After spending countless hours preparing for a tournament and finally securing a big win, it can seem unnecessary to have to provide your personal and banking information just to get paid. You might wonder why you can’t cash that oversize check you just received or just get a stack of bills after the event?

The reason is because the tournament organizer needs to know you are who you say you are, that they are sending the money to the right person, and that they have all the information they need to properly report the payment for tax and legal reasons.

How do people send prize money?

In order to send a payment, whoever is sending the money (in this case, it is a tournament organizer or publisher) needs to collect information from you, the winner. They need your name, address, Tax Identification number (TIN) or foreign equivalent, and bank information (routing and account numbers). You may have to fill out a tax form at this stage as well.

Then, the tournament organizer will submit the payment from their account to yours. The information you provide is used by the tournament organizer’s bank to send money into your account. This process can take 1-5 days and can be affected by different factors like what country you are in and the type of bank transfer. Bank-to-bank transfers within the U.S. are generally very fast, but receiving money from another country can take longer because of the varying regulations that funds transfers must follow.

If the money is returned or if a payment can’t be processed, it usually is because the wrong information was provided or the transfer was rejected, which could be for several different reasons. In this case, you will have to restart the process. For example, if you provide a paper routing number instead of a wire or electronic routing number, the payment will be returned and you will have to re-submit your bank information to the tournament organizer. The tournament organizer will not be able to resubmit your payment until they receive the corrected information.

What is a wire transfer?

A wire transfer is an electronic payment service that allows companies and individuals to transfer funds directly between banks. Only a payor can initiate a wire transfer to send money––these wires cannot be used to withdraw funds. The time it takes for a wire to reach your account depends on the network it was sent on, such as SWIFT or the Federal Reserve Wire Network.

What is ACH?

If you work or pay bills in North America and have a bank account, you are likely already familiar with the ACH (Automated Clearing House) network. The ACH network is part of the CHIPS system, which includes all the Clearing House networks within the United States. ACH is a type of e-check (an electronic check) that uses the ACH network to send money. The ACH sends payments in batches each day, making it a fast and cheap way to make payments.

Equivalent networks to ACH in other regions include SEPA (EU) and BACS (UK).

Why not a third-party payment network (PayPal or Venmo)?

Third-party payment apps like PayPal are convenient because you only need an email address to send or receive money. They’re great for splitting dinner with friends or buying something on Etsy or Ebay. Payments also transfer in about 1-3 days, meaning that under normal circumstances it is usually pretty easy to access your funds relatively quickly.

However, these apps have their drawbacks, especially when it comes to making tournament payouts. PayPal and similar services are not tax compliant for prize winnings without an additional tax solution. This additional tax requirement makes it harder for tournament organizers to automate the payment process while staying compliant. Additionally, any information PayPal does collect is not shared with the tournament organizer.

Another reason tournament organizers may not send tournament winnings through PayPal is because their solution for mass payments can be expensive for large cross-border payments, especially considering additional tax compliance is needed (e.g. sending and collecting tax forms, doing routine compliance checks, etc.).

Lastly, using any third-party payment service runs the risk of winnings being frozen for compliance reasons.