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.
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.
The term ‘electronic funds transfer’ brings together the whole variety of electronic payments which include are but not limited to the following:
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:
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:
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.
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.
Wire transfer payments can look like:
There are a wide range of different payments that can be classified as electronic fund transfers. These can include:
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.
Electronic funds transfers are most commonly used by businesses to pay vendors and employees.
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.
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.
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.
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.
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:
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.
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 than wire transfers and electronic funds transfers, there are a number of other options when transferring your money. These include:
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.
Wire and electronic transfers are valid choices for sending money abroad. However, their fees are too high, and the transfer speed is too slow. Instead, choose money transfer companies to get a better deal. Some offer a mixture of variable and fixed rate pricing. This means that you can get a good deal when sending small and large amounts of money.
TorFX is an example of a transfer provider that offers a better deal than bank transfers for sending money internationally. They do not charge fees for transfers but instead require a small markup percentage for currency conversions. Also, they offer multiple transfer methods to offer better flexibility for different customers.
Elliott is a former investment banker with a 20 year career in the city of London.
During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making.
During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others.
April is a trained journalist and the Content Editor for MoneyTransfers.com. She has 10 years experience writing about a diverse range of subjects, from financial services to arts and entertainment. When she’s not writing about global remittances she can be found daydreaming about her next holiday abroad.