Why Does It take Longer to Send Money Abroad?

Why Does It take Longer to Send Money Abroad?

Sending money abroad has become a common practice nowadays. With the rise of digital technology, it is easier than ever to transfer money to friends and family who are living abroad or to pay for goods and services in different countries.

However, despite the convenience that international money transfers offer, the process can sometimes be slower than domestic transactions.

In this blog, we will explore the reasons why it takes longer to send money abroad.

Currency Exchange

When you send money abroad, you must convert the currency of the sender's country into the currency of the recipient's country. This process involves exchanging one currency for another, and the exchange rate varies depending on the currencies involved.

Banks and other financial institutions charge fees for this service, which can add up to a significant amount of money, depending on the sending amount.

Moreover, exchange rates and fees are subject to change depending on the time of day, the day of the week, and other market factors. This can make it more challenging to predict when the recipient will receive the money.

Correspondent Banking

Every country has its own banking system. Each country has its own set of rules and regulations regarding financial transactions. As a result, transferring money across borders is more complicated than transferring it within a country.

The process of sending money involves various stages, including the sender's bank, the recipient's bank, and any intermediary banks that handle the transaction. Each of these institutions may have its own policies, processes, and fees.

Therefore, sending money abroad may require multiple steps and take longer to complete.

Regulatory Compliance

Different countries have different financial regulations, and transferring money internationally requires compliance with the regulations of both the sender and receiver's countries.

Financial institutions must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations, which require them to verify the sender and receiver's identity and ensure that the money being transferred is not linked to any criminal activity such as fraud, money laundering, or terrorism financing.

This verification process can take several days, depending on the level of due diligence required by the receiving country.

Time Zones

Time zone differences can also contribute to delays in sending money abroad. If you are sending money from Thailand to India, for example, there may be a significant time difference between the two locations. Your bank may not process the transfer until the next business day.

Transferring money can take longer if you're transferring money over the weekend or during a public holiday, as most banks and financial institutions are closed during these times.

This can make it more challenging to coordinate the transfer and may cause delays in processing the transaction.

Payment Method

The time used in international money transfers depends on the payment method used. Different payment methods have varying processing times and fees.

One common method of payment for international money transfers is through bank transfers.  However, bank transfers can take several days to clear, especially if the transfer is being made to a country with strict financial regulations.

On the other hand, international wire transfers can be processed quickly, but they often come with high fees, making them an expensive option. The fees can be particularly high for small transactions, which can make wire transfers an impractical option for some individuals.

In a nutshell, sending money abroad takes longer than domestic transfers due to several reasons, including currency exchange, correspondent banking, regulatory compliance, time zones and payment methods.

Understanding these factors can help you plan ahead and avoid unexpected delays when sending money to friends, family, or businesses located overseas.

SWIFT : The Backbone of Global Banking?

SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is a messaging network that has become a critical component of the global banking system.

It enables banks, financial institutions, and other financial entities to securely exchange information about financial transactions in a standardised format, regardless of their location around the world.

SWIFT was first established in the 1970s by a group of banks who saw the need for a secure, standardised messaging system for financial transactions.

Since then, the network has grown to include thousands of member banks and other financial institutions around the world.

Now, SWIFT handles millions of financial transactions every day, ranging from large corporate payments to small retail transactions.

One of the key advantages of SWIFT is its ability to standardise the messaging format used for financial transactions. This has been instrumental in reducing errors and misunderstandings that can occur when different banks and financial institutions use different messaging formats.

Another important benefit of SWIFT is its ability to help detect and prevent fraudulent activities. Because SWIFT messages are encrypted and can only be accessed by authorised parties, it is much harder for fraudsters to intercept and alter financial messages.

Additionally, SWIFT has implemented a number of security measures and controls to protect against fraudulent activities, such as requiring two-factor authentication for all users.

Weakness of SWIFT

In recent years, SWIFT has faced some challenges as new technologies and payment systems have emerged. While SWIFT is widely used by banks and other financial institutions, there are some weaknesses associated with the system.

Firstly, SWIFT has limited speed. While it has made significant improvements to its messaging speed in the last few years, it can still take several days for money to be transferred between banks using the system.

Another weakness of SWIFT is its high costs. Although it enables banks to transfer money securely, the fees associated with using the system can be expensive, especially for smaller banks and financial institutions.

This can make it difficult for smaller players to compete with larger banks, which have more resources to absorb the costs of using SWIFT.

Limited accessibility is another weakness of SWIFT. Despite it being widely used in developed countries, it is not accessible to many people in developing countries who do not have access to formal banking systems.

This can create obstacles for businesses and individuals in these countries to participate in global trade and finance and limit their economic opportunities.

Nevertheless, with the increasing popularity of online money transfer services, these weaknesses can be minimised, as online services often offer faster processing times and lower fees. It's essential to research the options available and choose a reputable service provider to ensure that your international money transfer is completed quickly and securely.

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