International money transfers allow more people to move money in the way that they want. Without a hefty credit card fee, transfer restrictions, or lengthy transfer times, an international money transfer API makes transferring money from one currency to another far simpler than ever before.
Whether you are traveling, or if you regularly deal with non-domestic currencies, international bank transfers can be integrated into a payment system ACH API for seamless financial transactions, including bill pay, eCommerce, recurring payments, direct deposit, and much more.
How an International Money Transfer API Works
In general, an international payment gateway is an API (application programming interface) that facilitates the transfer of funds from one country to another, allowing the sender or recipient the ability to send money through a foreign exchange system.
So, for example, the sender can send the money in their local currency (so long as the currency exchange rate works out for the recipient), and the recipient is able to receive the money in a foreign currency.
Typically, cross border payments that would go through the wire transfer system would use the SWIFT network. The SWIFT network, which stands for the Society for Worldwide Interbank Financial Telecommunication, was formed in 1973 with the purpose of securely transmitting messages to other financial institutions even if those financial institutions used different codes for processing.
SWIFT & IBAN Transactions
SWIFT standardized a system of codes, designating each financial organization a unique code a SWIFT or Bank Identifier Code (BIC) that is eight characters to 11 characters long.
The SWIFT payment method is really the only internationally recognized method of sending money worldwide. This is because the SWIFT banking system is extremely secure so financial institutions can share a significant amount of financial data and still stay relatively protected and safe. By allowing financial institutions the option of sharing details of the transaction, such as the debit and credit amounts and status, more banks can rely on this method and confidently share banking information worldwide.
Largely, international money orders and bank wire transfers rely on a set of international banking codes, IBAN codes, which are also necessary for international transfers. IBAN, which stands for International Bank Account Number, is primarily used in Europe as an internationally recognized code for banks worldwide and is a unique identifier for an individual account.
The IBAN code consists of a two-digit county code, followed by two numbers, and then three to five alphanumeric characters. This code was recognized by the International Organization of Standardization (ISO) in 1997 as a way of standardizing European banking. Now, IBAN numbers are a fixed length and can be used by banks worldwide.
Both the SWIFT/BIC code and IBAN code is required when making an international transaction. Therefore, allowing international transactions in an API, the API has to somehow allow for the IBAN and SWIFT identifiers to be inputted by the user and then verified by the recognized banking networks.
International Crypto Transfers
The SWIFT network is not the only way that an international transfer API can facilitate a money transfer. Another payment option is a crypto transfer, which offers faster payments, open banking, and more financial inclusion.
A patented stablecoin, like Sila’s SILAUSD stablecoin, can also allow users the ability to transfer money internationally with a much lower fee compared to other payment service providers, such as using a Paypal account or other payment gateway to send money.
To make an international transaction with Sila, the user initially transfers their money into the SILAUSD token. That token is then sent as a transaction, which is posted to a publicly available but secure blockchain address. Once the receiving bank gets that transaction, they can then download the token into one of the accepted currencies.
Both of these transaction types can happen in an API. The API must have the applicable code, though, so that the endpoints make secure connections and that banking information is shared securely. These are also fintech APIs, so they are also providing Know Your Customer/Business (KYC/KYB) verification, bank accounting linking, and ACH transfer capabilities through secure partner services.
Differences Between Domestic and International Money Transfer APIs
Tapping into the capabilities of fintech APIs for the payment process gives everyone the opportunity to send money internationally without having to go through a dedicated intermediary bank, like a bank and financial institution, to facilitate an international wire transfer.
Banking APIs can provide numerous banking options. These fintech applications allow users to build a digital wallet or eWallet, connect a private or business bank account, send an ACH payment, provide secure KYC/B verification, and speed up the time to market. Compliance is provided as a service so that transferring money can happen in less than 60 hours.
While it might seem like everything is the same when it comes to different banking services, each banking service requires a certain set of code (i.e., banking and technological codes) for the transaction to work properly. Therefore, there are differences between the types of transactions, such as a domestic money transfer service and an international funds transfer.
The API will connect to each of the required services through a unique endpoint, and each service will need a different set of information for the transaction to be approved.
Typically, the fee for international payment is higher because the international network is fast and requires more checks. Additionally, banks often have to front the currency conversion as well, so there is a higher risk associated with these types of transfers.
APIs for domestic payments and international money transfers might provide a different service, but one app can provide each service if it is prepared with that capability. For example, the Sila app allows users the ability to send money domestically in the United States and internationally (into and out of the United States). The user handling the USD needs to have a bank account in the United States; otherwise, transactions can be made over the crypto network using Sila’s patented stablecoin.
Security of an International Money Transfer API
Whenever you are transferring an electronic payment online, you must ensure optimal and high-grade security. APIs assist in this way, but additional security measures are required to limit financial fraud. Financial fraud is extremely prevalent, but there are ways that fintech companies can work to mitigate and stop fraud.
In general, sending an international bank transfer through an international money transfer API is relatively secure. These money transfers will still go through the same networks as transfer systems not using APIs – the SWIFT or the crypto networks. Therefore, entrusting an international money transfer API to this service is not far-fetched.
A unique and highly compatible mobile app, like the Sila app, facilitates faster payments through numerous API connections, which actually further secures the API from instances of fraud. By outsourcing KYC/B, bank account linking, and crypto, users of the Sila app are able to more securely and freely move about the digital money markets.
When shopping for an international money transfer API, make sure that they have checked all the boxes. They should have an FDIC-insured bank that supports the fund that is housed in the app. They also need to provide tight account and identity verification; account and identity verification is extremely important because fraudsters might use someone’s credentials to gain access to an account maliciously. Or, someone might be tricked into sending money through this service to a fraudster. It is up to the API to ensure that these fraudulent activities are flagged and stopped.
Compatibility of an International Money Transfer API with Major Remittance Networks
Internationally payment APIs can be seamlessly integrated into other financial service and payment systems, such as major remittance networks. If, for example, the international money transfer API uses the SWIFT network, the most popular network for sending money internationally, then there are minimal worries when it comes to API compatibility.
This API should be completely compatible with other services within the remittance industry since it is following the same code verification processes necessary within major remittance networks. In doing so, the API used should provide standardized details of the banking transactions.
Additionally, if you are using an API like Sila, the remittance can still be calculated through a detailed description of the bank account transfer, which is documented in the app. Even posting the amount (and the recipient receiving the amount) is provided as an overview to the sender. While the cryptocurrency network does not use the international banking codes, IBAN and SWIFT codes can be collected (and reported) so that it remains compatible with the remittance networks.