Many companies and people around the globe transfer money from one country to another by using wire transfers, also known as bank transfers. Merchants, exporters, importers, tourism companies, foreign property buyers, global law firms, finance and hi-tech corporations all rely on the international banking system in order to pay for manpower, suppliers and various services abroad.
For too many years, the only way to execute a bank transfer from one country to the next, was through a local bank account. The customer needed to have the payee’s full name and account number, payee bank name, BIC and IBAN codes. BIC stands for “business identifier code”. There are currently about 7,500 active (“live”) BIC codes. IBAN is short for “International Bank Account Number”, and consists of up to 34 alphanumeric characters: country code + check digits + basic bank account number. Today, the official IBAN registrar is the SWIFT network.
The term stands for the “Society for Worldwide Interbank Financial Telecommunication”, which is based in Belgium. SWIFT, live since 1977, handles most of the international interbank messages, linking and serving more than 11,000 banks and financial institutions in more than 200 countries across the globe. According to the 2013 Federal Reserve Payments Study (published in July 2014), there were 287.5 million wire transfers—including those sent over large-value funds transfer systems and those made on the books of depository institutions—in 2012, with a value of $1,116.3 trillion.
Consumer senders accounted for just 6% of all wire transfers by number and 0.14% by value; business customers accounted for the significant majority of both the number (86%) and value (74%) of all wire transfers. Interbank settlements accounted for approximately 8% of the number and 26% of the value of all wire transfers. Completing a standard online wire transfer requires the payer to login into his bank account, activate a wire transfer limit, typing in the payee’s information (bank name & address; payee’s full name & address; payee’s account name & number, or IBAN number; bank SWIFT/BIC code), then typing the payee’s currency and transfer amount, and paying the transfer fees – both for your bank and possibly also the payee’s bank. Then, wait for the online account to confirm the payment after a day or two. Still, you don’t have to work the old way.
Reducing your costs
International bank transfers today may be fundamental for your business, but are still quite expensive. Regular transfer fees are not cheap, since banks are considered a monopoly by a multitude of traditional businesses. Many banks offer their customers high exchange rates for each international bank transfer, making the deal more costly for you, the customer. Banks profit from each and every wire transfer, taking in hefty sums from your bottom line. Since international bank transfers can be pretty slow, and are irrevocable, every business needs to be very careful when conducting a wire transfer to another country. Paying high international bank transfer fees can erode your profit margin.
Business owners, CEOs and CFOs want to capture the best exchange rates, while paying the bank as little as possible. As of late 2016, the vast majority of banks worldwide have not yet joined the global payments innovation initiative, which are supposed to make cross-border payments easier in the future. Most international bank transfers today are still too slow. Most bank transfer fees are still not transparent enough, and most bank still do not allow the customer to benefit from end-to-end tracking. Every business using international bank transfers on a regular basis should be aware of services like Covercy, which offer international bank transfers using local bank transfer fees instead of international fees. Innovative risk management systems, working on a network of bank accounts worldwide, enable customers to save money on every money transfer to a different country.
No fee? think again
Even if your local bank promises a “no fee” or “no commission” for each international transaction, the important element is the actual exchange rate you get every time you are ready to make a wire transfer. Whether you need to send money to France, USA or India – reducing the amount of money you need to pay your bank is essential for the ongoing existence of your business in a competitive economy. Every time you complete an international bank wire transfer, you want to guarantee that the optimal exchange rate will be available at all times.
It does not matter whether you wish to purchase real estate abroad, pay a foreign currency invoice or receive funds from your suppliers in Europe. Using Covercy, and avoiding high international bank transfer fees using alternative local bank transfers, means you will pay less for every wire transfer. If reducing bank transfer fees on all your international bank transfers is a high-priority business target, consider joining Covercy. Start seeing the difference every time you send money around the world: The Americas, Europe (especially the EU markets), Asia and Australia. We’re here to save you money, by avoiding the big bank fees which make transaction costs higher than needed.