What is a SWIFT or BIC code? How do they work?

When conducting overseas transfers, you are often asked to provide either a SWIFT Code or a BIC code. But what is a SWIFT Code, and how is it different from a BIC code? Here we delve deeper into the mechanics of SWIFT or BIC codes and their practical applications in the financial industry.

Read on to find out more about SWIFT and BIC codes, their formatting, when you need them, and how they function globally. We will also share how modern fintech alternatives like Airwallex can save your business time and transaction costs.

What is a SWIFT or BIC code?

When corporations expand across international borders, finding out what a SWIFT code is becomes essential for executing secure payment entries. A SWIFT code is a standardised alphanumeric identification format containing 8 to 11 unique characters. The acronym represents the Society for Worldwide Interbank Financial Telecommunication, which acts as a messaging network connecting thousands of global institutions.  

The term Business Identifier Code (BIC) is also used sometimes interchangeably with SWIFT. Each bank has its own unique code for identification. 

Are SWIFT or BIC codes the same thing?

While researching what is a SWIFT code, business owners frequently encounter the alternative term BIC. While often used interchangeably, SWIFT and BIC codes are not entirely the same thing. While both are used for identifying financial institutions, they serve different purposes. 

SWIFT identifies specific banks or financial institutions globally, while BIC codes refer to a subset of SWIFT codes that specifically identify banks. You can think of it like a phone number (SWIFT) and an extension (BIC) – both are essential for making a call, but serve different purposes. The table below breaks down the difference between the two.

How do SWIFT or BIC codes work?

Unpacking what is a SWIFT code requires breaking down its highly structured four-part formatting sequence: Bank code (4 letters) + country code (2 letters) + location code (2 letters or numbers) + branch code (3 digits). 

1. Bank code: The initial four letters identify the primary financial institution.

2. Country code: Two letters follow to designate the nation where the bank operates.

3. Location code: Two alphanumeric characters pinpoint the precise city or regional hub.

4. Branch code: Three optional trailing characters target a specific local office.

When executing corporate transfers, entering the primary eight digits is generally sufficient to successfully route capital through the communication clearing house.

When do you need a SWIFT or BIC code? 

Since there is no direct connection between banks across borders, they need to communicate via the SWIFT network to notify the receiving banks about the transfer. Enterprise operations need these identifiers when executing wire transfers or handling foreign currency conversions outside domestic banking networks. 

Corporate organisations use these secure codes to execute cross-border settlements, purchase offshore inventory, and manage foreign employee payroll distributions safely. 

Do all banks have a BIC or SWIFT code for international transactions?

While prominent global groups possess native codes, smaller regional entities and local credit unions frequently operate without them. These institutions might rely on intermediary banks to process their international transactions, leveraging the intermediary's SWIFT or BIC code to facilitate cross-border transfers.

Relying on intermediary structures introduces additional processing steps, which often results in unexpected handling deductions from the final remittance. For corporate treasury teams, managing accounts with direct network connections provides greater transparency, faster clearings, and more secure international cash flows.

How to find a SWIFT or BIC code? 

Finding a SWIFT or BIC code is a straightforward process, and there are several reliable resources at your disposal. 

• Check bank statements: Look near your account summary details on paper or digital statements.

• Visit the bank's website: Check the international banking, help, or contact sections.

• Log into online banking: Find the codes under your main portal account settings.

• Search the SWIFTRef directory: Use the official online SWIFT lookup tool to verify institutional details.

• Contact customer support: Call or message the bank directly to get the exact branch sequence.

Alternatives to SWIFT or BIC code?

Modern business enterprises often look for payment alternatives beyond traditional banking systems. While analysing what is a SWIFT code mechanics reveals high security, the legacy correspondent process frequently introduces high costs. Airwallex transforms this cross-border environment by leveraging a comprehensive global network of local bank accounts. 

By utilising local payment rails, Airwallex allows businesses to send and receive funds in multiple currencies without the need for intermediaries, significantly streamlining the process. Over 93% of transfers can be credited the same day.

By opening an Airwallex Business Account, you can transfer 90+ currencies to 200+ countries and regions, with over 120 of them through local rails instead of SWIFT. Combined with the competitive exchange rates offered by Airwallex (only as low as 0.2% above the interbank rate), you can effectively reduce the costs of overseas transfers.

Moreover, the Airwallex Business Account allows users to open local currency accounts in multiple countries and regions. When transferring money overseas, you can simply transact like a local, instead of going through the complicated procedures of international transfer. This not only speeds up the process but also eliminates all unnecessary fees.

FAQs

1. Where can I find my SWIFT or BIC code?

In most cases, you can find the SWIFT code of a bank on its official website or bank statements. You may also contact the bank directly if necessary.

2. What is an IBAN number in relation to a SWIFT or BIC code?

SWIFT code and IBAN serve as two different types of identifiers for international transactions. SWIFT code is used to identify banks or financial institutions, while the IBAN is used to identify designated bank accounts.

3. What is a SWIFT banking system?

The SWIFT banking system is a global messaging network used by financial institutions to securely communicate and transfer funds internationally. It assigns unique SWIFT or BIC codes to identify banks and facilitates accurate routing of transactions, ensuring standardised and secure communication between banks to enhance the efficiency and security of cross-border transactions.