Is a Bank Transfer Safe?

Matt Di Vincere (Chief Editor)
Last Edited Dec 18, 2023

Millions of individuals and businesses rely on bank transfers each and every day, making it one of the most prominent payment methods in the world. For this reason, many people are concerned about the safety of bank transfers.

To put the frequency of their use into perspective, the Bank of England reported that the UK’s real-time gross settlement system handled a total of £748.5 billion through online transfers in Q1 2023. And global payment network SWIFT processed approximately 19.5 million payment messages daily in 2022. Given bank transfers are such a vital component in moving money from A to B, this guide will explain everything you need to know about the safety of bank transfers, the common pitfalls which lead to payment errors, and the different ways to secure your transactions.

Bank transfers are generally safe, particularly if you follow the safety tips outlined in this guide. Get these right and it is highly likely that you will experience a smooth and safe transaction, whether you are making a domestic bank payment or an international fx payment.

How Safe is a Bank Transfer?

Three main factors influence the safety of a bank transfer:

  • Payment Provider: Consider whether the payment provider is reputable, regulated, and has a track record of successful transfers. This applies to banks, fintech companies, or specialist international money transfer firms. The recipient’s bank also plays a role in completing a payment. Cybersecurity should be a priority for these firms, with robust encryption and secure processes to thwart phishing attempts and hackers.
  • Payment Network: The safety of the payment network through which the transaction travels is crucial. Hundreds of networks worldwide operate in specific countries or territories. International networks like SWIFT handle a large proportion of international transfers. Although funds are usually not hacked directly from these networks, hackers have exploited them to attack banks and payment providers.
  • Initiating Process: Consider the individual or automated process initiating the payment. Operational risks, such as human error in entering the wrong account number, can compromise safety. Implementing processes to double or triple-check payment details can significantly improve bank transfer safety.

Is it Safe to Do a Bank Transfer With a Stranger?

Using a bank transfer to pay a stranger can be risky. Before initiating a transfer to a stranger, you should always verify their identity and bank account details. In the UK, the Confirmation of Payee scheme (COP) was launched in 2020 which has improved safety in this regard. For domestic transfers, your bank should tell you ahead of initiating the transfer if the name of the account matches the account details provided.

In terms of buyer protection, a bank transfer offers little more protection than paying in cash. Using bank transfers as a payment method certainly has its place but they are generally not recommended when paying a stranger or unreputable firm.

In the UK (and in countries that have similar laws) the greatest buyer protection is afforded to those who pay via credit card. The consumer credit act provides protection against fraud for credit card purchases between £100 and £30,000. Then there is the chargeback scheme, which while not legally binding, is operated by network providers like Visa & Mastercard and has tremendous feedback for providing protection against fraud for debit/credit card purchases.

Learn why wire recalls are problematic once the money has already been credited to another bank account (one also has to consider if they would be happy for a bank to be able to take money from their own account once it has been credited).

If you’re paying someone new via bank transfer be sure to get an invoice and proof of payment which clearly details their refund policy.

Ultimately, bank transfers are generally safe for payments to institutions, organisations, or acquaintances. However, be cautious when paying an unknown party or making international bank transfers, as fees may apply.

Safe International Bank Transfers with a Reputable Payment Provider

When making a payment from the UK, always choose a payment provider regulated by the FCA and with a strong reputation. Banks should hold a full banking licence, while money transfer companies or currency brokers should be licensed as electronic money institutions or authorised payment institutions. Providers that are merely registered with the FCA might raise safety concerns, such as not separating client and company funds. Understanding when your money is segregated (kept separate from company funds) or safeguarded (protected if the firm goes bankrupt) is also essential for secure bank transfers. Learn more about the unfortunate case of Crown Currency Exchange and see a complete list of FCA-regulated payment firms here. To view recommended companies look into our best international money transfers list.

Common Pitfalls and How to Avoid Them

While bank transfers are generally safe, some common pitfalls can jeopardise transactions. These include:

  • Phishing Scams: Scammers use fake emails, text messages, or phone calls to trick you into providing sensitive information or transferring money to their account. Protect yourself by verifying the sender’s identity and checking the legitimacy of the communication. Always avoid clicking on suspicious links and verify any requests with the supposed sender via a known communication channel.
  • Beware of Overpayment Scams: Be cautious if you receive an overpayment for goods or services and are asked to refund the difference. This is a common scam where the original transfer is made with stolen or fake details and will eventually be reversed.
  • Man-in-the-Middle Attacks: These attacks occur when hackers intercept the communication between the sender and the recipient, typically by exploiting insecure networks or public Wi-Fi. Use a secure network when initiating bank transfers and enable two-factor authentication for added security.
  • Erroneous Transfers: Entering incorrect payment details, especially confusion when it comes to SWIFTS and IBANS, can lead to unintended transfers. Double-check the recipient’s information and consider implementing a verification process, such as confirming account numbers with the recipient.
  • Ignoring software updates: Regularly update your computer and mobile device operating systems, web browsers, and antivirus software to stay protected against the latest security threats.
  • Using public Wi-Fi for banking: Avoid using public Wi-Fi networks when accessing your online banking, as these networks may not be secure and could expose your information to potential hackers.
  • Not monitoring account activity: Frequently check your bank statements and account activity to detect any unauthorised transactions or suspicious activities quickly.
  • Sharing sensitive information via email or phone: Never disclose your banking details, such as account numbers and passwords, over email or phone. Banks will never ask for this information through these channels.
  • Set Transfer Limits: Where possible, set daily or transactional limits on the amount of money you can transfer. This can be a crucial safeguard in preventing large losses in the event of unauthorized access to your account.

Tips to Secure Your Bank Transfers

To ensure safe and secure bank transfers, follow these tips:

  • Choose a reputable payment provider regulated by the FCA or an equivalent authority.
  • Enable two-factor authentication for your online banking or payment accounts.
  • Use strong, unique passwords for your accounts and avoid sharing them with others.
  • Keep your computer and mobile devices updated with the latest security patches.
  • Be cautious of phishing scams and verify any payment requests with the intended recipient.
  • Set up account alerts: Configure your online banking settings to receive notifications for unusual account activity, failed login attempts, and large transactions.
  • Use biometric authentication: If your bank offers biometric authentication features, like fingerprint or facial recognition, use them to add an extra layer of security to your account access.
  • Be cautious with third-party apps: Ensure that any third-party apps or services you use to access your bank account are trustworthy and secure.
  • Use a password manager: A password manager can help you generate unique, complex passwords for your online banking and store them securely, reducing the risk of your account being compromised.
  • Enable multi-factor authentication (MFA): Whenever possible, use MFA for your bank account. This requires you to provide more than one method of identification, making it more difficult for unauthorised users to access your account.

Last Word: Are Bank Transfers Safe?

By taking the precautions outlined in this guide, you can minimise most of the associated risks and confidently use bank transfers as a safe and reliable payment method. Be watchful of payment scams and keep in mind that most payments go wrong due to fraud and human error. Always verify the identity and account details of the beneficiary, particularly when you are paying some new.

Articles you might be interested in:

Tax Implications of Transferring Money to the UK

Navigate the tax implications of transferring money to the UK. Understand factors like residency status, income, savings, country source of funds, remittances basis, inheritance tax, and fund repatriation. Gain insights into money transfers from different countries and arm yourself with valuable information.

The KYC Requirements in UK

Gain an overview of the Know Your Customer (KYC) process for individuals and businesses when registering with financial services providers, specifically money transfer companies. Explore required documents during onboarding and enhanced due diligence for high-risk customers.

International Money Transfer Regulation in UK (FCA Focus)

Understand the role and history of the FCA, different types of authorizations for money transfer providers, and discover top-rated authorized companies for secure transfers. Learn what to look for in a well-regulated, safe money transfer provider and the importance of choosing an FCA-authorized payment provider in the money transfer space.

How is Anti Money Laundering Regulated

The article details the intricacies of Anti-Money Laundering (AML) measures globally. It discusses the process of money laundering and the various sophisticated regulations in place to combat it, including the EU’s AML Directives, the USA’s Bank Secrecy Act and PATRIOT Act, the UK’s Money Laundering Regulations, and Australia’s financial laws. These regulations are essential for preventing financial crimes and vary in strictness across regions.

UK Banks & Scandals

The article sheds light on the history of financial misconduct by UK banks, focusing on malpractice, fraud, and the miss-selling of financial products. Notable scandals involve Lloyds Banking Group with fines for manipulating LIBOR and coercion in product sales, RBS Group with a guilty plea for money laundering and fines for mismanagement of small businesses, and Barclays facing repercussions for dark pool activities and LIBOR rate manipulation.

Declaring Foreign Bank Accounts to HMRC

Understand the significance of declaring foreign bank accounts to HMRC for UK residents. Explore potential penalties and legal consequences of non-compliance. Learn about worldwide income reporting requirements and the Common Reporting Standard, enabling HMRC to access offshore account information.

How To Obtain A Money Transmitter License In The UK

Delve into the comprehensive guide on acquiring a money transmitter license in the UK, regulated by the Financial Conduct Authority (FCA). Understand the significance of Money Service Businesses (MSB), the intricacies of EMI and PI licenses, and the step-by-step process to ensure compliance and secure authorization.

Is The Bank Transfer A Good Payment Method? (Travel Focus)

Explore the pros and cons of using bank transfers versus credit card payments for international travel expenses. Compare fees associated with credit card transactions, including foreign transaction fees and FX markups. Discover payment options for specific travel expenses like safaris, cruises, car hires, and hotels.

Is a Bank Transfer Safe?

Discover the importance of reputable payment providers and secure payment networks. Learn how to avoid phishing scams and man-in-the-middle attacks. Implement tips like two-factor authentication, strong passwords, and regular account monitoring for enhanced security and peace of mind during bank transfers.