Wire transfer
Wire transfer is the everyday name for moving money electronically from one person or organization to another, and the name comes from a telegraph cable. In 1872, Western Union launched the first widely used service of this kind on the telegraph network it already ran. A sender paid cash at one telegraph office. An operator then sent a message to a second office, where passwords and code books told the clerk when to release the funds to the recipient.
By 1877, the service was moving almost $2.5 million each year. Because those earliest transfers rode on telegraph lines, they were called telegraphic transfers, and some countries still use that older phrase.
Today the same idea runs through bank networks instead of telegraph offices. How does a payment actually cross the world, and why can it take days? Who quietly takes a share along the way, and why can a sender rarely call the money back?
Every bank wire begins at a bank, where a customer gives the order to send a certain amount. IBAN and BIC codes usually come with that order, so the bank knows exactly where the money is headed.
The sending bank then transmits a secure message through a system such as SWIFT or Fedwire. The message asks the receiving bank to pay according to the customer's instructions, and it carries settlement instructions as well.
Several hours, or even days, may pass before funds leave the sender's account and appear in the receiver's. The transfer is not instantaneous, whatever the screen at the bank counter suggests.
Two banks that hold reciprocal accounts with each other can settle directly. When they do not, the payment must go to a correspondent bank that has such an account, and that bank passes it along toward the final recipient.
International transfers ask for far more detail. A bank may need the recipient's full name, physical address, bank name and address, account number and type, routing number, and the bank's SWIFT or IBAN code. Fees and processing times vary by provider and by destination country.
How long all of this takes depends heavily on which network carries the payment.
The Federal Reserve's Fedwire system in the United States shows what the fastest kind of transfer looks like. Central bank systems like Fedwire tend to be real-time gross settlement systems, usually shortened to RTGS. They post every transaction one at a time, and immediately, to the electronic accounts that participating banks keep with the central bank.
The Clearing House Interbank Payments System, known as CHIPS, works differently. It provides net settlement on a periodic basis, rather than settling each payment as it arrives.
Speed comes with trade-offs. Systems that settle more immediately tend to handle higher-value, time-critical payments. They also tend to charge more per transaction and carry a smaller volume of payments overall.
The payoff for a faster settlement is protection from currency swings. Money that spends less time in transit has less time to lose or gain value as exchange rates move.
Those central bank systems are the plumbing. To steer a message through them and across borders, banks rely on a system of short codes.
In 1974, seven international banks founded SWIFT as a co-operative society. It operates a global network that lets banks exchange the financial messages behind a transfer, and most international transfers are executed through it. Its headquarters sit in La Hulpe, on the outskirts of Brussels, Belgium. SWIFT also serves as an international standards body for financial messaging.
Each financial institution receives an ISO 9362 code, also called a Bank Identifier Code, a BIC, or a SWIFT code. These codes are generally eight characters long.
Deutsche Bank, with its head office in Frankfurt, Germany, shows how the pieces fit. Its code is DEUTDEFF. DEUT identifies the bank, DE is the country code for Germany, and FF is the code for Frankfurt.
An extended code of 11 characters can direct a payment to a specific office, if the receiving bank has assigned codes to branches or processing areas. DEUTDEFF500, for example, points to an office of Deutsche Bank in Bad Homburg. SWIFT departs slightly from the standard by using position nine for a Logical Terminal ID, which makes its extended codes 12 characters long.
Within the European Union and Switzerland, banks making transfers also use the International Bank Account Number, or IBAN.
In the United States, banks use SWIFT to tell banks abroad that a payment has been made. Fedwire or CHIPS then carry out the payment itself, and domestic bank-to-bank wires run on those two systems. Each American bank is uniquely identified by its ABA routing transit number.
Whatever the code, every bank that touches the message has a chance to take its cut.
Picture bank S sending money to bank R through three intermediary banks, labeled I1, I2 and I3. The customer may hold a contract with only S or R. Yet I1, I2 and I3 can, and often do, take money out of the wire without any direct arrangement with that customer.
The sending bank typically charges its own fee, separate from the money being sent. The receiving bank and the intermediaries instead deduct their fees from the transferred amount itself, so the recipient gets less than the sender sent. Clients are sometimes surprised when less money arrives at bank R. In many places, no law or technical measure protects them from this.
Cheques offer a contrast. The full amount of a cheque is guaranteed, and any fees can be charged only by the banks at either end.
The European Union offers partial protection. It prohibits European intermediary banks from taking a fee out of the transferred amount, even on transatlantic transfers.
A loophole remains in practice. A European brokerage firm may announce that it charges no transfer fee, then ask its bank to take an unpublished fee from the amount transferred, which pays the bank out of the clients' own assets.
How much a bank may charge, and how openly, depends on the law of the country where the payment starts.
In 2002, the European Union handed regulation of fees on euro payments between member states down to the domestic level. The result was very low or no fees for electronic transfers within the Eurozone. In 2005, Iceland, Liechtenstein and Norway joined that regulation on electronic transfers.
Since 2009, European Union Regulation No 924/2009 has governed cross-border payments in the Union. Under its Article 1, an IBAN and BIC transfer within the Single Euro Payments Area, or SEPA, must not cost more than a national transfer, whatever the currency. The receiving bank may still charge for converting to local currency.
SEPA now covers 32 European countries and has superseded the earlier regulation. As of 2022, most European banks do not charge private customers for SEPA transfers, apart from possible exchange fees. Business accounts may be charged, usually less than 40 cents.
In the United States, Federal Regulation J and Article 4A of the Uniform Commercial Code govern domestic wire transfers. They can be costly. In 2016, among the 15 largest retail banks, the average fee for an outgoing domestic wire was $25. Incoming domestic wires were about evenly split between free and $15.
In Australia, the Australian Securities and Investments Commission is the main regulator of money transfers. Domestic transfers are generally free to consumers. International transfers can be costly, with a bank fee anywhere from $0 to $30 plus an FX margin, which is the gap between the interbank rate and the rate the customer is charged.
In industries where money laundering or terrorism financing is a risk, such as money remittance services, the Australian Transaction Reports and Analysis Centre adds further regulation. That worry about misuse runs through the security side of wire transfers.
Unlike a credit card payment, a wire can generally not be recalled, though recalls are possible in some cases and some jurisdictions. For bank-to-bank wires, every account holder must have a proven identity, and the information inside a wire travels through encrypted communications.
Cash offices are a different matter. Transfers collected there are essentially anonymous, and they are designed for people who trust one another.
Sending money to an unknown person for pickup at a cash office is unsafe. After collecting the money, the receiver may simply disappear without providing the goods or services promised. This trick has been used often, especially in the so-called 419 scams, which frequently name Western Union as the collection point.
International transfers involving the United States face another layer of scrutiny from the Office of Foreign Assets Control, known as OFAC. It reads the information in the text of each wire. It then decides, under federal regulations and the political positions of the US government, whether money is heading to terrorist groups or to countries and entities under sanction.
A financial institution that suspects funds are moving from or to one of those targets must block the transfer and freeze the funds.
The company named in those scams is also one of the largest names in everyday money transfer.
Western Union is one of the largest companies offering wire transfers, and it lets people send or receive money without holding an account with it or with any financial institution. Controversy around its transfers has grown in recent years. Monitoring of money laundering has increased, and so has concern about terrorist groups using the service, particularly after the attacks of the 11th of September 2001.
Specialised brokerage houses are another option for consumers and businesses sending money abroad. Many can offer better exchange rates than banks, saving up to 4%. They can also provide spot contracts, forward contracts and limit orders.
Regulation of these providers is uneven. In the United Kingdom, such companies are regulated by the Financial Conduct Authority, yet not all of them fall under its scrutiny. Other regulators include the Australian Securities and Investments Commission, the Financial Transactions Reports Analysis Centre of Canada, known as FINTRAC, and the Hong Kong Customs and Excise Department. In Australia, foreign exchange brokers usually charge a lower fee or margin than the banks.
The electronic funds transfer system, or EFTS, is a separate route. It moves money from a bank account to another party, and some online bill payment services use it. These transfers use a bank routing number and an account number at the receiving institution. They are often called ACH transfers, because they pass through Automated Clearing Houses.
EFTS payments differ from wires in important legal ways. An EFTS payment is essentially an electronic personal check, while a wire is closer to an electronic cashier's check. Either way, the routing number and account number are where every one of these journeys begins.
Updated
Common questions
What is a wire transfer?
A wire transfer is a method of electronic funds transfer from one person or entity to another. It can go from one bank account to another, or through a transfer of cash at a cash office.
When did wire transfer services begin?
The first widely used wire transfer service was launched by Western Union in 1872 on its existing telegraph network. By 1877 it was moving almost $2.5 million each year.
How long does a wire transfer take?
A wire transfer is not instantaneous. Funds may take several hours or even days to move from the sender's account to the receiver's account.
Why does less money arrive in a wire transfer than the sender sent?
Receiving banks and intermediary banks deduct fees from the amount being transferred, so the recipient gets less than the sender sent. Intermediary banks can do this without the account holder's knowledge or consent.
What is the difference between SWIFT and Fedwire for a wire transfer?
SWIFT is a co-operative society founded in 1974 by seven international banks that carries financial messages between banks. Fedwire is a central bank real-time gross settlement system in the United States that actually effects domestic payments.
Can a wire transfer be recalled or reversed?
Wire transfers can generally not be recalled, unlike credit card payments, though recalls are possible in some cases and jurisdictions. This is one reason sending a wire to an unknown person is unsafe.
How much does a wire transfer cost in the United States?
In 2016, among the 15 largest retail banks, the average fee for an outgoing domestic wire was $25. Incoming domestic wire fees were about evenly split between $0 and $15.
All sources
23 references cited across the entry
- 1Fedwire Funds ServiceFederal Reserve
- 2BookThe victorian internet : the remarkable story of the telegraph and the nineteenth century's on-line pioneersTom Standage — Walker — 2007
- 3How wire transfers work and when to use them23 Apr 2025
- 11Wire Transfers: A Guide to What Banks ChargeSpencer Tierney — March 25, 2016
- 12Australian bank fees for international money transfersHelen Champion — Finder.com.au
- 13Julian Morrow13 March 2014
- 15Western Union Money Transfer OptionsWesternunion.com
- 17Money Transfer South Africa: Starting InformationMoneyTransferSouthAfrica.org
- 18Money Transfers for Small BusinessesMoneyTransfers.com
- 19Forward Contracts and Limit Orders Explainedmoneytransfercomparison.com
- 20Currency Specialistsfxcompared
- 21The Importance of Regulation and Who Does What16 May 2016