International payment methods for Pakistan

International payment methods for Pakistan: SWIFT wire transfer

June 2nd, 2011

Sending money abroad and receiving payments from foreign companies or individuals is surprisingly difficult in Pakistan. There are many factors that come into play including the cost of the payment method, time it takes to transfer the amount and acceptability of the payment method to the foreign party. In this post I look at SWIFT wire transfer and discuss its advantages and disadvantages.
SWIFT Wire transfer
SWIFT is an encrypted messaging standard used to transmit wire transfer instructions by banks around the world. Using the SWIFT system you can transfer money to almost any country on the planet.
Receiving Wire transfers: I have previously blogged about receiving wire transfer payments in Pakistan. Receiving SWIFT wire transfer is easy as it only requires a bank account. Even a rupee account will suffice.
Sending wire transfers: Sending a wire transfer is a whole different story. You need a foreign currency account to be able to send a wire in your own name. Some foreign exchange companies can wire money on your behalf but then the money is sent in their name and that is often unacceptable to foreign companies.
Cost of Wire transfer: In terms of cost, wire transfer is quite expensive. There are sender’s bank fees, correspondent bank fees and recipient bank fees. Sending a wire transfer costs between $15 and $25 in Pakistan. Outside Pakistan that amount can be much higher. Around $50 in the US for instance.
In Pakistan banks generally don’t charge any fees for receiving wire transfers. However, they do make money off the currency conversion. US and European banks do charge customers to receive an International wire.
The hidden cost is often the correspondent bank fees. These banks help route the money to its destination and they can charge arbitrary fees without the sender or receiver knowing or consenting to it. In the past I have lost as much as $65 to correspondent banks.
As a result of all these bank fees it is impossible to say exactly how much the recipient will getin a SWIFT wire transfer transaction. IMO this is the biggest disadvantage of wire transfers.
Wire transfers are only recommended for transactions of at least $1,000. The bank fees involved make smaller transactions impractical.
Speed of wire transfer: SWIFT wire transfers take between 1-4 days to be credited to the recipient’s account. So wire transfers are a very fast payment method.
Security of wire transfers: Wire transfers are also a very safe payment method. Both the sender and receiver must have a bank account at a legitimate financial institution. The SWIFT messaging system uses cryptography to transmit wire instructions between banks. Wire transfers are also not reversible without the recipient’s explicit authorisation. So there is no risk of chargeback or payment reversal as in the case of credit cards.