The term “wire transfer” doesn’t necessarily bring to mind the latest technological advances in payment types. And it’s true: wire transfers have been around for roughly 150 years, back when they were limited to Western Union and sent over telegraph lines. Today, wire transfers could be a practical addition to your payments strategy - depending on your unique situation.
For modern consumers, their only experience with a wire transfer may be in the home-buying process at closing time, or sending money to a friend or family member overseas. Businesses find more opportunities to use wire transfers though - especially for situations where funds need to be delivered quickly.
A wire transfer is a quick way to send money electronically between a predetermined set of intermediaries. These intermediaries are can be traditional banks (i.e., Bank of America) or non-bank providers (like Western Union).
The wire transfer is sent out via a network that connects providers, and it includes a specific set of information: the names and bank account numbers of both the sender and the recipient and the amount to be transferred.
Domestic wire transfers can usually take place same-day, where international transfers can take several days to process. That speed will cost you though, which is why many would-be users shy away from them. Though many banks waive feesfor the recipient, some charge up to $20 per transfer received. Senders can expect to pay anywhere from $15-$50 to send a domestic wire, and $35-$65 for an international wire.
With all these fees, when it would it make sense to use a wire transfer for your business?
You require sizeable lump-sum payments that dwarf transfer fees. If your customers are paying you in the hundreds of dollars, there’s no reason to consider wire transfers. However, if you are receiving payments in the thousands of dollars, wire transfers might be a good option for your business. You can receive funds quickly via providers like PayPal or Stripe, but many charge a percentage based fee (rather than a flat fee). Take a look at your highest-paying customers to compare fees between your current payment method and a wire transfer.
Your customers are large institutions that can only access wire transfers as a fast method of payment. Dealing with smaller companies means you may have access to more flexible payment options - credit card payments, PayPal, Venmo, or even ACH payments. Larger companies may be less flexible and only have access to checks and wire transfers for payment methods. You may be in luck: your customers may have negotiated lower transfer rates with their bank, if there’s high volume. Make sure you find out what each customer’s transfer fee is (if any). You can then decide if you want to credit your customer the transfer fee on their invoice, sending some goodwill in the process.
- The bulk of your customers are outside the U.S. The type of customers you serve may sometimes dictate the payment methods your business accepts. If the bulk of your customer base is not in the United States, wire transfers may be a viable option to receive payments quickly. You could also consider setting up a bank account in the country you do the most business with, but that account may require a tax ID. As with the large customer scenario, make sure you know what the wire transfer fee is for all customers.
With so many payment options available in today’s marketplace, wire transfers may seem like a thing of the past. But wire transfers can be a cost-effective way to receive customer payments. Make sure to investigate all payment options before ruling out wire transfers.