Introduction to Wire Transfer

Wire transfer is a method of electronic fund transfer from one person to another person or institution. A wire transfer can be made from one bank account to another bank account through a transfer of cash at cash counter of the bank. They are meant for transferring individualized payments but can also be used for transfering payments in bulk, you should speak to your bank about it.  Wire transfer is the safest method to accept payment to your account and should be initiated with people whom you know well enough.Just wonder, what will happen to you, if your client was found to be a criminal or a politician involved in huge scams?  You will be traced if you transact wire transfer with people of such sort.

Searching for Alternative to Paypal

This post is exclusively for people who have recently got clients abroad and wish to accept payment from them with considerably good conversion rates (better than that of Paypal).

Most of you who are Indian users of Paypal, must have encountered the poor conversion rate provided by Paypal, which is about 3 to 5 % lower than the market value, and hence makes no sense to transfer money through it. Furthermore, their service has degraded and they have heavy charges for everything and it can charge upto 5 to 10% of your amount, which is definitely a very considerable sum of money.

Reserve Bank Of India implemented various complications under Paypal, after which, it’s a bit difficult to transfer money via Paypal and furthermore, you have to quote your ‘PAN Details’.

RBI’s guidelines are correct but Paypal does not wish to report it’s transactions above 500$ to the RBI, which made it compulsory for them to put the PAN restriction.

Refund Issues with Paypal

If by any way, your bank transfer gets cancelled mid way, you will loose a lot of money (about 10%).

This way, Paypal has become a way to decrease your money by a great fraction.  It’s good that, you have refund facility, so that you can refund all of your clients with the money you charged. And when you pay them bank, Paypal will refund it’s charge one by one. You will have to use the partial refund option many times so that you don’t owe much to the client.

And they’ll get about 93% of their payment.

There are various instances where Paypal seems to be charging high and providing very low conversion rates, which makes it NOT A PROFITABLE deal out.

And this is the reason, why I am writing on International Bank Transfer.

Why International Bank Transfer?

International bank transfer is the process under which, you pay the equivalent amount in local currency to your bank adding up the transaction charge and providing your bank with the details of the final beneficiary.

Remittance of foreign currency through bank transfer provides your beneficiary with good and justifiable conversion rates that creates a difference while using any another payment mode.

You must understand that, people using Bank Transfer are TAXABLE and have clear tax records as the banks have initiated tight regulations on Bank account holders.

The process of international bank transfer takes place as follows:-

1. Visit your Bank
2. Ask them for the ‘INTERNATIONAL MONETARY TRANSFER / INTERNATIONAL BANK TRANSFER’ form or procedure papers.
3. Fill in the details of your beneficiary (details are given below).
4. Deposit equivalent money into your bank account.
5. Submit it to the designated counter.
6. Debit money from your bank account in honor of submitted request for international transfer.
7. Wait for 2-3 days and your transfer is done safely.

New users of International Bank Transfer are bit confused about it’s duration and various other aspects, which is definitely a concern in case the amount you wish to remit is a huge one.

So, before initiating a bank transfer, make sure that you have all of the correct details of the final beneficiary so that the bank transfer does not get reversed or else you’ll be charged a bit of money.

The details you need are :-

• Beneficiary’s Name, Bank A/C No.
• Beneficiary’s Bank Details such as address, branch, SWIFT Code, Business Name
• You may also need correspondent banks ( in case your currency is variable)
• Letter of Credit / Debit from your ‘Client’
• Letter on Your Letter Head to the Branch Manager (explaining the purpose of transaction)

It’s the best way to get paid by bank transfer, as it is SAFER and CHEAPER method to get the money into your account. Banking officials are very co-operative in this regards and very helpful. And banks provide competitive conversion rates which is nearly equivalent to the currently traded value in FOREX.

Also be alert that transactions higher than 10,000$ are reported to the taxation authorities, and hence you should not forget to quote the income from this into your taxation bills.

You will need to explain your bank about the fact that why you want this transaction to take place i.e. the PURPOSE of transaction. Contact your bank before hand to get everything explained.

This is called Purpose Code, as you may have observed while bank transfers through Paypal.

SWIFT Code is assigned to every organized bank and makes international transaction easy to take place. You can visit your bank’s web site or premises to know about it or also search your bank’s SWIFT code on the SWIFT website.

You must ask your bank for the list of correspondent banks if you have to accept payment in various currencies (such as USD, JPY, EURO, POUND, etc) and vice versa. If you are transferring the payment to someone, ask them the details of correspondent banks.

Kindly, go through the RBI guidelines as follows, before initiating any “INTERNATIONAL BANK TRANSFER”.

• Under the Liberalised Remittance Scheme of RBI, all resident individuals, including minors, are allowed to freely remit up to USD 200,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.
• Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme.

The remittance facility under the Scheme is not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;

ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;

iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

iv)  Remittance for trading in foreign exchange abroad;

v) Remittance by a resident individual for setting up a company abroad;

vi) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;

vii) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and

viii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

Source: RBI Guidelines

So, in short, Intl. Bank transfer is the most legal and least complex way to pay and get paid keeping the above points into consideration.

You should follow the taxation rules as well as bank transfer regulations as laid out by the Reserve Bank of India.

Possible Alternative(s)

International Wire Transfer being a very safe method, there are several alternatives to Bank Transfer.

Some of them are as follows:-

• Western Union Money Transfer- Western Union is a financial service and communications company based in the United States. It has several divisions, with products such as person to person money transfer, money orders, business payments and commercial services. You have to quote the name of your beneficiary, his location and a few more details. Deposit the money and you will be prompted with a special transaction ID. Quote this transaction ID to your beneficiary and request him to collect the money from a nearby Western Union Money Transfer agent using the transaction ID details. Also tell him to carry with himself an identity proof.
• Money Gram- Global money transfer service allows consumers to send and receive money worldwide, primarily through a global network of third-party agents that use our money transfer systems. In addition to person-to-person (also known as cash-to-cash), customers have alternatives in money transfer delivery channels such as direct-to-account, ATMs and kiosks for deposit and cash receive, cash-to-a mobile phone and cash-to-card.
• Money Bookers-Moneybookers is an e-commerce business that allows payments and money transfers to be made through the Internet. It serves as an electronic alternative to traditional paper methods such as cheques and money orders. Moneybookers performs payment processing for websites, online auction sites, and other corporate users.