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Before diving into the mechanics of international wire transfers, let’s ask some essential questions: Why do people send money across borders? What do they need to know? Are there unique aspects of wire transfers? Who can you trust, and what should you look for when choosing a remittance provider?
This is the first in a series of five articles that will answer these questions and more. By the end of the series, you’ll be a wire transfer expert and might even discover a better alternative. So, let’s get started.
What is a Wire Transfer?
A wire transfer, commonly used to describe both traditional bank wires and international money remittances, is an electronic method of sending money, either domestically or internationally. Traditional bank wire transfers use a specific network to move money from one bank to another. New money transfer methods are now available, which you can think of as “digital wire transfers.” These new methods don’t rely on the traditional bank wire transfer network, and can offer more options for sending money. The time it takes to complete a transfer can vary significantly—ranging from a few seconds to several days—depending on factors such as the chosen transfer method, the destination country, and the financial institutions involved.
How Can You Make a Wire Transfer?
There are several ways to send money internationally via wire transfer, each with pros and cons. Let’s explore some popular methods.
Wire Transfers via Banks
Using a bank is the traditional method for wire transfers and often the first option people consider. Here’s what you should know:
Advantages of wire transfers with a bank:
- Security and Reliability: Banks are heavily regulated, ensuring secure and dependable transactions.
- Established Trust: Longstanding reputations make banks a trusted choice.
- Support for Large Transfers: Banks are well-equipped to handle substantial sums of money.
Disadvantages of wire transfers with a bank:
- High Fees: Wire transfers via banks often come with hefty charges, including fixed fees and less favorable exchange rates.
- Inflexibility: Bank processes can be rigid, often requiring detailed documentation and specific account information to complete a wire transfer—such as the recipient’s bank account number and routing number (also known as the recipient bank’s routing number).
- Access Issues: For recipients without bank accounts, common in some developing countries, wire transfers may not be an option.
Money Transfers via Digital Apps
Something interesting happened during the COVID-19 pandemic. It contributed to the accelerated adoption of digital financial services, including remittance platforms like Remitly, Wise, and WorldRemit as alternatives to traditional wire transfers, which you can think of as digital wire transfers. Remittance platforms offer ways of sending money abroad that don’t rely on the traditional wire transfer process. These apps remain popular in the post-pandemic era for their convenience and efficiency.
Advantages of money transfers with a digital app:
- Cost-Effective: Lower fees and more competitive exchange rates compared to banks. Transparent pricing shows the total cost upfront.
- Speed and Accessibility: Transfers are often completed within minutes or hours, with global availability and 24/7 access via smartphones or computers.
- Ease of Use: Intuitive interfaces make digital apps user-friendly, even for first-time users. They support multiple payment methods and offer diverse payout options, including bank deposits, cash pickups, and mobile wallets.
Disadvantages of money transfers with a digital app:
- Technology Dependence: Requires internet access and a smartphone or computer, which may exclude users in rural areas or older demographics.
- Potential Fees: Some payment methods, like credit cards, may incur extra charges. Exchange rates, while competitive, may still include small margins.
- Security Risks: Although secure, digital platforms carry a slight risk of cyber threats. (Stay tuned for the third article in this series, where we’ll cover protecting your money online.)
An Alternative to Wire Transfers via Remitly Circle
Remitly Circle offers an innovative solution for managing remittances. It allows you to store and share funds with loved ones worldwide through designated sub-accounts. These accounts give recipients direct access to the shared sub-account and, thus, they are able to be active participants in financial management. Of course, you can always use Remitly Circle to send money to your non-US bank account, similar to a bank wire transfer. In many ways, Remitly Circle represents the next evolution in remittance services.
Advantages of money transfers with Remitly Circle:
- Sub-Accounts for Family: The idea behind Remitly Circle is the sharing of sub-accounts with loved ones to which they are able to gain access. Because Remitly Circle is designed around storing and managing funds, transfer fees are eliminated
- Trusted and Secure: Built on Remitly’s reliable platform with robust security measures.
Disadvantages of money transfers with Remitly Circle:
- Technology Barriers: Both senders and recipients need internet access and smartphones, which may not be available in rural areas.
- Learning Curve: Recipients unfamiliar with digital platforms may require time to adapt.
- Limited Availability: The service is not yet accessible in all regions.
Finding the Right Fit for Your International Money Transfers
Banks, digital apps, and Remitly Circle each have unique strengths for cross-border money transfers. Banks offer unmatched security and capacity for large transfers but are costly and less flexible. Digital apps provide affordability, speed, and convenience but depend on technology and may have transfer limits. Remitly Circle revolutionizes remittances with shared accounts, eliminating fees and introducing USD storage.
Are you curious about placing a wire transfer, sending money using a digital app, or sharing a Remitly Circle sub-account with your family? Stay tuned for the next article, where we’ll provide a step-by-step guide to mastering cross-border financial management.