What bank transfer methods do you use for payment processing in your business? As a business owner, it’s important to understand the different transfer methods available to you, their benefits and how you can use them for your business transactions. 

Two of the most common bank-to-bank payment methods available in Kenya are RTGS vs SWIFT transfers. In this article, I will take you through what each transfer method is, how it works and when to use each method.

RTGS Transfers

This is a domestic electronic fund transfer system. RTGS, short for Real Time Gross Settlement, simply means that payments are settled in real-time, as the name suggests. That is, whenever you initiate a payment using RTGS, your bank processes the payment almost immediately. So, your payee will receive the payment almost immediately, usually within a few minutes or hours, usually 2 hours, of making that transfer. 

Having said that, it’s important to note that there are operating hours for RTGS transfers in Kenya. These are hours within which the transaction will be settled in real time. Banks in Kenya have varying hours for RTGS transfers, with cut-off times ranging between 2 to 3 PM. If you process your RTGS transfer past the cut-off time, it will be processed the following day. 

Here’s a breakdown of how RTGS transfers work:

Initiating the Transfer

You, the sender, instruct your bank to electronically transfer a specific amount to a recipient’s account at another Kenyan bank. You can do this through the available methods from your banking provider, like internet or mobile banking or visiting your bank’s physical location. 

Real-Time Settlement

Upon receiving your instruction, your bank electronically sends the transfer request along with the designated funds to the Central Bank of Kenya. The central bank then verifies the transaction details and instantaneously credits the recipient’s account at the other bank.

Finality of RTGS Transactions

Once the central bank completes the transfer, the funds are available in the recipient’s account immediately.  This finality ensures the transaction cannot be reversed, providing security and peace of mind.

Key benefits of using RTGS for your business:

• Speed and efficiency – funds are credited to the recipient’s account instantaneously, ensuring swift completion of your transactions.
• Security and finality – the central bank verification and immediate settlement minimize the risk of errors or fraud. Once completed, the transfer cannot be reversed.
• Suitable for high-value domestic transactions – due to its speed and security, RTGS is well-suited for high-value domestic transfers between Kenyan banks.

SWIFT Transfers

Society for Worldwide Interbank Financial Telecommunication or SWIFT transfer is a global messaging network that facilitates international money transfers. Unlike RTGS, SWIFT itself does not transfer funds directly. Instead, it serves as a secure communication channel for banks to exchange information and instructions regarding international transactions.

Here’s a breakdown of how SWIFT transfers work:

Initiating the Transfer

Similar to RTGS, you instruct your bank to initiate a transfer. You’ll provide details like the recipient’s bank and account information, the transfer amount, and the intended currency.

Related post: How to Find Your Bank SWIFT Code

The Role of the SWIFT Network

Your bank utilizes the SWIFT network to send a secure message containing the transfer instructions to the recipient’s bank. This message includes the Business Identifier Codes (BIC codes) for both banks, which function as unique identifiers within the network.

Correspondent Banking System

In many cases, international transfers involve multiple banks. If your bank and the recipient’s bank don’t have a direct relationship, intermediary banks (correspondent banks) will be involved to facilitate the transfer across different countries and currencies.

Settlement Process

The intermediary banks involved will debit your account and credit the corresponding accounts in the transfer chain. The final credit to the recipient’s account may take several business days, depending on the number of intermediary banks involved and their processing times.

Don’t miss this related article: 3 Common Mistakes to Avoid When Using SWIFT Codes

RTGS vs SWIFT Transfers

While both systems facilitate fund transfers between banking institutions, they are quite different. There are 3 key differences to note;

• Type of transfer – RTGS transfers are usually for domestic transactions, i.e., when paying a payee whose bank is within your country. SWIFT, on the other hand, is for cross-border transactions. 
• Speed of transaction settlement – RTGS transactions are settled almost immediately as long as the transaction is initiated before the cut-off time. With SWIFT transfers, the transaction speed will vary, ranging from 1 to 4 days. 
• Finality of the transaction settlement – the finality of both transactions also varies, depending mostly on the speed of settlement. For RTGS transfers, it’s almost immediate, while with SWIFT transfers, it can take hours or days. 

What’s the Right Option?

The right option to use between an RTGS transfer and a SWIFT transfer will mainly depend on the location of your payee. If you are paying a domestic client, an RTGS transfer is the payment option to choose. Especially if you want them to receive the funds almost immediately. However, if you are dealing with an international client, a SWIFT transfer is the option to use.