Millions of individuals and businesses trust the safety of bank transfers each and every day, being one of the most prominent payment methods. According to the Bank of England, the UK’s real-time gross settlement system handled a daily average of £741.5 billion through online transfers in Q4 2021. According to SWIFT, the network processed an average of 19.5 million payment messages a day throughout 2021. But just how safe are bank transfers? In this guide we explain why, on the whole, bank transfers are indeed safe and the common pitfalls that can affect the safety of a wire transfer.
How Safe is a Bank Transfer?
There are three main considerations when looking at the safety of a bank transfer.
- Firstly, we have to consider the payment provider being used – are they reputable, regulated and have a track record of successfully moving money from one bank account to another? This counts whether you opt for a bank, fintech or specialist international money transfer company. The beneficiary bank, i.e. whoever the recipient banks with, will also play a role in successfully completing a payment. Cyber security should be paramount for these payment firms, they should have high levels of encryption and secure processes in place to avoid phishing attempts and hackers.
- Secondly, there’s the payment network the payment travels through. There are hundreds of different payment networks around the world, all individual to the countries or territories in which they operate. Then there are international networks like SWIFT – the universal payment messaging system that handles a large proportion of international transfers. As funds sit with the financial companies, money doesn’t necessarily get hacked from these networks themselves but hackers have been known to utilise payment networks like SWIFT to hack banks and payment providers (more on this later).
- Lastly, we have to think of the individual or automated process which is initiating the payment. Operational risk is always a consideration. Human error could see an individual key in the wrong account number. Has an individual failed to identify a fraudster who is asking for a bill to be paid to a new bank account? An automated solution may even go wrong, perhaps a file upload has cross referenced account numbers wrong. Having processes in place to double or triple check the payment details are correct is probably the single biggest improvement that can be made to the safety of bank transfers.
The bottom line is that bank transfer is a safe method to pay, perhaps the safest method if you are paying an institution, organization or someone you know, but you have to be weary of who you are paying to. If you are making a bank payment abroad you should also be weary of international bank transfer fees.
Safe International Bank Transfers with a Reputable Payment Provider
When making a payment from the UK, always opt for a payment provider which is regulated by the FCA and has a high degree of credibility. If it’s a bank they should hold a full banking licence. If it’s a money transfer company or currency broker they should be licensed as either an electronic money institution or authorised payment institution. If a firm is simply registered with the FCA it can raise a number of safety issues. For example, they may not even keep client funds separate from company funds. Understanding when your money is segregated (kept separate from company funds) or safeguarded (kept safe when the firm goes bust) is an important element to making bank transfers safe. Learn more about the unfortunate case of Crown Currency Exchange and see a complete list of FCA regulated payment firms in our guide to international money transfer regulations.
If you’re making a payment from outside the UK, the same applies – be sure the provider is regulated by your local authority and has a high degree of credibility.
Regulated providers we recommend include Currencies Direct, TorFX, Moneycorp, OFX and Wise. All of these companies are regulated in more than just one country. We have even created dedicated reviews which focus on these companies’ safety as per below:
Once you know you’re working with a credible company that has the correct compliance protocols in place, you’ll want to be sure they have sufficient cyber security measures to keep your money safe. From data breaches at even the largest of US banks like Morgan Stanley through to cyber attacks on New Zealand banks and crypto exchanges, there are a number of examples of banks and payment providers being hacked. A recent high-profile case saw a significant cyber attack on Travelex. Ultimately, no customer was left out of pocket but the attack did see a number of clients have their accounts frozen and their cash in limbo, unable to access funds for over a week.
The Safety of Payment Networks
Payment networks are generally considered to be very safe. In the UK, BACS and Faster Payments are run off the Vocalink network. A mastercard owned payment infrastructure with top level encryption. The CHAPS payment network is now operated by the Bank of England with the highest levels of protection going.
There is a well-documented case of hackers taking advantage of the SWIFT network to steal $101 million from the Bangladesh Central Bank. The attacks exploited vulnerabilities in the systems of member banks as opposed to SWIFT themselves but by accessing the legitimate credentials of a SWIFT member bank they were able to send a SWIFT transfer message requesting funds. Hackers were also able to delete the transfer requests once a bank transfer had been initiated, thus delaying the time this scam could be identified, raising questions of SWIFT as well.
Making it Safe to Pay by Bank Transfer
When something goes wrong with a bank transfer it is almost always a result of the incorrect beneficiary details being input. On the plus side, if the account details you input belong to nobody the funds will automatically be returned to your account. However, as seen in our guide to reversing a wire transfer, getting money sent back to you is not straightforward when your funds have already been credited to a legitimate (if incorrect) bank account. The earlier you request to reverse a bank transfer, the better the chance you have of getting your money back.
Domestically, in the UK, the occurrence of this has been dramatically reduced by the introduction of confirmation of payee. Since 2020 it has been a legal requirement for banks to cross reference the name of an account with a sort code and account number. Remitters are now notified if the account number does not match with the account name and must agree to a disclaimer should they want to proceed.
Unfortunately, no such system is in place for international wires. There are, however, still various processes you can establish to make bank transfers safe. All online money transfer platforms should have 2-factor authentication when logging in and businesses should be able to set up dual authorisation to have two or more profiles required to authorise payments. Our top-rated currency brokers and money transfer companies should also have a simple online interface that makes it clear what and where beneficiary information should be input.
Is it Safe to Do a Bank Transfer With a Stranger?
Generally, no, it is not safe to do a bank transfer with a stranger. Ask yourself why you’re sending money to a stranger and what they have requested money for. Whenever setting up a new beneficiary in the UK, make the most of the confirmation of payee procedures which have been introduced. If the account name does not match the account number then ask the business or individual why this is not the case and re-confirm the account details. A stranger could be more likely to claim non-receipt of funds, even when funds already credited their account.
Is it Safe to Give Wire Transfer Information?
It is only safe to give wire transfer information to people you trust. A sort-code, bank account number and name is not usually enough for hackers to enter your account but it is some of the details they’ll need to illegally access your account. They’ll only have to find out a couple of other pieces of crucial information in order to access your account online.
Summary – The Safety of Bank Transfers in UK & Worldwide
Bank transfers are one of the safest methods to transfer money from point A to point B. They’re trusted by some of the largest organisations in the world to transfer their payments which can amount to hundreds of millions of pounds. There have been a number of examples of cyber security attacks on payment institutions and banks but it’s unlikely these result in a loss for an individual or business. This isn’t the case with fraud. Individuals and businesses aren’t guaranteed to get their money back if they’ve been the victim of fraud. For safe bank transfers, take extra precaution that account details are legitimate and correctly input.