Wire transfers explained: What they are and how they work?

Key takeaways

• Wire transfers are a fast and secure method for transferring money, both domestically and internationally. Domestic transfers are often completed within hours, while international transfers take one to three business days.

• While wire transfers are reliable, they can be costly due to transfer fees and foreign exchange (FX) markups. Fees can vary widely, and banks often charge additional fees for receiving wire transfers. 

• To mitigate the high costs and poor FX rates associated with traditional wire transfers, businesses can consider partnering with modern payment providers like Airwallex, whose proprietary local payments network offers a faster, more cost-effective, and transparent alternative.

When dealing with various global payment methods across countries and regions, your top priority is ensuring you transfer your funds securely and efficiently while keeping payment costs low. One reliable option is a wire transfer, which electronically sends money from one bank account to another. But what exactly is a wire transfer and how does it work?

Read on to find out more about wire transfers, its benefits, speed of payment, and costs to help you decide when a wire transfer works best as your preferred payment method. We’ll also share how Airwallex supports your business in achieving an agile global payments infrastructure.

What is a wire transfer?

A wire transfer is an electronic method to move money online between two bank accounts, either domestically or internationally. Wire transfers are suitable for sending large amounts of money quickly and securely through a bank or specialised financial institution. However, they can be costly due to fees and foreign exchange (FX) costs charged by one or multiple banks involved in the process. 

Typically, wire transfers involve the sender providing their bank with details like the recipient's name, account number, and transfer amount. The sender's bank then securely transmits payment instructions to the recipient's bank, which then deposits the funds into the recipient’s designated account.

How does a wire transfer work?

Here’s a step-by-step guide to help you understand how wire transfers work:

• The sender provides their bank with the recipient’s banking information. This information typically includes the recipient’s name, bank account number, bank branch, and SWIFT or IBAN code for international transfers.

• The sending bank verifies the sender’s identity and authorises the transaction. Fees may apply.

• The sending bank transmits the payment instructions to the receiving bank through a secure system. Intermediate banks may also be involved at this stage.

• The recipient’s bank receives the funds and credits them to the recipient’s account. The wire transfer process can typically take a few hours to a few business days.

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.

Here, we’ve outlined four different examples of wire transfers – SWIFT, ACH, SEPA, and FPS – so you can choose the most appropriate method for your 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.

Bank wire vs. local transfer: what's the difference?

Bank wires and local transfers both move money between accounts, but they differ in how payments are routed, the costs involved, and how quickly funds arrive.

Bank wires, often sent through the SWIFT network, connect banks via intermediary institutions to move money across borders. While SWIFT offers broad global reach, payments can take longer to process and may include additional fees from correspondent or receiving banks.

Local transfers, on the other hand, route payments through local or regional rails such as ACH in the US, SEPA in the EU, or FPS in the UK. Payments are processed as if they were local transactions, resulting in faster settlement times and lower costs.

As a general rule, use local transfers when available for speed and cost efficiency. Reserve SWIFT wires for high-value payments, niche currencies, or corridors where beneficiary banks require bank wires.

With Airwallex, you can bypass the SWIFT network and send fee-free transfers to 120+ countries via local payment rails. 95% of transactions settle as quickly as within a few hours, giving your business the best combination of reach, speed, and cost efficiency.

How long does a wire transfer take?

Global wire transfers usually take one to eight business days to reach their destination. The table below highlights the average time spent on a wire transfer by region or country.

How safe are wire transfers?

Wire transfers are one of the safest and most secure methods of transferring money, with key factors contributing to their safety and security:

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 you complete a wire transfer, 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 as any error could lead to complications. 

What are the pros and cons of wire transfers?

Wire transfers offer significant advantages to global eCommerce businesses due to their speed, security, and reliability in facilitating cross-border transactions.

Pros of wire transfers

• Wire transfers are fast: Wire transfers are incredibly fast compared to other methods. Domestic transfers are completed within hours, and international transfers take one to three business days. This speed is essential for businesses needing to make urgent payments.

• Wire transfers are reliable: Once initiated and authorised, wire transfers are almost guaranteed to reach the recipient, provided all information is correct. This reliability makes them ideal for significant business transactions.

• Wire transfers have a global reach: Whether paying an international supplier or receiving payments from overseas clients, wire transfers facilitate seamless global commerce, enabling your business to operate globally.

Cons of wire transfers

• Wire transfers can be costly: Wire transfers can come with significant fees, both for the sender and recipient. These fees can vary widely depending on the financial institutions and the countries involved, making them less cost-effective for frequent or small transactions.

• Wire transfers require detailed information: To start a wire transfer, you need to provide a substantial amount of detailed information, including the recipient's bank details, account numbers, and sometimes even their address. Any errors in this information can lead to the transfer being rejected.

• Wire transfers are irreversible: Once a wire transfer is completed, it’s generally irreversible, so if you send money to the wrong account or if there's a dispute, it can be difficult to recover the funds. You must be absolutely certain about the recipient and the details before starting the transfer.

Fees and costs of wire transfers

Wire transfers often come with high costs due to hefty transfer fees and large markups on foreign currency exchanges. These expenses can add up quickly, especially for businesses that often handle international transactions. 

The high fees are largely due to the operational and administrative costs involved in the traditional banking system, including maintaining complex technology, adhering to strict security protocols, and employing trained staff. International transfers are particularly expensive, often involving multiple banks and additional fees. Regulatory compliance, like anti-money laundering (AML) and KYC requirements, further increases these costs.

Domestic and international wire transfer fees

Domestic and international wire transfer fees can vary by country and region.

Here are examples of the fee ranges for the US, UK, and EU:

Individuals and businesses also incur costs when they receive wire transfers, with receiving fees ranging from US$10 to US$20 per transaction.

Poor FX rates

Bank wire transfers often offer less competitive FX rates. That’s because traditional banks need to cover the operational costs of maintaining currency trading desks and complying with regulations, creating higher overhead costs.

Banks may also factor in a profit margin in their exchange rates to generate revenue from currency conversions. The lack of transparency in FX markups can result in less favourable rates for bank wire transfers compared to those offered by modern financial service providers. On average, bank exchange rates can have a markup of up to 3% to 6% above the mid-market rate.

How to navigate costly wire transfer fees and rates

To mitigate the financial drawbacks of cross-border payments like those seen in wire transfers here, consider partnering with a modern payment provider that delivers competitive and transparent pricing. Certain providers have flexible FX solutions, giving businesses like yours greater control over how they obtain FX rates, execute transactions, and manage FX risk.

Access to real-time or locked-in competitive exchange rates can help eliminate inflated markups and ensure a more favourable currency conversion. This ultimately enables your business to save on transaction costs effectively.

Best wire transfer options for high-volume transactions

Businesses managing frequent or large-value transfers need predictable costs, speed, and control. The most efficient setup combines local payment rails for supported corridors with SWIFT for markets or currencies that require wires. Multi-currency accounts can also help reduce FX conversions and simplify reconciliation.

Here are some ways to optimise high-volume transfers:

• Routing: Use local rails for faster delivery and fewer deductions; rely on SWIFT when required for coverage

• FX and pricing: Choose providers that offer interbank-aligned FX rates and transparent margins

• Operational control: Use batch transfers and approval workflows to reduce manual processing and ensure visibility

• Reconciliation: Choose platforms with real-time tracking and accounting software integrations to simplify reconciliation and reporting

With Airwallex, businesses can manage all of this in one place – combining local speed with global reach, automated approvals, and full payment visibility.

Banks and fintech providers that do wire transfers

There’s a wide range of banking and fintech providers to choose from when wiring money. In the table below, you’ll find a few global banks and fintech companies with a comparison on their wire transfer fees, exchange rates, and payout coverage for Australia specifically since fees, rates, and coverage can vary by country.

Wire transfers are known for their speed and security. However, they can be costly due to fees and FX costs, depending on the financial institutions and countries involved. Modern payment providers can help to mitigate costs with access to better FX rates, and wider local payment networks. These offerings support businesses to manage global payments efficiently and cost-effectively.

Manage global payments and FX rates with Airwallex

Airwallex’s global payment infrastructure lets you pay partners, suppliers, and employees in 150+ countries at speed, with 120+ countries using local payment methods to remove transfer fees. With access to market-leading FX rates no matter the transaction size, international wire transfers are cost-effective, secure, and reliable.

You can also simplify your workflows with batch transfers, customisable approval processes, and seamless accounting integrations.

Frequently asked questions (FAQs)

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

A bank transfer is a broad term that covers any movement of funds between bank accounts. It includes ACH (Automated Clearing House) transfers, which are typically slower and used for smaller amounts.

A wire transfer is a specific type of bank transfer typically used for higher-value or international transactions. Wire transfers are sent over the SWIFT network and often involve intermediary banks and higher fees.

A local transfer moves funds via domestic or regional payment networks – such as ACH, SEPA, or FPS – offering faster delivery and lower transfer fees.

What do I need for a wire transfer?

To initiate a wire transfer, you'll need:

• The recipient’s full name and address

• The recipient’s bank account number

• The recipient's bank name and branch

• SWIFT or IBAN code for international transfers

How can I send a wire transfer quickly?

To expedite a wire transfer:

• Ensure all recipient details are accurate

• Initiate the transfer before the bank's cut-off time

• Opt for transfers using a multi-currency global bank account

How secure are international transfers?

International transfers are protected by encryption, compliance screening, and regulatory oversight. Providers like Airwallex also offer role-based access, multi-approval workflows, and real-time tracking for full visibility and control. For critical invoices, selecting “OUR” charges ensures recipients receive the full amount without hidden charges.