The world of business has expanded greatly due to use of the internet. Both potential sellers and purchasers now have a much larger market place to interact with. Even a small company may wish to take advantage of being able to make purchases and trade with companies and customers outside of the UK. The issue of
sending money abroad is : how to pay, with what currency and will the costs outweigh the benefits of buying, or selling, directly with people in another country.
Make the Right Decision
There are a number of variables which must be considered when contemplating making an international bank transfer from your business. For example, will the transfer be to a known and trusted company, or is this the first transaction. What is the size of the transaction and will it be a single transaction or repeated regularly. The answers to the following questions will direct you to the correct solution for
YOUR particular needs.
Preparing to make an international bank transfer
- Where are you sending the money?
- How much money are you sending?
- What will the costs be?
- What are the recipients requirements?
- What time-scale is required/available?
Where are you sending the money?
The destination of the money you are transferring has a huge bearing on the system and process you will need to use. For payments from a UK bank to a recipient based in the European Union (and a few other nearby countries) it is possible to use SEPA (Single Euro Payments Area) or SWIFT(Society for Worldwide Interbank Financial Telecommunications). Both of these are available through your local bank and provide secure and reliable money transfers. For world-wide transfers SWIFT will be the way to go.
How much money are you sending?
For amounts above £3,000 it may be more cost effective to consult an FX (Foreign Exchange) Broker.
What will the costs be?
This will include the foreign exchange rate, bank sending fees and bank receiving fees. Be aware of ‘hidden’ costs within the exchange rate set by the sending bank.
What are the recipients requirements?
For SWIFT payments the receiver may stipulate one of the following options:
- OUR This means you pay all transfer charges.
- SHA (shared) This means you only pay your bank’s outgoing transfer charge. The recipient receives the transferred amount minus the correspondent (intermediary) bank charges.
- BEN (beneficiary) This means you do not pay any charges. The recipient receives the amount after all charges are levied.
What time-scale is required/available
This is another variable that will depend on where the money is being sent. If the sending bank has an arrangement with the receiving bank the transaction will be directly between them. However, where the bank has no arrangement an intermediary or third party bank will be included and this may extend the time to complete the transfer process. On average an international transfer takes 1-4 working days to be deposited in the recipients account.
The information required from the recipient to undertake a successful international bank transfer:
- The IBAN (International Bank Account Number)of the recipients bank account. This is used with SEPA transactions.
- The SWIFT CODE of the recipients bank account. This is used with worldwide transfers.
- Recipients bank account address and account number.
Fees – Not always what they seem
Some banks advertise very low international transfer fees, some even free, but this is not the whole picture. There are often ‘hidden fees’ that involve the exchange rate the bank sets for the transaction. Consequently, a very low or ‘fee free’ transfer may not be the cheapest option.
International Bank Transfers in the Digital Age
The rise of Financial Technology (Fintech) has forced the traditional banks to rethink how they conduct international transfers.
Electronic fund transfers(EFT) are common place within the country but are now also being used internationally. However, due to governments and security agencies having concerns over money laundering and other illegal activities, the process of international transfers is considerably more ‘tardy’ than is the case for domestic transfers. Security checks will slow the process leading to the 1-4 working days to process international remittances, as indicated earlier.
Alternative International Transfer Options
The growth of Fintech has seen the spawning of a number of alternative, on-line companies providing international bank transfers at very competitive rates. It should be said that the benefit of using an on-line company can vary depending on the size of the amount to be transferred. However, companies such as
Transferwise provide a very transparent fee structure that indicates exactly how much money the recipient will have deposited in their account.
Making an international bank transfer will really depend on the circumstances of the transaction. Small, one-off payments can be made securely using internet based companies such as Moneygram or Western Union. These companies, though long established, do not provide cost-effective transfers where larger amounts are involved. However, if the recipient is trusted then the service is almost instant in transferring cash between the sender and receiver.
As a business you will already have a relationship with your own bank branch. It would make sense to approach them first when considering how to transfer a payment to a foreign bank.
Many UK banks will allow use of their on-line banking so it may be possible to conduct the whole transaction, quickly and comfortably from your desk by using a Personal Computer or even a mobile device.
Payments to some countries may require more ‘paperwork’ than transfers to European or North American recipients.
Make your own bank your first port of call when considering an international bank transfer, after all, they know your business and have a relationship with you so they will no doubt be happy to assist you with any questions about the transfer.