Financial institutions come up with many solutions to allow customers to navigate the banking sphere more accessible and straightforwardly. Direct debit payments are one such tool. In this article, Genome will explain what direct debit transactions are and the benefit of direct debit. Direct debit: meaning of the term A direct debit transaction is a payment method used for collecting payments. Using direct debit, the account owner authorizes the third-party (different kinds of businesses and merchants) to pull funds from the said account to pay for the company’s products or services. The clients must notify their financial institution that they
To common users of banking services, money transfers are money transfers. As in, you don’t consider them complex: just a tool to send and receive funds.
But then, you face a plethora of terms like bank transfers, wire transfers, electronic payments, online transfers, and so on. And you start to wonder – “is there a difference between all of these?” and “what should I use?”. Well, let’s figure it out together!
In this article, Genome will primarily focus on bank transfers and wire transfers and how they differ and compare wire payments to other transfer options as well.
Wire transfer: meaning and what you should know
Wire transfer is a type of electronic money transfer during which two financial institutions that represent the sender and the beneficiary exchange payment information about the funds’ recipient via the messaging network.
Note that the wire transfer term can also refer to payments made with the help of wire transfer agencies like Western Union and such. You can find out more about these agencies here, but we won’t discuss them in this article anymore.
Types of wire transfers
Wire transfers can be separated into two types: domestic and international wire transfers.
Domestic wire transfers are payments made between two financial institutions located within one country. Many countries have their version of domestic wire transfers, and such payments are usually quick – the beneficiary will usually receive funds the very same day they were sent.
International wire transfers are a bit more complicated. As you might have guessed, they occur between the sender and beneficiary, which are situated in two different countries. Most commonly, such wire transfers are carried out using SWIFT.
SWIFT is a messaging network that allows the exchange of payment data between different banks and payment providers. SWIFT is available in over 200 countries and territories, making it the ultimate international wire transfer option. For instance, if you have an account within Genome, you can SWIFT transfers to more than 140 countries and territories.
Let’s take a look at bank transfers next.
How about bank transfers?
As the name suggests, bank transfers are a process of sending funds from one bank account to the other. Such payments can be made between both individuals and companies.
Bank transfer is sometimes used as a common term for any payment involving banks (yes, even wire transfers). But, in this article, we focus specifically on bank-to-bank payments, not transfers, where banks play a part as intermediaries.
Thus, you usually encounter this type of bank transfer when you send money to another account that is within your bank network. Domestic bank transfers are more prevalent, but international payments are also possible if your bank has branches in different countries. As expected, the first option is very cheap – some banks even allow making domestic bank transfers for free. The payment usually reaches the beneficiary in a matter of hours or one business day.
International bank transfers, on the other hand, can take a bit longer, and banks can apply some additional fees. For instance, for foreign currency exchange.
Three common ways you can make a bank transfer:
- With the help of a banking app or online – via the website;
- By coming straight to your bank branch, where the representative will help you;
- You can call the bank, and they will guide you through the process;
Comparison: wire transfer vs. bank transfer
Now, it is time to examine bank account transfers vs. wire transfers. Remember, some people consider wire transfers and bank transfers to be the same. But here, we will compare the two based on the information we presented prior in the article.
|Points of comparison||Wire transfers||Bank transfers|
|How the payment method works||Two (or more) financial institutions are involved, which are not necessarily traditional banks. The money is sent thanks to messaging networks (such as SWIFT), which exchange payment data.||The payment occurs between two banks. Usually, the transfer is sent between the sender and the beneficiary that share the same bank.|
|The role of the bank||Usually acts as an intermediary, as the leading role during wire transfers falls onto the money transfer networks.||Principal, as it is a bank-to-bank payment.|
|Destination||Both international and domestic wire transfers are available. Domestic payments are usually made with the help of local payment schemes. And international wire transfers can be carried out via SWIFT, SEPA, and other messaging networks.||Bank transfers mainly happen within one country. For instance, ACH transfers are considered a local bank transfer option in the US. International bank transfers are rare and usually occur if the sender’s bank has a branch in the beneficiary’s country.|
|Transfer time||In both cases, the time that payment reaches the beneficiary can vary drastically. Domestic wire and bank transfers can be pretty quick, taking a couple of hours or one business day. And as for international wire transfers, they can take from 1-2 days to a week, depending on the destination country. Generally, banks and payment service providers post the approximate execution time of wire and bank transfers on their websites.|
|Fees||Domestic wire transfers are cheap, sometimes free. But international payments can be expensive (especially via SWIFT) because of foreign exchange rates and the number of intermediary banks involved, which can cost as much as 25-30 euros.||Pretty cheap, especially local options. Some bank transfers are even free of charge.|
In conclusion, wire and bank transfers are convenient, cheap, and relatively inexpensive options for domestic payments. However, wire transfers will suit you more if you need to send money abroad. For instance, you can use SEPA transfers for cross-border payments within Europe.
Other transfer options: do they vary from wire transfers?
In this section of the article, we will cover some common questions that occur when people compare wire transfers to other payment methods.
1. Wire transfer vs. electronic transfer – is there a difference? To answer this question, let’s first clarify the meaning of an electronic funds transfer. Well, that’s easy: it is a method of sending money digitally. Electronic funds transfer is a term that encompasses many other types of money transfers, as most of them are made via electronic means. It includes wire transfers as well. So, the difference between electronic and wire transfers is that the latter falls under the electronic funds transfer classification.
2. How about wire transfer vs. online transfer? Online transfers are synonymous with electronic funds transfers, as they are also carried out digitally. Thus, wire transfers can also be called a part of an online transfer family.
3. Last but not least, is ACH a wire transfer? No, they are different, as the ACH transfer is considered a local bank transfer option in the United States of America. We have already described what ACH payments are and how they differ from wire transfers in this article.
Is a wire transfer a bank-to-bank transfer?
It can be a bank-to-bank transfer in a broad term, but generally, bank transfers are used for such payments. Meanwhile, wire transfers can occur between different financial institutions with the help of transfer networks.
Is it better to wire money or transfer money?
Basically, it is the same thing. Money transfer is a broad term that encompasses different ways of sending money, and wire transfers are one such method.
Is an international money transfer the same as a wire transfer?
Wire transfers can be both domestic and international. So, international money transfers can be used as another title for international wire transfers.
When should I use a wire transfer?
Whenever you understand that this is the best money transfer option your financial institution provides. They are especially useful when it comes to international payments.