A wire transfer is an electronic transfer of funds through a network that is managed around the world by hundreds of banks and transfer service agencies. At a cash office, the transfer can also be done in cash. Wire transfers enable the individualised transfer of funds to others from individuals or entities while still preserving the efficiencies associated with the fast and secure movement of money. Individuals in different geographic locations can safely transfer cash to local and financial institutions around the globe by using a wire transfer.

Wire transfer flow

For the transfer of funds from one bank or financial institution to another, wire transfer is most often used. When conducting a wire transfer, no physical money is transferred between banks or financial institutions. Instead, information regarding the recipient, the bank receiving account number and the amount transferred is passed between banking institutions.

The sender of a wire transfer first pays upfront at his bank for the transaction. The sending bank sends a message through a secure system, such as Fedwire or SWIFT, to the recipient ‘s bank with payment instructions. The recipient’s bank receives from the initiating bank all the necessary information and deposits its own reserve funds into the correct account. The two banking institutions then (after the money has already been deposited) settle the payment on the back end.

Bank account numbers are not required for non-bank wire transfers. Western Union, whose international money transfer service is available in more than 200 nations, is one popular non-bank wire transfer company.

It takes up to two days to process all legitimate wire transfers. If it takes more than a few days for an electronic form of payment, it cannot really be considered a wire transfer. On the same day that it is initiated, a domestic wire transfer is processed and can be received within a few hours. Normally, international wire transfers are delivered within two business days.

The use of domestic Automated Clearing Houses (ACH) and foreign processing systems gives the reason for the two different lead times. A domestic wire transfer only has to go through a domestic ACH and within a day it can be delivered. A domestic ACH and also its foreign equivalent (thus adding an extra day to the process) must clear international wire transfers.

Wire transfers, regardless of whether they are domestic or international transfers, cost money to initiate. Some providers charge as little as $25 per transaction for domestic wire transfers, but the fee can be as high as $35 or more. Sometimes, international wire transfers have a higher fee, as much as $45.