What is a Wire Transfer

Thanks to wire transfers, sending funds from a bank account in one country to another is easy. This guide will help you learn everything about wire transfer

In the current banking system, transferring funds from one country to another country is extremely simple. Previously, such transfers were possible only through drafts, cheques, and money orders, which took a lot of time for their settlement. However, the availability of online banking platforms and the introduction of wire transfer has made it possible to transfer funds quickly.

What is a Wire Transfer?
 

Wire transfer is an electronic fund transfer process from one country to another. The recipient’s bank and sender either directly connect with each other to transfer funds or use the SWIFT (Society for Worldwide Interbank Financial Telecommunications) network to facilitate fund transfer. While wire transfer often infers international money transfer or cross-border transfer, it also allows domestic money transfer. In the case of domestic money transfers, the receiver and originator are situated in the same country.

Thus, a wire transfer can be defined as a medium to transfer funds from one country to another or within the national boundaries of a country.

How does Wire Transfer function?
 

The term ‘wire transfer’ originates from an age-old event when long-distance communication happened over telegraph wires. For sending funds over long distances, a visit to the telegraph office was a must to make the payment. The telegraph office then would send the coded text to the recipient’s nearest telegraph office. On authorisation of the code, the funds would be released to the receiver.

A common way to make wire transfers is through the SWIFT network. It is one of the prudent types of transfer options that uses the messaging protocol. This network covers over 11,000 financial institutions in 200+ countries. By using this network, info can be sent from one bank account to another. Also, this includes instructions for the wire transfer.

Let’s suppose an individual in Canada has an account in Bank X. He wants to transfer some funds to India. The bank account where he wants to make the fund transfer is Bank Y. Bank X will send fund transfer instructions to Bank Y electronically. Such instructions will include data like the recipient’s bank details, name, and transfer amount. These details might be sent through the intermediary bank and not directly from the sender’s bank to the recipient’s bank.

It is necessary to note that there is zero actual transfer of funds. It is because the funds are deducted from the sender’s account and added to the bank account of the recipient on the authorisation of the details. This is how the wire transfer happens.

How can you do a Wire Transfer?
 

Upliftment in technology has made it simpler to transfer funds across borders and within. To send the funds via wire transfer, it is necessary to provide a few required information to the bank. Such info includes the recipient’s bank account details, name, amount to be transferred etc. In a few cases, banks may provide a paper form, which the sender must fill up. However, most banks allow you to complete the transfer process online.

What is the cost involved in Wire Transfer?
 

While the remittance fees are usually nil, a few intermediary banks might levy a charge. A flat fee for foreign currency conversion may be levied. Lastly, service tax is also charged. It may be the percentage of the overall amount.

Which banks allow Wire Transfers?
 

Almost all banks allow wire transfers, including IDFC FIRST Bank. Note that, unlike most other banks, IDFC FIRST Bank does not levy any fee for the fund transfer received from overseas. GST is levied on converted INR amount (gross) according to the receiver’s income tax slab.

To transfer funds, follow the listed steps:

• Approach the bank online or through an offline route

• Provide the payment info – sender’s details (name, account number & full address) and receiver’s details (name, account number, full address, swift code etc.)

• For faster credit, mention the payment purpose.

Ensure that you have an NRI IDFC FIRST Bank savings account to use this option to transfer funds conveniently to your family or friends in India.

Types of wire transfers
 

There are primarily two types of wire transfers: domestic and international wire transfers. Both types of wire transfers require specific information, including the recipient's bank details, the sender's account information, and the transfer amount. While domestic transfers are usually processed swiftly, international transfers may take longer due to intermediary banks and currency exchange. It's crucial to ensure accuracy when providing recipient details, as mistakes can result in delays or even loss of funds.

• Domestic Wire Transfers

These involve the transfer of funds within the same country. They are typically faster and less expensive than international transfers due to less complexity. Domestic wire transfers are commonly used for payments between individuals, businesses, and financial institutions within the same country.

• International Wire Transfers

These are designed for sending money across borders. They involve more complex procedures, currency conversion, and higher fees to send money from one country to another. These transfers require multiple levels of paper checks and may involve more than two banks for fund transfers. International wire transfers are necessary for various purposes, such as overseas business transactions, sending money to family members living in another country, or for investment activities.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.