Cross-border payment and remittance guide: more cost-effective method

Hong Kong wholesalers usually use secure, reliable, and reputable traditional banks for international payments, but that usually comes with expensive charges. Do you know what other fees traditional banks charge and how long it takes for the remittance? Are you aware of the impact of high exchange rate on each transaction?

What are the options for making cross-border payments in Hong Kong?

Wire transfer is the most common method. Banks use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system to process wire transfers, and almost all banks offer this service and have their own SWIFT Code (also known as Bank Identification Code, BIC). As long as you have the recipient's bank SWIFT Code and account number, you can wire funds to destinations around the world with a handling fee.

International transfers involve multiple fees

Typically, multiple fees are incurred for cross-border transfer, and these fees vary among different banks. In addition to a basic fee of HK$50 to HK$200, additional fees may be applied by agent banks, receiving banks, or settlement institutions, ranging from approximately HK$100 to HK$300. Some banks may even impose fees for services such as inquiries, cancellation, or adding remarks to the transfer instructions, costing around HK$100 to HK$200. Generally, online remittances tend to have lower fees compared to branch transactions, but certain banks may occasionally waive transaction fees to attract customers.

For individuals and wholesalers who frequently make international remittances, the accumulation of various fees can add up significantly. It is recommended that you take the time to check the bank's official website or consult bank personnel about the required procedures and approximate fees before the bank transfers.

Who bears the remittance fee?

The remittance fees can be borne either by the sender or the receiver. Typically, these fees are deducted from the remittance amount or paid separately during the transfer. When filling out a remittance application form, you will often come across the following options:

1. SHA: The remitter pays the remittance fees charged by the remitting bank, and the recipient covers the charges by the intermediary bank and the receiving bank.

2. BEN: The recipient pays for all domestic and international fees associated with the transfer.

3. OUR: The remitter pays for all domestic and international fees associated with the transfer.

4. Full payment: This ensures that the entire remittance is transferred to the receiving bank. However, if the bank charges an inward remittance fee, the recipient is still responsible for the remittance fee

Benefits of using traditional bank transfers

1. Multiple processing channels

Traditional banks typically offer at least three ways to process remittances, including branch offices, online banking, and mobile apps. This allows you to choose the most suitable channel based on your personal needs.

2. Remittance tracking service

Some banks, such as HSBC and Hang Seng Bank, provide remittance tracking services. You can instantly check the progress of your remittance by logging into online banking or the mobile app.

Disadvantages of using bank wire transfers

1. Local banks set the exchange rate, which leads to higher costs

As central banks around the globe began to raise interest rates, the exchange rates of major currencies such as the United States dollar (USD), Euro, and British Pound (GBP) have become more volatile, increasing the foreign exchange (FX) costs for wholesalers. In addition, FX rates set by traditional banks are typically more expensive than market rates. This means that even if a currency drops at some point, most people are unable to make the remittance at their desired market exchange rate. Therefore, even if some banks offer free wire transfer fees, they cannot offset the high FX spread. For wholesalers who make multiple cross-border transfers a day, high FX will increase their operating costs.

2. Cross-border transfer generally takes longer

International payments usually require processing through a correspondent bank, which acts as an intermediary to help customers remit funds to the local beneficiary bank. Several correspondent banks may be required to complete the remittance for some regions that are loosely connected to Hong Kong. With different time zones and cutoff times for each currency at the clearing institutions, traditional banks generally take 1 to 5 working days to complete remittances. If you opt to make the wire transfer at the branches of the same bank, the remittance procedures can be expedited and may be completed immediately.

Is there a limit on the amount of remittance for traditional bank wire transfer?

In order to safeguard the security of accounts, there are daily limits for traditional bank wire transfers. Generally speaking, there are two types of limits: unregistered payees and registered payees. The former has a lower daily limit for wire transfers, ranging from around HK$10,000 to HK$400,000, while the latter has a significantly higher limit, ranging from HK$500,000 to HK$3,000,000 per day. Since banks need time to process the application of registered payees, larger-scale wholesalers who want to make large wire transfers should register the payee information in advance.

On top of the daily limits, individual banks have different restrictions on international remittances in different currencies. For example, Hong Kong residents can only transfer money to a China RMB account under the same name, with a daily limit of 80,000 yuan per person. It is recommended to check the latest wire transfer limits and currency restrictions on the bank’s official website.

What is the SWIFT network? What are the advantages and disadvantages?

Wholesalers who have used international remittance and payment services should have seen the word "SWIFT". "SWIFT" stands for the Society for Worldwide Interbank Financial Telecommunication, and the society provides wire transfer services to banks and securities institutions in over 200 countries/regions worldwide. Once a bank or financial institution becomes a member of SWIFT, it will be assigned a unique SWIFT code that customers need to fill in when using cross-border transfer services.

However, the processing fee for SWIFT network wire transfers is not low, so banks pass on the cost to customers through higher FX and different fees to offset their costs.

Higher fees

Customers using traditional wire transfers need to go through the SWIFT network, and the entire cross-border transfer process may involve more than one intermediary bank, resulting in higher fees. At the same time, if the transfer involves currency exchange, wholesalers will need to pay the FX difference. It is known that the FX offered by banks for the SWIFT network is usually 4–5% higher than the market rate. For smaller-scale wholesalers, this greatly increases cost pressure.

Slow processing time

The SWIFT network usually takes 1–2 working days to process and credit the account. In some cases, it may take up to 5 working days, depending on the complexity of the transfer. In the current business climate, a transfer that takes up to 5 working days to complete is inconvenient and unfavourable for business.

Currency exchange shops can also process remittances

When it comes to competitors in the remittance business, most FX shops provide remittance services with more competitive remittance fees compared to traditional banks. The time required for international remittances for FX shops is gradually catching up with online banking transfers. In addition to the lower fees and FX, the currency and location of the remittance are almost unrestricted. If the remittance is not urgent, it is recommended to pay attention to the FX and fees when choosing an FX shop. At the same time, since remitting with FX shops requires transferring through a third party, it is recommended to choose a reputable FX shop to mitigate the risk.

Transfer through Airwallex

Airwallex has emerged as a renowned all-in-one financial platform, capturing the attention of wholesalers in recent years. With global infrastructure established worldwide, Airwallex uses local rails to facilitate overseas transfers for clients. This approach allows for the potential savings of multiple fees, such as SWIFT network charges and intermediary bank fees.

With an Airwallex Business Account, you can transfer with over 60+ different currency pairs to 150+ countries at favourable FX, with no minimum transaction amount and exchange fees in a small markup as low as 0.2% above the interbank exchange rate.

How fast can Airwallex complete cross-border payments?

Airwallex only needs as fast as one business day to process your international transfer requests. The actual completion time depends on several factors, such as the payment method, the recipient's bank address, and the transaction date.

Here are the steps to transfer with Airwallex

1. Log in to your Airwallex WebApp.

2. Top up your account if your account balance is insufficient.

3. Click “Transfers” in the left-hand menu.

4. Fill in the recipient's information (name, country or region, address and city), bank account details, and select the transfer method (local transfer, or SWIFT wire transfer).

5. Choose the payment currency, and enter the amount.

6. The payment summary will show the applicable FX and detailed fees.

7. Check that the information and amount are correct, confirm the transfer, and receive an email notification.

Frequently asked questions

Is Airwallex's cross-border transfer secure?

Airwallex is secure and reliable. Airwallex is regulated by the Hong Kong Customs and Excise Department and holds a Money Service Operator (MSO) license (No. 16-09-01929). Additionally, Airwallex has registered or obtained authorised licences from regulatory institutions in several overseas countries, including the United States, the United Kingdom, Australia, Canada, Malaysia, New Zealand, Singapore, and more.

What information and documents are needed to open an Airwallex account?

Airwallex only provides services for corporate clients and does not currently offer personal account services. However, certain businesses such as investment companies, pharmaceutical companies, and charitable organisations are not eligible to apply for Airwallex account services. Opening an Airwallex account is simple and only requires the following documents: Certificate of Incorporation (CI), Business Registration (BR), and the identification documents of authorised agents. For more details, please visit here. You can start using our service after account verification, which generally can be completed within 24 hours, and up to 3 days.

What are the benefits of opening an Airwallex Business Account?

Airwallex offers services such as payment collection and cross-border payments, which can be conveniently done through our website and app. With an Airwallex Business Account, you can transfer globally in 60+ currency pairs, with no minimum transaction amount and exchange fees at a small markup as low as 0.2% above the interbank exchange rate. Transfers can be completed in as quickly as one business day.

Which currencies are supported by Airwallex Business Accounts?

Airwallex supports multiple currencies, including USD, GBP, CNY, EUR, and many more.

Does Airwallex Business Accounts charge any account opening or monthly fees?

No, Airwallex does not charge any account opening or monthly fees, nor do they have a minimum balance requirement.

In addition, businesses can open Global Accounts in 60+ countries, and monitor all cash flows on a single platform. It only takes a few minutes to open an account online, without the need to visit a bank in person.

Learn more about how Airwallex helps wholesalers save costs today. Watch our demo to find out more.