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Wire Transfers vs EFTs

Wire transfers and EFTs are the most dominant technologies in the money transfer world, and while they are often confused with each other there are distinctions between the two. As businesses grow and the movement of people across borders increases, there is a need for fast and safe ways to send money from one person or entity to another, and both wire transfers and electronic funds transfers have helped to fulfill this consumer demand. This guide will take you through everything you need to know about electronic funds transfer vs wire transfer.

Updated: 03/06/2021
Read time: 10 minutes
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What is the difference between a wire transfer and an EFT?

There are subtle differences between wire transfers and electronic funds transfers (EFTs), which mainly centre around the fact that wire transfers are a specific type of EFT.

A wire transfer refers to an electronic transfer of funds between individuals or entities across a network of banks and non-bank financial institutions such as money transfer agents and specialist money transfer institutions. Instead of moving funds physically, the remitting institution sends instructions via a secure messaging system – such as the SWIFT network – to its receiving counterpart asking it to deposit its reserve funds to the recipient account referenced.

Once these instructions have been received, the two institutions can then settle the payment details between them in order to record the transfer of funds. Wire transfers are done through a network of banks or transfer providers from one account to another. Generally, wire transfers are available immediately, and cannot be reversed once initiated. Make sure you’ve entered the correct details, as it might be difficult to reverse the transfer.

An electronic fund transfer (EFT), on the other hand, moves money from one bank account to another bank account and is an umbrella term that covers any form of transferring funds electronically. EFT payments are commonly used by businesses to pay vendors and employees, while consumers will often use electronic transfers to make purchases online.

In short, while a wire transfer is a type of EFT, there are other forms of electronic fund transfers, too.

What types of transfers are defined as EFTs?

The term ‘electronic funds transfer’ brings together the whole variety of electronic payments which include are but not limited to the following:

  • Telephone instructed transfers
  • Computer-based transfers including online transfers
  • Magnetic tape or card payments 
  • Automated teller machine (ATM) transfers
  • Point of sale transfers
  • Direct deposits and debits of funds
  • Bank transfers

How do wire transfers and electronic fund transfers work?

Wire transfers

Wire transfers will usually go from one bank to another using the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network.

This network is a secure messaging system used by banks to send information – including wire transfer details – to one another worldwide.

Here’s the typical process for a wire transfer:

  • Step 1: The initiator of the transfer fills in an electronic or manual wire transfer form instructing their bank to pay a certain amount to a designated beneficiary. The form captures, among other details, the beneficiary’s name and address, bank name and address, account number, branch, IBAN, ABA, SWIFT or BIC code, location, and country.
  • Step 2: The remitting bank processes the instructions and sends them via a secure messaging system such as Fedwire or SWIFT to the receiving bank ordering it to credit the specified customer’s account.
  • Step 3: The receiving bank then verifies the instructions as received and credits the account of the customer referenced.
EFT

Most Electronic Fund Transfers are processed via an automated clearing house (ACH) in the US, or via a BACS payment in the UK.

ACH transactions tend to be more secure and lower in cost than wire transfers, but they will often take longer to appear in your recipient’s account.

Here’s an example of how card payments work:

  • Step 1: The customer or cardholder swipes their card or enters their pin at an electronic terminal or an online merchant store. Merchants usually specify the types of cards they accept.
  • Step 2: Through the payment terminal, the merchant sends the transaction information to a payment processor or acquiring bank – a financial institution appointed by the merchant to handle financial transactions on its behalf.
  • Step 3: The acquiring bank routes the transaction to the payment network which could be Visa, Mastercard, American Express, Discover, or any other card.
  • Step 3: The payment network routes the transaction to the issuing bank which is the customer’s bank. Mastercard uses a network called Banknet while Visa uses its VisaNet network to route the transaction.
  • Step 4: Based on the transaction information from the payment network, the card issuer either approves or rejects the transaction. Insufficient balance and inconsistent card information are some of the main causes of card transactions being declined. Whatever the outcome information is rerouted through the payment network back to the acquiring bank.
  • Step 5: The merchant gets a response code at their terminal from the acquiring bank and the transaction is finalised. The rest of the process comprises clearing and settlement transactions where the payment processor deposits funds to the merchant’s account at a pre-agreed fee.

How long will a wire transfer take versus an EFT?

Wire transfers

Wire transfers are processed instantly in many cases, which is why they will often have higher fees than other EFT payment types.

International wire transfers can take longer, however, up to several working days.

If you’d like to know more about the best way to wire money, check our wire transfer guides.

 

EFT

How long an EFT payment will take depends on the type of payment you are making.

However, in the majority of cases, EFT payments will be cleared by the next business day or up to 3 working days. This may be longer if you are sending money internationally or sending a large sum of money.

What are the different types of payments you can make with each process?

Wire transfers

Wire transfer payments can look like:

  • A bank-to-bank transfer using your financial institution to send money either domestically or internationally
  • A transfer initiated by a non-bank institution such as a money transfer operator. These can be used to send money domestically, but are most commonly used for international money transfers
EFT

There are a wide range of different payments that can be classified as electronic fund transfers. These can include:

  • Direct deposits: Often used by businesses to pay employees, direct deposits can be pre-arranged to deposit funds in another account on a regular, scheduled day.
  • Credit/debit cards: EFT payments can be made with a debit or credit card to make purchases online, pay bills, and move money from one account to another.
  • Wire transfers: A wire transfer can still be classified as a type of EFT, typically used to quickly send a sum of money to another bank account. This is also a popular type of international transfer.
  • ATMs: ATMs enable you to check your bank account balance and withdraw or deposit money without having to physically enter your bank.

What are wire transfers and electronic fund transfers most commonly used for?

Wire transfer

Wire transfers are a good option if you need to send or receive money urgently. This is because wire transfers are a rapid (instantly, in many cases) and secure way of sending money to your recipient, whereas other forms of bank transfer such as ACH payments can take longer.

EFT

Electronic funds transfers are most commonly used by businesses to pay vendors and employees.

Wire transfer fees versus EFT fees

Wire transfers

Wire transfers usually have higher fees than electronic fund transfers because of how much quicker they are processed. Read up on the wire transfer fees for US and UK banks.

The cost of wire transfers can be divided into two different scenarios: domestic (BACS in the UK and SEPA in the EU) and international transfers. When done through banks, domestic wire transfers cost an average of $15 for incoming transfers and $25 for outgoing transfers. The cost for incoming and outgoing international transfers averages $15 and $45, respectively.

For international transfers, you also need to be aware of the exchange rate margins charged by your provider for currency conversions.

EFT

Electronic fund transfers will usually have lower fees, partly because they take longer to clear than a wire transfer.

However, this really depends on the type of EFT payment you are making. For example, an ATM withdrawal in your own currency may have no fees attached but can incur fees if you are making a withdrawal from a foreign ATM.

On the other hand, direct deposits are a popular payment method with businesses because of their low fees.

  • Telephone transfers: Telephone banking typically costs about £25 to per transfer.
  • Online banking: Payments cost as low as £0 for the sending account and anywhere between £5-£10 for the receiving account.
  • Card payments: Most debit card transactions cost nothing to the person making payment while credit cards may charge a cash advance fee.
  • Point of sale transfers: Most of these payments are free of cost
  • Direct debits: Unless otherwise stated, most direct debits do not attract any charges to the sender. Recipients may pay a small set up fee and a nominal maintenance cost.

How secure are wire transfers and EFT payments?

Most banks and non-banking financial institutions have invested in superior technologies to help keep clients’ funds safe. On top of that, they are regulated by bodies such as the Financial Conduct Authority, the Financial Crimes Enforcement Network, and the Australian Transaction Reports and Analysis Centre (depending on where they operate) which have stringent security requirements.

Wire transfers

The parties involved in wire transfers are usually checked and have their details verified in line with strict Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) policies.  Also, financial instructions are sent through a secure messaging system such as SWIFT or Fedwire.

Additionally, regulatory authorities require that banks and money transfer companies use technologies such as SSL to secure client communications.

EFT

EFTs are also secure and reliable. However, compared to wire transfers, other EFTs have some exposures and vulnerabilities that call for enhanced vigilance on the part of users. Here are the most common security issues to watch out for:

  • ATM devices: ATMs may go offline hence lacking access to customer accounts and critical updates on issues such as stolen cards. This can pose security risks.
  • POS terminals: These may be vandalised hence rendering them inoperable
  • Card payments: Debit or credit card payments face an increasing wave of card fraud risk.

Having said that, EFTs are also gaining ground on fraud preventive measures. For instance, payment networks like Visa and Mastercard have come up with technologies like tokenisation, biometrics, EMV chips, and predictive analytics to counter cyber fraud.

Are wire transfers and EFTs different to telegraphic transfers?

Telegraphic transfers and wire transfers refer to the same thing. However, EFTs are an umbrella term covering both wire and telegraphic transfers among other types of transfers. 

The name telegraphic transfers or TT arose from the use of telex, an antiquated telephone system, to send money transfer instructions. Today, telegraphic transfers are sent using the SWIFT system. 

Other transfer options

Other than wire transfers and electronic funds transfers, there are a number of other options when transferring your money. These include:

  • Mobile money transfers: With mobile transfers, funds can be sent from a bank account, mobile money transfer service, online money transfer service, or cash-based money operators. Transfers are normally instant and often limited to small amounts.
  • Cash pickup: When making a cash transfer, funds are sent to the beneficiary so that they can collect it in cash from a pickup point. The recipient does not need a bank account to receive the money and transfers take a few minutes.
  • Home deliveries: In countries like Vietnam and Thailand, money can be sent through online money transfer services and delivered in the form of cash right at the recipient’s doorstep.

Summary

Wire transfers and EFTs offer a secure and convenient way to move funds between individuals and businesses across the world. The transfers can be made through banks, high street money transfer companies like Ria, Western Union, and MoneyGram, or through online money transfers like OFX, Currencies Direct, TransferWise and WorldRemit.

Although used interchangeably, wire transfers and EFTs are not exactly the same thing. EFTs refer to the entire realm of electronic-based payments including wire transfers and ACH payments. This means that while wire transfers are a form of EFT, ETFs are not a form of wire transfer.

In terms of speed and safety, wire transfers employ a much more stringent security protocol than other forms of EFT. The other EFTs such as POS and card payments are also secure, but they require a little more vigilance on the part of the sender.

Apart from wire transfers and EFTs, there are alternative money transfer options you can look at such as mobile money transfers, cash pickups and home deliveries. It’s always best to bear all options in mind before making a transfer, and our money transfer comparison tool can help you find out the best way to make a transfer in seconds.

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