Transferring to overseas suppliers: 5 primary international transfer methods

In Hong Kong, inter-corporate remittances have become increasingly convenient. However, traditional methods of remittances still prevail for overseas remittances. For Hong Kong businesses that need to remit funds to overseas suppliers, traditional methods take longer to process, cost more, and ultimately affect cash flows. This article provides an overview of the commonly used methods for overseas remittance and analyses their pros and cons.

5 major overseas transfer methods (characteristics, advantages and disadvantages)

Common international business transfer methods include professional overseas remittance companies, third-party payment platforms, bank wire transfers, money orders, and money changers. They each vary in terms of security, costs, and time when it comes to transfers. Their features, advantages, and drawbacks are outlined as follows:

Professional overseas remittance companies

Professional overseas remittance companies like Alliance Forex Limited (AFX) can assist clients in sending funds to overseas suppliers. Fees are typically lower than banks, and their services are more personalised and flexible, with faster customer support responses. 

However, it is best to opt for larger multinational corporations to ensure a smoother experience, as some smaller ones may not automate the transfer process and potentially lead to errors or delays. Additionally, smaller firms may lack transparency regarding their backgrounds and companies with banking regulations. They often impose minimum transfer amounts which significantly affect flexibility. Nonetheless, their overall fees and FX rates are more attractive than traditional bank wire transfers.

Third-party payment platforms

The operations of third-party payment platforms like Airwallex, Wise, and OFX are fully automated. Customers input the transfer amount and currency, which prompts an automatic quotation. Upon transferring funds to the platform, the money is sent to the specified account.

When sending money abroad through third-party platforms, the exchange rates and fees are typically lower than traditional bank wire transfers. The process is streamlined and entirely online. Nonetheless, customers must first transfer funds to the third-party platform's bank account, which subsequently remits the funds to the designated account.

Bank transfers

Bank telegraphic transfers (T/T) are cross-border fund transfers facilitated electronically between the members of Society for Worldwide Interbank Financial Telecommunication (SWIFT) through the SWIFT system. While these transfers are known for their secure and reliable point-to-point transactions, not everyone is well-versed in the workings of the SWIFT system. When initiating a T/T, the sender must provide the SWIFT details of the sending and receiving banks, along with the name, SWIFT number, and the address of corresponding bank. These information are not easily accessible, and any inaccuracies can result in delays. Additionally, T/T are typically priced higher than interbank FX rates, leading to increased exchange costs.

Cheque remittances (money orders)

Cheque remittances, also known as money orders, is the traditional method used for sending money overseas. Sender hands over the funds to the bank and the bank will issue a cheque. The sender mails the cheque to the recipient who is located abroad. The recipient can then withdraw the money from their local bank. 

Although the fees associated with money orders are usually similar to that of T/T, the processing of money orders is slower. Even if the recipient receives the cheque, they will need to personally visit the bank to access the funds, which might not align with the supplier's expected timeline for payment.

Money changers

Money changers is another common transfer method. Remitters simply need to provide ID documents and confirm the exchange rate, and proceed with the remittance. 

Depending on the recipient's location, funds can be credited as quickly as 2 business days. Unlike bank transfers that involve extensive paperwork, transferring through money changers is straightforward. However, the transparency of shops’ backgrounds may be questionable and might not meet compliance standards of banks and regulatory bodies. There have been instances where the accounts of money changers are frozen due to security and money laundering concerns.

Comparison of commercial transfers: time, processing time and fees

Key things to consider when sending money to oversea suppliers

When making transfers to oversea suppliers, there are several important considerations:

• Processing time: Overseas transfers are not processed immediately, and the processing time differs based on the countries and financial institutions involved. To meet payment deadlines, it's recommended to send funds to suppliers ahead of time. 

• FX rate: Fluctuations in FX rates could affect the total payment. It's recommended to check and compare the rate and fees on the day of transfer.

• Handling fees: Handling fees are either a fixed fee or calculated based on a percentage of the transfer amount. Some platforms may impose various hidden charges, so it is best to understand the full range of fees associated with the platform.

• Limitation on the transfer amount: Transferring platforms might set limits on the minimum and maximum transfer amounts. It is suggested to understand the platform’s rules for overseas transfers to prevent any shortfall that may hinder completing the transaction.

• Delays: Delays can happen when dealing with FX and oversea transfers. Hence, it is crucial to allow ample time for the transfer, and proactively learn about the tracking methods to monitor the status regularly.

• Account opening requirements and required documents: Ensure that the supplier has a valid overseas bank account before an oversea transfer. Different countries and financial institutions may also have varying regulations regarding account opening and document requirements.

Information required for sending money to suppliers

The following information is required for sending money to supplies: 

• Supplier’s bank account details: This includes the name and address of the bank, account number, and SWIFT code (if sending through the SWIFT system.)

• Currencies and amount: confirm the transfer amount and currencies.

• Purpose of payment: Specify the purpose, nature and any relevant information of the payment. This is required by the bank to determine the purpose of the remittance. 

• The remitter’s ID documents: Depending on local laws and the requirements of financial institutions, the remitter is required to provide a Certificate of Incorporation, and the relevant contract and invoices relevant to the transfer.

To ensure a smooth transfer and avoid any delays or errors, prepare the aforementioned information and required documents as per the instructions of the bank or remittance platforms.

Which overseas remittance method is best for sending money to suppliers?

Each overseas remittance channel has its own unique features, so it is crucial to weigh each factor like time, cost, and security when choosing the suitable transfer method. Typically, payment platforms and banks complete remittances in 5-7 business days. Yet, specialised services like Airwallex can complete transfers in as quickly as just 1 business day. With Airwallex’s global reach, you can transfer securely in 60+ currencies to 150+ countries, including USD, GBP, CNY, EUR, JPY, KRW, and more.

Case study: Meat and seafood wholesalers 

Meat and seafood imported from foreign countries often need to be delivered within a short period of time, so wholesalers must also keep up with the pace to settle the payments quickly. However, the pricing of products depends on the exchange rate at the time of ordering. If the remittance lags slightly, wholesalers would bear additional exchange rate risks.

For example, a seafood wholesaler in Hong Kong orders seasonal fish from Japanese suppliers every week. That means he also has to exchange Hong Kong Dollars for Japanese Yen weekly to pay the supplier. With traditional bank wire transfers, the wholesaler performs currency exchange weekly and pays a handling fee each time in order to pay the supplier. This can add up significantly over time due to the accumulation of fees every week.

With Airwallex's multi-currency Global Account, you can save on most bank charges and increase your profit margin while enjoying more favorable exchange rates. Moreover, Airwallex can complete transfers as fast as within 1 working day. Wholesalers no longer have to make early payments days in advance each time so cash flow can be managed more efficiently.

Case study: Action figure supplier

Action figures have become increasingly popular, which is why, although the production takes a long time, wholesalers are still purchasing in large amounts to meet the demand of retailers. The transaction amount is huge, and since handling fees for international money transfers are calculated by a percentage, such fees can eat into profit margins significantly.

For example, a wholesaler specialising in anime action figure models from Japan orders hundreds to thousands of boxes of action figures, with each transaction amounting to at least HK$100,000. In the past, wholesalers used bank telegraphic transfers for remittance at a rate generally 1-3% higher than the bank's interbank exchange rate. Wholesalers would pay at least HK$1,000 as exchange costs when remitting money. With other hidden handling fees, the remittance cost would add up to the cost of buying several more boxes of action figures.

Airwallex enables businesses to remit over 60 currencies to more than 150 countries or regions, with FX rate at as low as 0.2% above the interbank rate, so you can save up to 80% on FX fees and enhance profitability. Where possible, payments are made using Airwallex’s local network to eliminate transaction fees and deliver your funds faster and in full. With Airwallex’s easy-to-use platform and multi-currency accounts, you can transact in local currencies and be credited as fast as 1 business day. Start today to simplify accounting and manage cash flow here.