Wire Transfer
Wire transfer, or credit transfer as it is also known, is a way of transferring funds from one person or institution to another by electronic means. Wire transfers can be made between bank accounts, or through a transfer of money at an appropriate financial office.
There is a wide variance of options relative to the speed of transfers, the way the transaction is enacted, and the costs involved. The central bank wire transfer system, for example, as used by the US Federal Reserve provides a quick availability of funds as the transfer happens in real time, and there is no option for the transfer to be reversed before the funds become available. Other systems, such as CHIPS (Clearing House Interbank Payments System) have a clearing system similar to cheques, which means funds are not available until the transaction has cleared, and a transaction can be cancelled at any time up to that point.
Wire Transfer history
Wire transfers have been around since before the 1900s. They developed as a way of transferring money as a country's telegraph system was set up, particularly in the United States where money needed to be transferred from coast to coast in a more acceptable way than physically transporting it across several states.
One of the first companies to offer wire transfers in the US was the (then) telegraph company Western Union. In the late 1800s, a person needing to transfer amounts of cash across the US would approach Western Union and request that the transaction take place. They would then give Western Union the money. Western Union would then send a telegraph to the nearest Western Union office to the person or institution who needed to receive the money, instructing that office to deliver the cash to the person as necessary. Western Union would charge a fee on top of the money being 'wired' for the use of this service.
In 1974 a co-operative society called SWIFT was created by seven international banks in order to execute secure international bank transfers. The society developed a series of codes called BICs (Bank Identifier Codes) or SWIFT codes. BIC codes are today used for all kinds of international monetary transfers, and not just wire transfers.
Wire Transfer today
The use of wire transfers to move money is now no longer as popular or as attractive a method of moving money for personal customers as it once was, mainly due to the fees involved. As of 2012, the Bank of America charged $25 to send a domestic wire transfer, and $12 to receive one. To enact an international transfer, those fees increase to $35 to $45 outgoing, and $16 incoming.
Despite the rise in internet financial solutions, most major financial organisations still use wire transfers to settle accounts between themselves and other similar institutions as wire transfers are seen as being more secure. In the United States alone, the amount of money that is moved using wire transfers per annum is over $600 trillion, although this is diminishing as online transactions are becoming increasing secure due to advanced encryption techniques.
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