If you want to send money internationally, you have two main options; your bank or a licensed money transfer provider. Both options provide the same service but in different ways – Envios de dinero a Guatemala en linea. This article will examine their differences and help you decide which is better to use.
Difference Between Banks And Money Transfer Providers
A bank offers a broad range of financial services, including savings accounts, foreign exchange, loans, mortgages, money market funds, etc. On the other hand, money transfer providers focus on transferring funds between different customers.
How Do Banks Handle Foreign Transfers
Most banks handle foreign payments via the SWIFT network. SWIFT stands for Society for Worldwide Interbank Financial Telecommunications, the standard messaging system for global financial institutions.
Every banking institution has its unique SWIFT code. When you initiate a transfer, your banking institution will contact the recipient’s institution via their SWIFT code and instruct them to deposit cash in the recipient’s account. Once the deposit is confirmed, it removes the equivalent amount from your bank account.
SWIFT is not the only messaging system for transferring funds internationally. You can also use the Single Euro Payments Area (SEPA) network if you live within the Eurozone and the Cross-Border Interbank Payment System (CIPS) for yuan transfers to Chinese financial institutions.
How Do Money Transfer Providers Handle Foreign Payments?
They avoid the SWIFT network due to high costs and regulatory hurdles. Instead, they use a network of local bank accounts around the globe to serve customers.
When you send cash through a provider, it looks like it goes directly from your account to that of the recipient. However, it isn’t so. What happens is that the provider deposits your cash in their local account. It then sends the equivalent amount to the foreign recipient via an account they hold in the recipient’s country. This method is why their transfers are usually faster and offer more favorable exchange rates.
For example, you can use Silverbird to send dollars from the U.S. to a business partner in the U.K. Silverbird will deposit the USD into its U.S.-based account. It’ll then remove the equivalent amount from its U.K.-based account and send to your business partner.
The clever method of using local accounts means money transfer services are cheaper and quicker.
Banks vs. Money Transfer Services
Let’s see how these two fare against each other in important areas.
Fees
The cost of a foreign bank transfer usually outweighs using a money exchange service. Banks must pay expensive annual fees to the SWIFT network, so recoup their money by charging customers a significant amount on each SWIFT transfer. On the other hand, transfer services bypass the SWIFT network and can send funds more affordably.
Speed
SWIFT transfers can take up to five working days to settle. Sometimes, the cash passes through several intermediary banks before getting to the final destination, meaning more time is needed.
In contrast, money exchange services already have local accounts in the recipient’s country, so can wire the cash in less than 24 hours.
Security
Banks are considered more reliable and secure than money exchange companies. It’s not that the latter is inherently secure. It’s just that banks have been around for much longer and have more experience in handling foreign transactions.
You shouldn’t be scared to use an exchange service because they are licensed and authorized by the government, just like banking institutions.
Which One Should You Choose?
Choose a transfer service if you want the best exchange rates and lower fees. If you don’t mind paying extra fees because of your relationship with a trusted bank, you can go for that option.