Normally, SMEs in Asia rely on SWIFT wire transfers to manage their international money transfers. This happens because most are not aware of other cross-border payment methods that are quicker, cheaper and more reliable than SWIFT. In this article, let us introduce you to an alternative global payments method "Local Transfers" so you can compare the two options and determine when to use which.
What is SWIFT?
SWIFT is a secure, electronic global payment and settlement system i.e. the SWIFT International Payment network. A SWIFT wire transfer is executed by the payer’s bank debiting their account, and is routed through a series of intermediary banks in the SWIFT network and ends with the recipient’s bank crediting their account. This method of telegraphic transfer (TT), also typically called a wire transfer, is the largest financial messaging system in the world.
What are Local Transfers ?
Local transfers are powered by Real Time Gross Settlement (RTGS) and other electronic local payments systems.The customer uses a domestic transfer to send funds to the remittance provider e.g. Wallex. Then, the remittance provider does the FX conversion through its network and pays the converted amount at a pre-agreed rate in the destination currency.
Traditionally, SWIFT transfers/telegraphic transfers (TT) were heavily used for international money transfers. However, local transfers are now picking up due to the significant advantages they offer to end customers.
Wallex’s cross-border platform supports both types of payments for customers with differing needs.
The Differences between SWIFT and Local Transfers
SWIFT transfers involve routing the funds through a network of intermediary banks (up to 3) and each of those intermediaries charge a transaction and/or service fee. Due to the unpredictable nature of the fees and FX margins involved, the final amount to be received by the beneficiary cannot be promised.
SWIFT transfers tend to be the more expensive international payments option, so we recommend that you only initiate them when elaborate documentation is required and cost is not a consideration. SWIFT is also very useful when transferring large sums of money which may not be supported by local channels.
For global payments, local transfers use a network of bank accounts from all over the world - with local currencies. This process removes the need for intermediary banks, saving customers multiple transfer fees and unreasonable FX rates.
Local channels can be cheaper than SWIFT channels because they are free of any receiving bank charges for receivers and beneficiaries receive their funds in full.
They are also getting much faster, especially with Wallex, as we are continuously strengthening our cross-border payments network and offer near real-time transfers through them.
Having said that, in some cases, local channels may support less currencies. It depends on the the network of the remittance provider. They may also have a limit of the amount one can pay out at a time.
SWIFT vs Local Transfers: Details Required and Common Mistakes
Information needed for SWIFT:
- Full name and address
- Account number and account type
2. Recipient’s bank:
- Name and address
- Routing number
- SWIFT or BIC code
- IBAN (if applicable)
4. Transfer amount
5. Reason for transfer
Most countries and banks have a unique SWIFT or BIC code, and it is essential to provide it. Many European countries also use IBAN codes, so payments to these countries must also include this information.
Information needed for Local Transfers:
- Account Holder Name
- Account Number
- SWIFT code
- Local bank account number
2. Recipient country’s local routing number if applicable (e.g. IFSC code in India, BSB code in Australia etc.)
Common errors with international transfers:
- Incorrect city or country names
- Bank name is listed without the address
- Incorrect SWIFT or IBAN codes
- Mismatch in account name and account number
Such errors can lead to processing delays or the wrong recipient receiving funds. Telegraphic transfers (TT) are irrevocable, so it is critical to provide the correct information from the get go.
Summary: Use Wallex for SWIFT and Local Transfers
Whether you select SWIFT or local transfers, both global payment methods keep your money secure and are supported on our cross-border payment platform. Wallex uses an intelligent routing system that deploys SWIFT or local transfers depending on a combination of factors like urgency of transaction, amount, currency corridor amongst many others.
We are happy to share more about our international payment solution with you. Register your interest here: https://www.wallex.asia/sg/contact