Currently, almost all financial systems can provide real-time settlement for domestic transfers. However, when it comes to international remittances, achieving instant transfers is not so easy. The following will introduce the time typically required for international remittances and outline how new types of banks are collaborating with FinTech companies to speed up international money transfers.
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How Do International Remittances Work?
There are two main ways to send money internationally. One is through wire transfers, where banks and other financial institutions use the SWIFT system for electronic transfers. The mechanism is broadly similar to domestic transfers offered by financial institutions, but the key difference is that the recipient’s account is in another country, thus requiring an intermediary bank for international transfers involving the SWIFT system. The other method for international remittance does not go through banks and, naturally, does not use the SWIFT system; instead, it relies on the remittance service provider’s own communication system to transfer funds.
Both methods typically support online remittances, but the process varies among different financial institutions and remittance service providers. In general, wire transfers tend to be more expensive due to the unavoidable SWIFT telecommunication fees. The security and reliability of the SWIFT network often justify the higher fees for wire transfers. On the other hand, remittance service providers may also involve third-party fees. Therefore, if banks and financial institutions can reduce the involvement of third-party companies, they might be able to lower the average cost of remittances.
How Long Do International Remittances Take to Arrive?
When sending an international remittance through a bank, the funds can usually be received within one to two days, though it can sometimes take up to five days. This depends on various factors, the most significant of which is the currency type. Strong currencies like the US dollar and the Euro are typically processed faster, while other relatively weaker currencies may take longer. Additionally, the receiving bank also needs time for processing. The banking infrastructure and regulations in the recipient’s country can also impose certain limitations on international remittances, so the arrival time for an international transfer may sometimes even exceed five days.
Why Do Banks Take So Long to Process International Remittances?
Most banks support online international remittances. After submitting a transfer instruction, many people expect the bank to process it in real-time and for the funds to arrive instantly, just like a domestic transfer. However, many banks do not offer real-time international remittance services, primarily due to the following reasons:
- Fraud prevention
- Time zone differences
- Currency conversion
- Bank holidays
Below is a detailed explanation of how these four factors affect the speed of bank remittances.
1. Fraud Prevention
When making an international remittance, security is extremely important for both the sender and the bank. The sender naturally wants the funds to arrive safely at their destination, and the bank has a responsibility to protect its customers’ funds. In recent years, high-profile hacker attacks have also caused serious damage to the reputation of banks and other financial institutions.
Therefore, banks need to take a series of measures to prevent fraud and ensure the security of funds. However, the implementation of such anti-fraud measures can significantly increase the time required for international remittances. At the same time, banks must also comply with the regulations and laws set by their home governments and international financial regulatory bodies. Consequently, in addition to the bank’s own rules, international remittances may be subject to additional checks from higher-level external banking institutions.
2. Time Zone Differences
International remittances involve different countries, and fund transfers may occur across different time zones, which can lead to potential delays. Even if the local sending bank processes the customer’s remittance instruction immediately, the systems of the intermediary and receiving banks may not be operational when the request is processed, making instant processing impossible. When there is a time difference between the sending and receiving countries, it is difficult to ensure that all relevant financial institutions are open for business at the same time.
For example, if an international remittance is made from India to the United States, and the sender submits the instruction at 10 AM, the time in Los Angeles would be 9:30 PM. This would result in an unavoidable waiting period of up to 12 hours before the receiving bank in Los Angeles opens for business.
3. Currency Conversion
International remittances between different currencies involve converting the payment currency to the receiving currency, which can add to the processing time. However, in some cases, even when different countries and currencies are involved, there may be no extra processing time. For instance, some financial institutions allow customers to send international remittances in the currency required by the recipient, which eliminates the currency conversion step from the process. Additionally, some financial institutions may partner with third-party financial institutions, allowing them to instantly convert the remittance currency to the receiving currency upon receiving the instruction.
4. Bank Holidays
Similar to the logic of delays caused by time zone differences, if a remittance coincides with a public holiday or weekend in the country of a relevant financial institution, the processing time will inevitably be postponed until the next business day after the holiday.
Banking holiday schedules vary from country to country, and sometimes banking holidays can last for up to a week. In such cases, no financial institution will process customer remittance requests during the banking holiday. Similarly, banks do not process transfers on weekends. While most people are aware of these common rules, it is important to note that not all countries have weekends on Saturday and Sunday. For example, in Egypt and the UAE, the weekend is on Friday and Saturday.
How Are FinTech Companies Changing the International Remittance Market?
The time banks take to process international remittances can sometimes be inconvenient for both the sender and the recipient. For example, suppose an overseas worker wants to send an international remittance to a relative in a developing country. Even if they try their best to avoid objective factors like time differences and public holidays by submitting the request at the best possible time, it is difficult to get a specific arrival time from the bank. If their relatives back home are in an emergency and need the money immediately, the uncertainty of the arrival time can cause extreme anxiety for family members separated in different countries.
Speed and convenience are very important to modern consumers, which has prompted banks, other financial institutions, and remittance service companies to offer faster international payment solutions to attract more customers and maintain customer loyalty. Fortunately, with the rapid development of FinTech companies, the speed of international remittances is gradually increasing. Financial institutions are collaborating with technology companies to introduce cutting-edge technology, minimizing the number of intermediaries involved to create a faster, more streamlined remittance process.
Currently, some FinTech companies offer international remittance platforms that can reduce the average transfer time to within 30 minutes, without incurring SWIFT telecommunication fees. In countries with well-developed instant payment infrastructures, such as the UK, India, and Singapore, it is even possible to process international remittances 24/7, 365 days a year. Additionally, in the Single Euro Payments Area (SEPA), international remittances can arrive within minutes (or at the latest, on the same day).
While offering high-speed transfers, FinTech companies also place great importance on the security of funds. By conducting security and compliance checks on every remittance and tracking and monitoring the real-time status of transfers, the sender’s funds can be properly delivered to the recipient’s account.
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