Overseas Remittance: Are you paying too much using SWIFT Network?

With today’s modern connectivity and digitalization, international trade is an open arena even for solopreneurs and small companies. Does your business source for supplies or services from overseas? If yes, do you rely on international bank transfers via SWIFT to send them your B2B cross-border payments?

In this blog article, we’ll look at the transaction fees involved when you remit money through banks. Read until the end to learn about a more cost-efficient method of sending money overseas.

But first, let’s clarify what SWIFT is.

What is SWIFT?

SWIFT stands for the “Society for Worldwide Interbank Financial Telecommunication”. It was formed in 1973 when six major international banks came together to operate their own private, secure network to send financial messages to each other. Today, SWIFT has more than 11,000 members from over 200 countries and territories.

Many users mistake SWIFT for being a portal that transfers funds. Rather, it’s a global messaging network which banks and other financial institutions use to send and receive information – such as money transfer instructions – to each other in a quick, accurate and secure manner.

How do SWIFT transfers work?

The money that you intend to transfer gets deducted from your bank account. Next, it gets routed through a series of intermediary banks (all whom are members of the SWIFT network) until it reaches your recipient’s bank.

What are the costs involved in SWIFT transfers?

Let us break down the main components of service charges when making international wire transfers via the SWIFT network.

  1. Transfer Fees – This is the service fee for transferring funds internationally. Typically it’s a percentage of your transfer amount, with a minimum charge specified. For instance, with certain banks, this could look like 1/8% of your transfer amount with a minimum charge of $30. Urgent, same-day transfers may also be offered as a premium service. Although nobody wants to pay the higher charges, sometimes pressing circumstances leave you with no choice but to fork out this extra amount so that you don’t miss out on business opportunities.
  2. Exchange rates – It’s common for banks to mark up their exchange rates to earn a profit from you. In truth, they enjoy a much lower, wholesale exchange rate – known as “mid-market rate” – when they transact with their foreign exchange partners. This is usually where banks earn most of their commission from you because it’s hidden and not easy to compute or compare with rival banks. The bank spread, as we call this profit margin, can be up to 5%.  if you’re transferring a large sum, you might feel the pinch. For example if you are converting and transferring $2,000, 1% would be $20 and 5% would be $100…! But with companies such as G-EMx, you can enjoy access to near mid-market rates for 180+ countries.
  3. Incoming fees for recipients – After your payment has traveled across countries to reach your recipient’s bank – he may be charged an incoming fee by his bank to have the funds released to him. While this situation may not be within your control because it depends on his bank’s policies, it becomes another reason to keep your overall transaction fees low to make each international transfer more cost- efficient for both parties.

An Alternative to SWIFT transfers: Local transfers

Another option to remit money to an overseas recipient is to use local transfers. Such transfers operate outside of the SWIFT network. What your bank or financial service provider does is to use a network of cross-border financial institutions to pay your recipient through their local bank. This method eliminates intermediary banks. The financial institutions own a network of bank accounts all over the world. They deposit your funds into one account, and pay your recipient using another account in the destination currency. This is done at a conversion rate that is agreed upon before the transfer is confirmed.

A more cost-efficient way of sending money overseas

At G-EMx, we want to help you escape high fees and avoid paying too much by leveraging local transfers for international payments where possible. Not only are our fees a fraction of what you’d pay the banks for SWIFT transfers, –we can also get the job done instantly. 

In general, our SWIFT transfer fees range between $25-$30, whereas banks may charge up to $50 for the same service. We also offer the flexibility of having you pay for the transfer fee or splitting it with your recipient.

Find out more about our services or contact our service representative now to learn how you can save on your operational costs with us. Do business with foreign parties with a peace of mind when you know you can easily send payments globally with G-EMx.

Read More