What is a local bank transfer?

Local bank transfers are a way to send and receive money overseas at a lower cost than using international bank transfers. By relying on a direct payment method, money can be transferred faster, and at a reduced rate.

What are the cost and time savings of a local bank transfer?

While international bank transfers take up to 5 days to complete, local bank transfers are completed in between 1 and 3 days. Costs vary from $3- to $25 per transaction for local bank transfers, and international bank transfers via wire transfer start at around $35 and can be as much as $50.

How does a local bank transfer work?

Local bank transfers use a direct approach to transfer money from one account to another, usually with one payment processor or vendor in between the sender and the recipient bank account to act as a clearing mechanism and process the transfer of funds. This is unlike international bank transfers which may use a network of messaging services, other banks or payment processors to get the money from A to B.

Some banks may be relatively well connected and the payment route is short and straightforward. Other times, there will need to be an intermediary bank or another financial institution in the mix. The more entities involved, the longer the process takes and the higher costs will be accrued. This could include transaction fees, international transfer fees, exchange rate fees due to a markup, and also transaction fees on the recipient’s side.

In the US, an ACH transfer is an example of a local bank transfer, however it cannot be used for making international payments. Other regions have models in place for local bank transfer internationally, such as SEPA, the Single European Payments Area in Europe.

The difference between local bank transfers and SWIFT

SWIFT transfers rely on a network of intermediary banks to route a payment from A to B. Each of these financial parties will charge their own transaction fees, and perhaps service fees as well. ForEx margins can be hard to guess ahead of time, and the fees are also an unknown quantity, making SWIFT less transparent and predictable than local bank transfers. SWIFT payments are usually the most expensive option for global payments.

However, SWIFT is a great option when transferring large sums of money, which may not be authorized by local bank transfer, or when time is very important, as it is much faster than local bank transfers.

If time is not critical, and the amount of money can be sent via local channels, local bank transfers can save cost and complexity. Local transfers will use a network of global bank accounts, without relying on intermediary banks at all. Remember that they may not support all currencies, so it’s important to check with your local bank transfer provider before you choose this approach.

What are peer-to-peer local bank transfers?

One method for local bank transfers that is gaining in popularity is using a peer-to-peer model, where local accounts are used to transfer the funds internationally.

To benefit from this approach, a business will need to utilize a money transfer service, such as PayPal, Revolut, or many others. When a transfer request is submitted, the platform will find another user who is making a transfer request in the country where the sender wants to transfer the money.

The local funds will be used to fulfill the original request, sidestepping any bank charges, additional markup currency conversion fees, or other unnecessary costs. The money transfer service usually takes a transparent and fixed fee for their service.