Wire Transfers: What They Are & How They Work

Published on June 18, 2024

Wire transfers have been around for roughly 150 years, originating in the era of Western Union and being sent over telegraph lines. Fast forward to today, wire transfers have transformed into a versatile payment tool. 

Wire transfers are not just confined to moments like finalizing a home purchase or sending money abroad to loved ones; businesses can also benefit from sending and receiving wire transfers, particularly for urgent fund transfers, where speed is paramount.

Keep reading to learn about wire transfers, the different types of wire transfers, how wire transfers work, when it makes sense for businesses to wire money, the advantages and disadvantages of utilizing wire transfers, and alternatives to wire transfers.

What is a wire transfer? 

A wire transfer is a quick way to send money electronically between a predetermined set of intermediaries, without a physical exchange of cash. These intermediaries can be traditional banks (i.e., Bank of America) — also known as bank wire transfers — or non-bank providers (like Western Union). They require specific information such as the names and bank account numbers of both the sender and the recipient and the amount to be transferred. 

Most wire transfers can take up to two business days to process, depending on the type of wire transfer. They’re generally considered to be a secure way of wiring money between bank accounts as long as you know the other parties’ correct information. Wire transfers don’t come without a price, however. Though many banks waive fees for the recipient, some charge up to $20 per transfer received. 

Types of wire transfers

As mentioned, there are two types of wire transfers. 

Domestic wire transfer 

A domestic wire transfer refers to any electronic payment made between two banks or financial institutions within the borders of a single country. One advantage of this type of transfer is its swiftness. Typically, these transactions are processed and completed on the same day they are initiated, often arriving within just a few hours. Senders can expect to pay anywhere from $15-$50 to send a domestic wire.

International wire transfer

An international wire transfer involves initiating a payment in one country and settling it in another. Even if the recipient holds an account at the same bank as the sender but in a different country, an international wire transfer is necessary. Sendings will need a routing or SWIFT code to send this type of transaction. Typically, international wire transfers are completed within two business days — the additional day is required so the transfers can pass through a domestic automated clearing house (ACH) and its foreign counterpart. Fees associated with sending an international wire range from $35-$65.

When would a business use a wire transfer?

With its high fees, you may be wondering when it makes the most sense to use a wire transfer for your business. Here are a few scenarios where a wire transfer may be the most efficient payment method:

Large payments

If your customers are paying you in 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.

Customer payment preference 

If your customers are large institutions that can only access wire transfers for quick payments, a wire transfer makes sense. 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, on the other hand, often have limited options and may only accept checks or wire transfers. You might be fortunate if your customers have negotiated lower transfer rates due to high transaction volumes. Ensure you know each customer’s transfer fee (if any). You can then decide if you want to credit your customer the transfer fee on their invoice, demonstrating goodwill in the process.

International customer base 

A wire transfer could be a good choice if most of your customers are located outside the U.S. The preferences of your customer base might influence the payment methods your business adopts. Opting for wire transfers can be a practical way to receive international payments swiftly. Alternatively, you might explore establishing a bank account in the country where you conduct the most business, though this could necessitate a tax ID. Similar to the scenario with large customers, ensure you’re aware of the wire transfer fees applicable to all customers.

How does a wire transfer work? 

For a wire transfer, funds move between banks or financial institutions through wire networks like the Federal Reserve Wire Network in the U.S. (also known as Fedwire). When initiating a wire transfer, the sender provides the bank with details such as the recipient’s name, bank name, account number, and routing number. Once the sender’s bank receives the necessary details, they initiate the transfer by deducting the amount from the sender’s account and sending payment instructions to the recipient’s bank. 

Upon receiving the payment instructions, the recipient’s bank deposits its reserve funds into the recipient’s account. The actual settlement of funds between banks occurs after the recipient’s bank confirms the availability of funds. This process ensures that wire transfers are swift and efficient, making them a preferred choice for businesses, consumers, and financial institutions requiring timely and secure money transfers.

Pros and cons of wire transfers for businesses 

To help you decide whether to accept and receive wire transfers, here are some advantages and disadvantages of wire transfers:


  • Fast: Wire transfers are one of the fastest ways to send and receive money electronically.
  • Secure: With encryption technology in place, only authorized parties can access sensitive information while the funds are being transferred. 
  • There is less room for error. A wire transfer will show up on time and where it’s supposed to unless the sender inputs the incorrect account information for the recipient. 


  • Expensive fees: As mentioned, the high fees associated with sending and sometimes receiving wire transfers can quickly add up. 
  • Irreversible: Once sent, international transfers are nearly impossible to cancel as they are settled soon after they’re initiated. However, if the funds haven’t already been processed and deposited, international transfers can sometimes be canceled within 30 minutes of initiation.
  • Banks can limit the amount: Certain banks may impose a cap on the maximum transfer amount.

Alternative to wire transfers

If wire transfers don’t make sense for your business or you’re looking for a more affordable payment method that can be as quick as wire transfers, there is an alternative option: ACH payments. ACH transactions are also electronic, bank-to-bank payments that are typically completed within one business day. ACH payments can support up to a $1 million deposit and can be particularly useful for automatic payments and recurring billing

Compared to wire transfers, ACH payments are less expensive and more secure. In a 2022 AFP Payments Cost Benchmarking Survey, organizations with revenue less than $4.9 billion reported average costs between $.26 and $.50 to support their ACH transactions. However, these amounts exclude additional monthly, percentage, or reversal fees. The ACH network also has built-in anti-fraud measures to help limit risks. It’s also important to note that, unlike wire transfers, they only support domestic transactions within the U.S. and its territories.

To learn more about how these two payment methods compare, check out our article on ACH vs wire transfers.

As part of Invoiced’s Automated Accounts Receivable software, our recently introduced Vendor Pay function is designed to lower payment processing costs for businesses utilizing ACH payments. Vendor Pay entails a flat fee of just $1 per invoice, providing a significant cost-saving advantage. This feature enables sellers based in the United States to minimize expenditure on fees, thereby enhancing their overall financial performance.

Invoiced: Fast and cost-effective payment processing 

Invoiced offers a wide range of payment methods, including ACH, credit cards, virtual cards, wire transfers, and more, ensuring you meet the preferences of every customer. Our Vendor Pay feature enables efficient management of ACH payments at a flat rate of $1 per transaction, helping you reduce processing costs.

Leveraging our Accounts Receivable platform allows you to streamline payment processes, cut down on expenses, and deliver a seamless experience to both suppliers and customers. Whether you aim to optimize wire transfers, simplify collections with AutoPay, or improve accounts receivable efficiency, we have a solution to meet your needs. 

If you’re ready to elevate your payment capabilities, schedule a demo today.

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