If you’re overseas or are sending money to family overseas, you might be hesitant to do so without a little bit of knowledge ahead of time. Understanding how international money transfer works will allow you to be less hesitant to send money, increase your confidence levels when sending money, and allow you to understand the best methods to send money safely.
Below are just a few of the things that go behind how international money transfer works.
Banks Communicate with the SWIFT network
Banks will communicate with each other in order to get the fund transfer process started. They do so by using what is known as the Society for Worldwide Interbank Financial Telecommunications, also known as the SWIFT network. This is not a bank itself, but a way for banks to communicate with each other to initiate transfers.
Using the SWIFT network allows banks to share information about who is sending money, who it’s going to, the amount that needs to be transferred, and other similar information. You can rest assured that the SWIFT network is a powerful network that is trusted by thousands of banks worldwide.
Banks Have Individual Numbers
The SWIFT number, or BIC number, is a unique code that is given to banks all around the world. This unique code is specific to a particular branch in a particular location. For instance, if you want to send money to a bank in Amsterdam, then this bank will have its own BIC, as will a bank in another part of the world, such as Houston, Texas.
These unique BIC codes allow SWIFT to communicate efficiently between banks and transfer funds easily.
You Need to Share Information
In addition to having your bank’s BIC on hand and the BIC of your friend’s bank, you’ll also need to have their account number and other relevant information on hand. Such information includes:
- Full name of you and your loved one
- Full bank account number of you and your loved one’s bank account number, also known as the IBAN. The IBAN is the International Bank Account Number of your loved one, and it is unique to each person.
- Money that needs to be transferred
- Reason for the transfer
Fortunately, there isn’t a cap that is set on the amount of money you can transfer. However, the IRS might require information to track the transfer if it is over 10,000 dollars. This is usually their responsibility and not yours, but it’s still a good idea to keep track of your transfer information.
It Takes Time to Receive Funds
After you transfer your funds, then the bank of the receiving party now has to initiate the transfer process. For some banks, this is a quick and easy process. For others, it might be time-consuming due to several factors. If you’re sending to a country in a different time zone, then this might mean that you sent your money after business hours.
Thus, the bank will need to wait until normal operating hours to start your transfer. Other times, banks need to ensure that the money is not part of a fraud, and will do fraud checks to protect the sender. In addition, banks might also take time to process funds due to the different rates of currency they must convert.
For instance, if you send your money from the United States to Italy, then the bank in Italy will need to convert your American currency into Euros. This is just one example of the many different types of currency that are used! Because of this, the receiving bank will take more time to process funds.
If all of this sounds time consuming, that’s because it is traditionally time-consuming for banks to initiate money transfers and complete them. However, there are now many online apps that allow you to transfer your money safely and in less time than it would take for your bank to complete a transaction. These online transfers might only require a debit card or credit card, although they might have extra fees associated with quick transfers.
Banks might also have 24-hour turnaround times for bank transfers, but these will also be associated with fees.