A wire transfer payment is an electronic way individuals and financial institutions pay for goods or services based on a previous agreement. While this payment method has been around for several decades and available to larger organizations, the increasing development and use of technology has lowered the cost of a wire transfer payment so a variety of individuals can avail themselves to this service. Financial institutions are the primary source for financial wires. Wires also make it possible for individuals and businesses in foreign nations to transfer money, as this method is seen as more secure than other payment methods.
Individuals and businesses can often initiate the wire transfer payment directly from their bank account. Many financial institutions use highly secure banking websites that protect a client’s information, allowing the payment initiation process to occur. Banks will need information such as payment amount, recipient’s name, bank receiving the transfer, and bank account numbers. This information allows the bank to begin the wire transfer payment process.
Much of the wire transfer process goes on behind the scenes of the normal banking process. Banks will send and receive information electronically with instructions for completing the transfer process. Many times, banks must physically approve and post information relating to the wire transfer payment. This slows down the process and allows banks one final review prior to completing the transaction. While not instantaneous, this process is much quicker than traditional payments methods offered by banks or financial institutions.
Financial institutions typically have agreements with one another to ensure that transfer payments can flow smoothly between the banking systems. The number of credit unions, local banks, large financial institutions and savings groups can make it difficult to manage the amount of transfers between these groups. Additionally, banks and other financial institutions that send money internationally must have similar agreements to accept electronic information from each other. Not having a standing agreement will usually result in banks needing an intermediary institution to act as a clearing house. These clearing houses will hold wire transfer payment information and allow banks to gather the information as necessary to complete the wire transfer process.
Wire transfers may be difficult to stop once the process begins. Many banks and financial institutions only allow a few hours for the individual initiating the payment to request a stop payment. The limited amount of time is due to the short process that allows banks to complete the wire transfer process.