What is the SWIFT Payment Network?

Alice Wong
6 minutes
What is the SWIFT Payment Network?
In this article

Now more than ever, money changes hands and country codes in the blink of an eye. The majority of these international transfers are carried out between banks, using the SWIFT network.

The SWIFT network provides the infrastructure that underpins your international money transfers. These are sometimes still referred to as wire transfers. 

Let’s dive into what a SWIFT payment actually is, and just how SWIFT payments work.

What is SWIFT?

SWIFT is an acronym for Society for Worldwide Interbank Financial Telecommunication. Meaning, SWIFT is both an organisation and payment method.

The SWIFT network was established in 1973 and was created to establish a foundation of common processes to standardise international payments. Since its birth, SWIFT has grown to include over 10,000 financial institutions across 212 countries all across the world, including Singapore. SWIFT is renowned for providing a secure, fast, consistent method for banks to transfer currency between countries.

Before SWIFT, there was TELEX

Before SWIFT came around, banks relied on the TELEX system. TELEX used a wire system similar to telegraphs, to communicate text-based messages between banks, notifying of a money transfer—hence the term ‘wire transfer’ was coined.

How the SWIFT network operates

SWIFT isn’t a portal that transfers money from one bank to the other—it transfers information.

The SWIFT network acts as an information transport network, connecting your money’s original location to its final destination via a series of banks. Your money is then transferred from country to country, passing between different financial institutions, until it reaches its endpoint.

Notably, the SWIFT network doesn’t actually transfer your money. Instead, it creates a payment order that gets passed between the different financial institutions’ accounts. This is known as a SWIFT code. It consists of a series of 8-11 unique characters which are used to identify the specific bank where your money is headed. SWIFT codes are also known as Bank Identifier Codes (BIC).

Here’s a breakdown of what the characters in a SWIFT code means:

  • A 4-letter financial institution code

  • A 2-letter country code

  • A 2-digit code for the city or location

  • If applicable, a 3-digit individual branch code (although SWIFT codes don’t always include this)

It’s these codes that get transferred between banks, and the end result is money arriving at its destination. 

Using the wrong SWIFT code

Using the wrong SWIFT code can result in your transfer being delayed or not being sent at all.

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Making a SWIFT payment

Banks usually publish their SWIFT code on their website, however, you can also perform a search of the SWIFT database to find the specific financial institution you’re looking for. It’s always best to check with your bank prior to sending, though, to make sure you’re using the best code.

Making a SWIFT payment involves the following steps.

  1. Go to your bank and provide them with the receiving bank account details and the bank’s SWIFT code.

  2. Your bank sends a SWIFT message to the receiving bank, communicating your request to transfer money.

  3. The bank receives the SWIFT communication and allows the money to be credited to the receiving bank account.

The costs involved with a SWIFT payment

When making a SWIFT payment, it’s important to confirm that your bank is actually part of the SWIFT network. If it is, you’re all set. However, there are a number of fees to be aware of when making a SWIFT payment.

As you’re transferring between banks, each intermediary bank will likely charge a handling fee or commission for their service. Your bank may charge a flat rate to cover these fees, so it pays to check first. Given the international nature of the SWIFT payment network, there is no set table of fees.

If your transfer involves exchanging currency from one to another, be aware of your exchange rate. Banks have been known to offer poor exchange rates on SWIFT payments, and they end up keeping the difference. The rate banks charge can be up to 4-5% higher than the interbank FX rate (what you find on Google).

These fees means transferring smaller amounts can end up being quite costly, taking out a large chunk of your funds.

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SWIFT payment timeframes

The SWIFT network was created to be a faster, safer alternative for international transfers. But in the modern day, the truth is that SWIFT is actually quite slow. 

SWIFT transfers usually take 24-48 hours to be completed, which isn’t too bad. However, depending on the complexity of the transfer, SWIFT transfers can take up to five business days.

Discover the alternative to SWIFT

While SWIFT certainly has revolutionised international money transfers, it is over 40 years old and in need of an update. Fintechs like Airwallex are revolutionising cross border payments with their priority technology. With Airwallex’s technology, businesses can bypass the SWIFT network, reducing fees while at the same time making payments faster (same day). 

Send international payments with $0 TT fees and market-leading FX rates

Contact us today to speak to a specialist, and we’ll share how Airwallex can streamline your international money transfers.

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Alice Wong
Growth Marketing Lead

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