Transferring money electronically allows people and businesses to securely send and receive money all around the world. Two of the most popular ways of electronic transfer are wire transfers and online transfers (also known as internet money transfers).
As these two payment methods often get confused, we’re going to walk you through their differences and outline the pros and cons. We hope this helps you make a more informed decision when sending payments.
Let’s start at the very beginning…
What Are They?
Wire Transfers
A wire transfer is a direct bank-to-bank transaction, that allows you to move money from one account into another.
Money is sent electronically through wire networks such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or the Federal Reserve Wire Network (FEDWIRE).
During this process, your transfer may be transmitted through a string of correspondent banks as it finds its way to the destination bank account.
Online transfers
Online transfers are where the old-fashioned concept of wiring money converges with the modern technology of electronic funds transfer (EFT).
Online transfers allow people to send money simply by transferring it (or the data that represents that money) to another person.
It can be done via any computer with internet access, which is why it’s also known as Internet Money Transfer. You require a reliable and trusted money transfer company in order to send online transfers.
Let’s Compare Them
Factor 1 – Speed
Wire transfers typically take around 3-5 business days to move money between bank accounts.
An international wire may take even longer, especially in the following circumstances:
- when sending to a country that doesn’t have strong banking relationships with your country’s banks/intermediary banks.
- when sending a payment in an exotic currency.
Online transfers are the fastest way to send international payments – they are most commonly completed within one business day. However in some cases it can be instant, depending upon the efficiency of the money transfer company you’ve chosen.
Factor 2 – Cost
Wire transfers can cost a lot of money, especially when it comes to international payments. For example, some banks can charge almost $40 to send $5000 to the United States.
It’s also common for the receiving bank or credit union to charge a small fee to receive funds by wire as they are loath to provide the services without getting their share of the service fees.
Hence, when you send an international transfer to pay a $5000 invoice, , the recipient may only get $4950 in hand.
Check out: Why Are Wire Transfers So Expensive?
Online transfers can be expensive too, with some online transfer companies charging an arm and a leg to make payments. It is not uncommon to see some large global money transfer companies charging their fees as a percentage of the amount being sent.
However, if you look around, you can find some transfer companies that offer a very low and favourable flat fee.
Factor 3 – Security
Wire transfers are typically a very secure method of payment.
However, if you are using a wire transfer to send a cash payment rather than paying directly into a bank account, there is a potential risk of fraud or theft.
A false identity can be used at one end of the transaction, with a fraudster collecting the money. Once the wire transfer turns into cash, it cannot be traced or recovered if someone intercepts the transfer.
Online transfers are also a very safe payment method, and transfers into accounts can be reversed in case of fraud.
This means that if there is a fraudulent transfer out of your account, mistakes can be rectified (subject to due diligence being exercised before initiating a refund request).
Both online and wire transfers are covered by fraud liability laws. This means that if you pay for something using your credit card or other payment method, and it arrives damaged, or does not get delivered, you are protected and can be refunded.
However, it’s important to note that if you pay using a cash transfer service like Western Union, you are not protected in the same way should the wrong person pick up your cash payment.
Check out: 10 Things You Need To Know About Wire Transfers
Factor 4 – Process
Wire transfers can involve physically going to a bank or credit union and filling out forms, especially for large payments.
Wire transfers can also be sent over an internet banking website or through a company that processes wire transfers.
When sending a wire transfer, you must provide information about your account and the account you want to send funds to. You will need bank names, account numbers, SWIFT codes and/or routing numbers, and of course, the names of the account owners.
To receive a wire transfer, you need your account number and a wire transfer routing number. International wires require a SWIFT code instead of the wire transfer routing number.
Online transfers are quite simple to make, especially person to person.
With online transfers, there is no need to go to a money wiring office, telegraph station or even a bank.
Online transfers typically involve filling out a simple online form with some details of the person/organization you’re paying.
You can also set up automated transactions for regular bill payments, such as mobile or gym memberships.
What’s The Best Option For Your Business?
Overall, there’s no denying that sending money online is the best way to transfer funds.
Online payments can be made at any time, anywhere…and we know a thing or two about that. Here at Remitr, we offer effortless, on-time payments, wherever you do business.
With us, Canadian businesses can pay local staff, vendors, suppliers etc. without the hefty bank wire fees or the delays. Plus, our same-day local payments only cost you a flat fee of $1!
Remitr also offers non-stop international business payments. You can send payments to 150+ countries in our global network in 1-2 business days – all for a flat fee of just $5.
We’ve even got you covered for receiving your online sales payouts. The FREE Remitr Global Business Account (GBA) makes getting paid painless. Receive in USD, EUR or GBP from your customers or your payment processor, and save up to 2% in currency fees.
Sign up for Remitr today, or chat with our Business Payments Specialist for more info.
