an MT103 – to the receiving bank. This message contains the sender's identity, account numbers, payment amount, and currency. Bank Identifier Codes (BICs) route these instructions safely to any of the roughly 11,500 participating banks worldwide.

Nostro and Vostro accounts

To settle payments, banks use matching accounts held with each other, known as Nostro and Vostro accounts. A Nostro account is "our account with you" in a foreign currency; a Vostro account is "your account with us" in domestic currency. Instead of physically moving cash across borders, banks settle the transfer by debiting the sender's account, adjusting these ledger balances, and crediting the recipient's account.

Correspondent and intermediary banks

When the sending and receiving banks don't have a direct relationship, the payment routes through correspondent banks instead. Each one can deduct a "lifting" fee directly from the principal amount as it passes through – the main reason traditional international wires can be slow, costly, and hard to track.

How do domestic high-value wire transfers work in Australia?

In Australia, your bank processes a high-value domestic wire in real time through the central bank's settlement system.

Australia's RITS system

High-value domestic wires clear and settle via the Reserve Bank Information and Transfer System (RITS), operated by the Reserve Bank of Australia (RBA). RITS uses Real-Time Gross Settlement (RTGS), meaning each payment is processed individually rather than bundled into an end-of-day batch. It does this by simultaneously debiting and crediting Exchange Settlement Accounts (ESAs) held at the RBA by participating banks and authorised deposit-taking institutions (ADIs). Under the Payment Systems and Netting Act 1998, these settlements are final and legally irrevocable the moment the ESA accounts update which removes settlement risk and helps keep the financial system stable¹. 

The US comparison (Fedwire vs CHIPS)

In the US, high-value transfers settle either through Fedwire – a real-time gross settlement system run by the Federal Reserve – or CHIPS, a private-sector network that nets wholesale transactions throughout the day. Fedwire offers immediate gross settlement like RITS; CHIPS nets transactions to save on institutional liquidity.

How much does a wire transfer cost?

A wire transfer is rarely just one flat fee, charges pile up from several places at once.

How those fees are split depends on standard SWIFT allocation codes:

• OUR: The sender pays all upfront, intermediary, and receiving bank fees, so the recipient gets the exact amount sent.

• SHA: The sender pays their own bank's outgoing fee, while intermediary and receiving bank fees come out of the payment – so the recipient gets a lower net amount.

• BEN: The sender pays nothing upfront; every bank in the chain deducts its fee from the transfer amount, leaving the recipient to cover the full cost.

Standard fee structures

How long does a wire transfer take, and what causes delays?

Domestic wires can clear the same day; an international wire typically takes one to five business days to land.

Several things can slow it down:

• Time zone gaps: Send a transfer outside the recipient bank's working hours and it queues until they open.

• Currency conversion steps: Payments in less common currencies often route through a hub currency like USD, adding steps.

• Weekend and holiday cut-offs: Legacy bank systems only run during standard hours, so a Friday afternoon payment won't move until Monday.

• Mandatory AML and sanctions screening: Banks scan transaction data against global sanctions and anti-money laundering databases, which can pause a payment for manual review.

How safe are wire transfers?

Yes, wire transfers are highly secure, but because they rely on manual setup, they're a prime target for payment errors and invoice scams.

Encryption and security protocols

Payment service providers and banks employ robust encryption techniques and stringent security protocols to send financial data securely during wire transfers. Technologies include Transport Layer Security (TLS) and Secure Socket Layer (SSL) encryption to safeguard ‌ payment information from unauthorised access or interception.

Identity verification

The payment service provider verifies the identity of the sender and the recipient to prevent unauthorised transactions. Verification methods include Know Your Customer (KYC) procedures that require customers to provide information to confirm their authenticity and purpose of the wire transfer.

Regulatory oversight

National government agencies, like the Financial Crimes Enforcement Network (FinCEN) in the United States, monitor wire transfers to detect and prevent fraud, money laundering, terrorist financing, and other illicit activities, fighting financial crimes effectively.

Irreversibility

Once a wire transfer is complete, it’s irreversible, meaning once the funds have been transferred, they can't be recalled, providing a level of certainty for both the sender and the recipient. This certainty can be particularly valuable in high-stakes transactions, where the reliability and finality of the payment are vital. It’s important to remember, however, that extra care must be taken to ensure accuracy of the recipient’s details before initiating the transfer since any errors can lead to complications. 

What are the alternatives to a wire transfer?

A traditional wire transfer is no longer your only option for moving business funds quickly and securely, and if you're still comparing providers, our guide to choosing a business bank account covers what to weigh up before you commit.

For domestic transfers in Australia, the New Payments Platform (NPP) offers real-time payments through Osko and PayTo. Running on the Fast Settlement Service at the RBA, these networks clear and settle payments instantly, 24/7. They bypass the cut-offs and multi-day delays of older systems like BECS, at a fraction of the cost of a domestic wire. In the US, similar domestic options include ACH and real-time networks like RTP and FedNow.

For international payments, fintech platforms bypass SWIFT by holding pre-funded domestic accounts in multiple countries and settling transfers locally. For example, Airwallex collects funds locally in Australia and pays out from a local account in the recipient's country.

For smaller, recurring supplier payments, a virtual card can replace a wire altogether.

When are wire transfers still necessary?

Even with faster local networks available, traditional SWIFT wire transfers are still necessary when sending or receiving money from overseas. Many developing markets, remote regions, and smaller banks aren't integrated into modern fintech networks, so SWIFT is the only way to send funds. High-value commercial transactions – commercial real estate settlements, large equity funding, or bank-to-bank transfers required by contract – also tend to rely on SWIFT for the clear, bilateral audit trail compliance teams need.

Why businesses choose Airwallex for international transfers

If you're regularly paying overseas suppliers, the Big Four fees and FX margins above add up fast – Airwallex is built to undercut both.

• Wholesale FX rates: Convert currencies at a transparent 0.5% markup above interbank rates for major currencies, well below typical bank spreads of 3% to 6%.

• SWIFT alternatives: Pay out through local networks in 120+ countries for free, or use SWIFT at a benchmarked $10–$30 SHA/OUR fee.

• Global Accounts: Open local accounts in 20+ currencies across 70+ countries to collect, hold, and spend foreign revenue without a forced conversion.

• Automated accounting integrations: Connect directly with tools like Xero and NetSuite to sync transactions automatically and cut down on manual data entry.

Frequently asked questions

What is the difference between a wire transfer and an ACH payment?

A wire transfer is an immediate, individual push payment that moves cleared funds directly between bank accounts, while an ACH payment is a batch-processed domestic transaction routed through a central clearing house in the US. Wires clear the same day domestically or within one to five days internationally via SWIFT, at a higher cost. ACH payments typically cost under a dollar but take one to three business days to clear and are subject to return windows.

Can a wire transfer be cancelled or reversed once sent?

Generally, no – not once the receiving bank has accepted the message and credited the recipient's account. You can only cancel an instruction if it's caught and recalled before final clearance, usually within minutes of setup. If there's a bank error or fraud, the sending bank can request a recall, but getting the money back depends entirely on the recipient consenting to return it.

What details are needed to receive an international wire transfer?

To receive an international wire transfer in Australia, you need to share:

• Your full legal name and physical address (PO Boxes aren't allowed).

• Your complete bank name and branch address.

• Your account number or International Bank Account Number (IBAN).

• Your bank's SWIFT/BIC code.

What's the difference between a wire transfer and a telegraphic transfer (TT)?

There's no functional difference – both describe an electronic push payment sent directly between bank accounts. You'll encounter "telegraphic transfer" mainly with Australian, UK, or Commonwealth banks, while "wire transfer" is the standard term in North American and international business.

Do you need a SWIFT/BIC code to receive a wire transfer in Australia?

Yes, for an international wire – the SWIFT/BIC code acts as the mandatory address that routes the SWIFT message to your bank. You don't need one for domestic transfers from another Australian account; those just use a standard BSB and account number.

Sources:

1. https://www.rba.gov.au/payments-and-infrastructure/rits/about.html 

2. https://www.asic.gov.au/regulatory-resources/financial-services/epayments-code/