When telegraph firms launched wire transfers, it revolutionised the convenience of making financial transactions and financial services in general. However, with the introduction of new age financial services such as Bitcoin and Ripple, it is time to consider what the future holds for global financial services. Get More Information
Wire Transfers in the Old Way
Let’s start with an overview of how things have been for the previous 150 years, since wire transfers were first introduced. Transferring funds via a bank’s wire transfer technique is a multi-part process rather than a single step. This is how it works: The sender goes to his or her bank and requests that funds be transferred to an account. The sender provides the bank with unique codes such as BIC and IBAN numbers so that the bank knows exactly where the monies need to be moved.
The sender’s bank notifies the receiver’s bank of the need for a transfer by sending a message through a security system such as Fedwire or SWIFT. When the receiver’s bank receives this message, which also includes settlement instructions, it requests the sender’s bank to transfer the stated amount. The money is now transferred from the sender’s bank account. This is done in stages rather than all at once, so it could take anywhere from a few hours to a few days to transfer the total amount. The two banks must have a reciprocal account in order to make the transfer. If this isn’t the case, the transfer is routed through a correspondent bank with such an account.
As can be seen, this method of transfer is unduly reliant on a middleman, takes longer than it should, and can be costly because banks demand a fee for their services. Bitcoin and other distributed currencies offer a potential alternative to this method.
Currencies that are not centralised
Bitcoin differs from traditional services in that it does not rely on a central mediator and instead uses cryptographic protocols to operate. As a result, the procedure is more faster, easier, and more efficient. Traditional systems are vulnerable to fraud due to the complicated processes involved, however this system is extremely transparent to both end users and end users.