Alternatives to International Wire Transfers For Businesses

As the business world has become more global, international transfer has become a norm. In Indonesia alone as a developing country, last year saw more than 4 billion of dollars going out from the country. This amount is only expected to increase as Indonesia continues to develop. With its growth rate, Indonesia could become one of the world’s largest economies in the future.

There are several options that can help your business transfer money into Indonesia or out of it. Continue reading on to help you decide which of them would be the best method for you. For comparison purposes and your perusal, we would also take a look at wire transfers and what they entail.

In essence, a wire transfer is an electronic funds transfer. This transfer takes place via a global network of financial institutions and regulatory bodies. This has become a popular method because it is practical. Instead of sending money physically, the account balances of the sender and recipient will be adjusted based on the amount sent and received. This settlement is done electronically, making wire transfer becomes a desirable choice when it comes to transferring money internationally.

However, due to its complicated nature that involves various banks and financial institutions in different countries, it comes with its drawbacks:

The cost can be high

Different institutions charge different amount of fees to cover for their services. The cost of wire transfer per transaction can reach as high as US$35 or more.

It may take more time

Since international wire transfers involve an intermediary, it must be cleared through a country’s domestic ACH system and its foreign equivalent. A normal processing and clearance time for wire transfers is 3-5 business days.

Exchange rate fluctuations

Since wire transfers take several business days to be cleared, real-time payment verification is not possible. This means that unpredictable exchange rates of currencies can be a hinder. Plus, every country, with their own regulatory bodies, may impose extra charges in currency conversion that results in more unexpected losses.

Due to the aforementioned drawbacks, wire transfers may not be ideal for you. To answer the needs of different businesses, banks have come up with alternatives and products to help them grow. Below are some of the solutions that may prove beneficial for your business:

Receivables finance

With receivable finance, cash flow becomes healthier since it allows a fast crediting of funds when necessary. Unlike wire transfers that can take days to clear, you can receive a percentage of your invoices’ values without waiting for long. As soon as you create invoices and issue them to be sent to your clients, access up to 90% of their values immediately.

This way, any cash caught in your sales cycle can be freed up to cover for your expenses, ensuring the sustainability of your business’ day-to-day operations.

Foreign clearings and global payments

Solutions like the RTGS in Indonesia and telegraphic transfers can help you settle payments on a real-time basis with more affordable costs. Any transaction can be validated and confirmed immediately, optimizing your capital towards a healthier cash inflows and outflows.

These clearings and payments solutions usually also offer flexible transaction processing, where everything, such as your payment templates, could be customized to reduce errors. They could offer an extra feature that a regular international wire transfer does not have: they can often be paired with an integrated online payment system, ensuring that everything is within your control any time you need.

Global payables

Under a global payables solution, transfers become easier to process. Both paper-based and electronic transfers, whether they are domestic or international, your payments can be managed in a more effective manner. The reconciliation of funds is faster due to several integrations with local payment systems such as the SKN in Indonesia.

The global payables alternative usually also offers other benefits and features that could assist you in focusing on your business operations instead of fund management. These features could vary, but an example would be an autopay/payroll system. Payment processing is now faster and more efficient, because an autopay/payroll system could help your business by making bulk transactions at once, reducing the time needed as opposed to single wire transfers. You could also have it integrated easily with your business’ treasury management systems, allowing for a seamless funds management.

After learning of the alternatives to wire transfers and knowing how they can help your business’ operations, the next steps would be to:

1). Check with your local bank to see which alternatives they provide. Look for the one(s) that would be most suitable for your business.

2). If you have not found an appropriate alternative, reach out to them. Explain your needs and ask if they can assist. During reaching out, banks would usually require some details about yourself and your business in order for them to get back to you.

3). Lastly, once you have discussed with your bank and figured out the right wire transfer alternatives for your business, you can open an account with them to get started in making international transfers and managing your funds better.

Conclusion

International transfers have become obligatory for businesses to prosper and tap into the international market, and being established in Indonesia does not constitute an exemption. However, since wire transfers come at their own costs, you can look for other alternatives and solutions that can answer your business’ needs in international transfers.