What factors affect international money transfer speed?

We’re lucky to be living in a time where companies can effortlessly move money between colleagues, suppliers and customers based in different corners of the world. In the past, sending money was slow, difficult and expensive. Now, innovative global payment methods mean that transfers can happen in an instant, with minimal costs.

In order to take advantage of the best payment methods for your company, it’s important to understand the factors influencing the speed of international bank transfers. Armed with this knowledge, you’ll be able to choose the right form of payment and balance the need for speed with a cost that makes sense for your bottom line. 

Why does international transfer speed matter?

Quicker payment settlement is more convenient for everyone. For businesses, though, fast, reliable payments can be a necessity rather than a luxury. That’s because delays in paying suppliers can lead to supply-chain lags that can hurt the bottom line during peak seasons.

Talent retention is another important factor in business success, and employees need to know when to expect wages in their account. In addition to this, there are times when emergency funds need to be transferred in order to solve an urgent problem. Ensuring a good solution is in place now will be invaluable in this type of scenario. 

What factors affect the speed of international payments?

Cross-border payments constitute a complex web of actions, and not all routes to payment are direct. 

Relationships between financial institutions

If the sender's bank does not have a direct relationship with the recipient's bank, an intermediary bank (or series of intermediary banks) is used to bridge the gap. This can add to the amount of time it takes for a transaction to be completed. Intermediary banks are more likely to be used when the sender’s currency is different from the recipient’s currency.

Some banks and financial institutions are part of a shared payment network. These streamline the communication and settlement process, minimising the need for intermediary banks and speeding up the money transfer.

Banking hours and time zones

Each bank has its own specific operating hours, and transfers initiated outside these hours may experience delays. If you are sending money to a country that is in an opposite time zone, you are more likely to add time to the transaction, as it is less likely that both the sender’s and recipient’s financial institution will be open at the same time. Weekends and public holidays also play into this, as local banking operations can be paused during these times.

Regulations and compliance 

Adherence to international and local regulations can introduce additional steps in the payment process. Delays may occur if there are compliance issues or if additional documentation is required.

Geopolitical events

Political instability and other global geopolitical events relating to issues such as sanctions and heightened security concerns may add to international payment processing times. This is because there may be increased scrutiny, more stringent compliance checks, new regulations, increased risks leading to banks taking additional precautions, an impact on corresponding bank relationships, and operational disruptions. 

Particular currencies and countries

Some pairings are more well-established than others, with better infrastructure and a higher volume of transactions. For example, transactions involving major global currencies such as the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), and British Pound (GBP) often have faster processing times. These currencies are widely used in international trade and finance, resulting in well-established and efficient payment channels.

Payment methods

There are many different ways of sending money overseas, including wire transfers via the SWIFT payment and other types of less traditional money transfer services. Some of these international payment methods come with bigger fees, some prioritise fast payments, and some use technological advances so that you can pay money to foreign countries as though you are a local there, which is both quick and cost-effective.

How do international money transfers work?

SWIFT: A worldwide payment network

The SWIFT (Society for Worldwide Interbank Financial Telecommunications) network is the most common method used by banks to move money across borders. Founded in Brussels in the 1970s, it provided financial institutions with a private network to transmit financial data worldwide. SWIFT payments come with transaction fees and foreign exchange fees, and can take up to five days to clear. 

Regional payment networks

Other countries and regions have their own payment networks like SEPA in Europe, ACH in the US, CHAPS and BACS in the UK, and FPS in Hong Kong. These help streamline payments within the geographic location they serve, and each comes with its own time frame for completion.

For example, Hong Kong’s FPS (Faster Payment System) allows for near-instantaneous payments, often completed within a few seconds. CHAPS, SEPA and ACH payments are designed to take place within a single business day, although this is not always the case. There are several different types of BACS payment, from the BACS Faster Payment System (FPS) which is almost immediate, to Direct Credits and Direct Debits which usually take three business days to clear. 

How are fintech platforms changing money transfers?

As well as the legacy system of financial institutions, it’s now possible to send money abroad via fintech platforms and peer-to-peer services. 

Some of these can be instant if both sender and recipient have an account with the platform, but if the payment is funded using a bank transfer or a credit or debit card, the processing time can depend on the institution involved. Note that some of these platforms can come with steep fees and hidden currency conversion costs that can hike up the cost of the transaction.

Airwallex is a fintech platform that offers the best of both worlds: fast payments that are also cost-effective. Airwallex leverages local payment schemes to facilitate faster global payments for businesses. Airwallex FX rates are market-leading with no hidden fees, and more than three-quarters of global transfers settle same-day.

Airwallex offers a wide array of local and global transfer options, ensuring customers get the fastest and most cost-effective solution. By leveraging local payment rails, Airwallex can deliver instant transfers to 60+ regions and countries, and faster transfers to 150+ regions and countries. Sign up today to find out more.