Telegraphic Transfer

Telegraphic transfer refers to the electronic mechanism using a teleprinter to send money to domestic or overseas account. In simple terms, it's the money transfer from the sender to the beneficiary account established through the telegraph system.

This traditional mechanism was prevalent in the 20^th century before the advent of the internet, offering a secure mode of money transfer. Today, however, transfers are primarily internet-based. Nevertheless, the old name persists and is interchangeably used to mention cash transfers.

• Telegraphic transfer (TT) is a type of currency transfer in which two banks communicate using morse code signals, often with the help of intermediaries.
• Telegraph or telex messages generated using teleprinter activate the money transfer process.
• It is now widely used to refer to various money transfers, including bank transfers and wire transfers.
• Sending bank fees, intermediary bank fees, exchange rate margins, and recipient bank fees are some of the fees involved in the TT.

Telegraphic transfer are one of the most used ways to send money over the world. Banks used a telegraphic system to generate messages encrypted into morse code to transfer money across large distances before the internet and computers were commonplace. For example, they used it to send deposit print messages to other banks.

In 1872, the Western Union implemented the TT for the first time, making it a ground-breaking method for completing transactions quickly while maintaining security. For example, remittances that used to take weeks to arrive took only 2-4 days with the TT method.

The sender's bank, intermediaries or correspondent banks, and the recipient's bank processed the TT payments. Each of these transfer network nodes processes data independently and charges according to their discretion, including the exchange rate markup. This explains why TT is so expensive.

General details required to process TT are:

• Senders and recipients name, address and bank account number
• The payment amount and currency details
• The SWIFT code of the recipient’s bank

In a TT, the sender's bank first links with a bank with a business connection in the destination country. It may or may not be the recipient's bank. If it is the recipient's bank, the money directly arrives at its destination, and the recipient can collect it. All other banks, if any linking the network, on the other hand, operate as correspondent banks until the money reaches the recipient’s bank. Thus, the money transfer process starts from a source bank and passes between correspondent banks until it reaches its destination. The more intermediaries a transfer must pass through, the more time and cost it’ll take.

Leading TT use and increased transaction traffic in the 1990s resulted in centralized regulatory entities like SWIFT, Fedwire and CHAPS. These networks or associations ensure the successful completion of the transaction. In the US, most domestic transfers pass via the Federal Reserve’s Fedwire, for example.

Most of the transfers done in the United Kingdom go via the Clearing House Automated Payments System (CHAPS), managed by the Bank of England. It works similarly to the Fedwire, and it attains same-day transfers using the Sterling, taking only a couple of hours to get processed. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was founded in 1973 to facilitate global transactions between previously unconnected banking institutions. It accomplished this by establishing a set of standards that ensures the feasibility of international transactions. As an identification, each bank in the association has a SWIFT code.

Tele-transfer costs are often high, depending on the number of banks involved, and various banks can charge different amounts. There are no predetermined costs, and generally, the total cost incurred will be evident after completing the transaction. There are four different kinds of fees. Each one points to a separate entity that will assist them in the process:

1. Sending bank fee: The bank selected by the customer for transferring the money will generate the sending bank fee.
2. Intermediary bank fee: The intermediary banks connecting the SWIFT network for enabling the money transfer flow will generate the intermediary bank fee or corresponding bank fee.The more intermediaries there are, the more money you’ll need to pay.
3. Exchange rate margin: if you need to turn the money into foreign currency, it has a cost, too.
4. Recipient bank fee: Finally, the bank receiving and delivering the payment to the recipient will also charge. 

Each bank furnishes independent fees rather than charging a centralized amount for the whole process. How much you pay on behalf of the fees depends on several factors. For example, some banks charge flat fees for each transaction, while others will take a percentage from the money under the transaction.

Using the SWIFT telegraphic transfer system, BDO Philippines charges $10 for local wire transfer requests and an additional $25 for a foreign wire transfer, and Maybank Philippines charges the recipient $5 as a receiving bank and will charge the sender $15 for transferring to other banks.

Both TT and wire transfers are examples of EFT (Electronic Fund Transfer). There’s no actual difference between TT and wire transfers besides their name. When the first time electronic fund transfer was introduced, it was referred to as Telegraphic Transfer.

Nowadays, banks in different countries use distinct nomenclatures. For example, most people prefer to say wire transfer in the United States. In contrast, banks in the United Kingdom, Singapore, Australia, and New Zealand use telegraphic transfers even though telegraphs or wires are not used, unlike in old times. The whole process is through the internet these days. You may also find banks calling this process bank transfers, credit transfers or wire transfers.

This has been a guide to Telegraphic Transfer and its Meaning. Here we discuss how telegraphic transfers work along with its fees and intermediaries. You may learn more about financing from the following articles -

• Transfer Agent
• Paper Money
• Hot Money