- Posted by Jason on January 6, 2015 in Banking
Need to transfer money to a foreign bank account online? Unsure of how the process works? This article will not only walk you through how to do it, but explain the technology and process behind international money transfers between bank accounts so you understand exactly what will happen and know what the potential risks are (and how to avoid them).
How Foreign Bank Account Transfers Work
Sending money overseas online using your Internet banking service may seem like a pretty straightforward thing to do. Pump in the details of the foreign bank account, enter the amount you wish to send and click the send button. But the reality is that there is a lot more happening behind the scenes of the remittance.
The person sending the money will need to provide their bank with the details of the recipient along with relevant IBAN or SWIFT details for the overseas bank, and once the money has been “sent” from the owner’s bank account a message is transmitted to the receiving bank by a secure international network.
The message that is sent to the foreign bank includes the details of the bank account that the funds are to be credited into, along with settlement instructions for the overseas bank to follow. In the event that the relevant institutions hold accounts with each other, the transaction is a simple debit and credit on those accounts. If the banks do not hold such accounts then a correspondent or intermediary bank is used to get the money overseas.
As there are often a number of banks involved in a money transfer to a foreign bank account, the transfers are seldom immediate. Sometimes these transfers can in fact take hours or even days to reach their final destination.
What are SWIFT Codes?
A SWIFT code (Society for Worldwide Interbank Financial Transfers) is a unique code that identifies financial institutions enabling them to transfer money between each other. They are either 8 or 11 digits long and function sort of like a telephone number.
The codes enable institutions to easily and readily communicate between each other with instructions regarding international money transfers. As an example, someone who has a bank account in Australia who would like to transfer money to a bank account in the United Kingdom, can provide the Australian financial institution with the receiving bank’s SWIFT code and the relevant identifying details and the funds will get to their destination using the methods outlined earlier in this article.
SWIFT codes have made transferring money to a foreign bank account an easy and straightforward thing to do, although not always fast or cheap. Since the network was established in 1973, the SWIFT network has grown to include over 9000 banks in 209 countries and territories around the globe.
Example: Sending Money from the UK to Australia
If someone in the United Kingdom wants to send money to someone overseas in Australia for instance, first they will need to complete the details of the transfer in their Internet banking application. This is the easy bit. From there the bank will begin the transfer process – this often comes with a relatively high fee to the sender.
Over the course of the ensuing hours or days, depending on how many hops are involved in the transfer and other factors such as public holidays in both the sending and receiving countries, the instructions will be actioned. When the bank in Australia has the message, they will charge a further fee and subsequently credit the value of the transfer to the relevant bank account.
Direct Bank Account Transfers and Their Advantages
There are two big advantages that OrbitRemit offers over international wire transfers. The first is speed. OrbitRemit has the overseas transfer in the foreign bank account within 1-2 business days. This is because we operate directly, without the need to deal with correspondent banks or the international money transfer system that large banks use.
As a result of the way that we transfer funds overseas, we are also able to pass significant cost savings on to our customers, charging a single flat rate for each transaction. The fact that there are not so many banks involved in the transaction also means that we can be transparent with our exchange rates.
There are other online money transfer services that people can use to avoid the international money transfer system as well, such as PayPal. One of the issues with these other operators is the amount of time that is involved in the transfer. While many of them offer instant transfers between their own accounts it can take quite some time before the funds are actually liquid in the foreign bank account – they are not actually transferring directly between foreign bank accounts, but simply between two Paypal accounts which must be linked to separate bank accounts.
OrbitRemit offers the fastest and cheapest way to send money overseas online – check out the calculator on the right hand side of this page to see exactly what a transfer with us could help you save.
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