What is SWIFT? How the payment network works and what it costs

Key takeaways

• SWIFT is a messaging network, not a payment processor. It sends standardised instructions between banks for international transfers, but it doesn't hold or move funds itself.

• SWIFT says 90% of cross-border payments reach beneficiary banks within an hour. However, end-to-end settlement (including domestic processing) can take one to five business days. Timing depends on things like intermediary banks, compliance checks, and local infrastructure. Transfers also include transaction fees and foreign exchange mark-ups, which can change based on how many intermediary banks are involved.

• Airwallex offers a faster, more cost-effective option. It supports payouts to 150+ countries, uses interbank FX rates, and about 95% of transfers arrive the same day or within hours.

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a global messaging network. It links over 11,500 financial institutions across 200+ countries. It doesn't actually move money. Instead, it sends secure, standardised instructions between banks so international transfers can happen. If you've ever sent or received money overseas, there's a good chance SWIFT was involved.

For businesses that work across borders, it helps to know how SWIFT works. It can affect how fast you pay suppliers, how quickly you get paid by customers, and how you manage cash flow across currencies.

In this article, we'll explain what SWIFT is, go through how SWIFT transfers work in three steps, and look at faster, more cost-effective SWIFT alternatives for businesses.

What is SWIFT and why does it matter?

Think of SWIFT like a postal service for payment instructions. When you send a letter, the postal service delivers your message, but it doesn't carry your bank balance with it. SWIFT works the same way. It delivers the payment message between banks, while the money moves separately through the banking system.

SWIFT was founded in Belgium in 1973. It replaced the older TELEX system, where banks sent messages through telegraph wires². That's also where the term "wire transfer" comes from. Before SWIFT, international payments were slow, easy to get wrong, and not standard. SWIFT fixed this by creating a shared language and a secure private network that banks around the world could use. This helped banks process global transfers more accurately and reliably.

Today, SWIFT handles over 53 million messages each day. That makes it a core part of international banking. Its standard codes and message formats mean a bank in London can communicate with a bank in Singapore using the same rules and security standards.

SWIFT services beyond messaging

SWIFT also supports businesses with services beyond financial messaging³:

• Market infrastructure services: Helping businesses adjust to changing community needs and financial rules.

• Financial crime compliance: Helping with compliance for international sanctions, anti-money laundering (AML), and know-your-customer (KYC) requirements.

• Corporate treasury: Tools for cash management and financial risk management, to help businesses operate in the global economy.

SWIFT gpi and the move to ISO 20022

SWIFT hasn't stayed the same over the past 50 years. In 2017, it launched SWIFT gpi (global payments innovation). This aimed to fix common complaints about speed and transparency. With gpi, banks can track payments end to end in real time, much like tracking a parcel. Businesses can get confirmation when funds arrive. They can also see where a payment is in the process.

More recently, SWIFT has moved to ISO 20022. This is a message standard that supports richer, more structured payment data. The main coexistence period for cross-border payment instructions ends in November 2025. In practice, this can mean fewer errors, stronger compliance screening, and more detailed remittance information sent with each payment. For businesses, that can make reconciliation easier and reduce payment investigations.

The geopolitical role of SWIFT

Because SWIFT is the most common way for banks to send transfer instructions worldwide, it also has a major role in geopolitics. SWIFT itself is neutral. Still, cutting banks off from the network has become a key tool for the European Union (EU) when it sanctions countries that have broken international law.

For example, in 2012, EU sanctions against Iran led SWIFT to disconnect sanctioned Iranian banks. Later, in March and June 2022, SWIFT disconnected designated Russian entities and their Russia-based subsidiaries. It also disconnected designated Belarusian entities and their Belarus-based subsidiaries. It did this on instruction from the EU after Russia's invasion of Ukraine. These sanctions aim to create economic pressure. They do this by making it harder for those countries to receive payments from other countries.

SWIFT's lead overseer is the National Bank of Belgium (NBB), and SWIFT operates under Belgian law. However, SWIFT is also overseen by the G-10 central banks. Other banks from major economies also oversee it. These include the People's Bank of China, the Monetary Authority of Singapore, and the South African Reserve Bank.

How SWIFT payments work in 3 steps

When you make a SWIFT payment, your bank usually doesn't send money straight to the recipient's bank. Instead, it sends a secure SWIFT message with instructions for the transfer. Then the funds move through the banking system. Along the way, they may pass through one or more intermediary banks. Here's how it works.

Step 1: Gather the required banking information

Like any transfer, you need key banking details for everyone involved. SWIFT uses these details to route the payment message to the right place.

To complete a SWIFT payment, you'll need:

• Your personal information, including name, address, and bank identification

• The recipient's full name (business name or individual legal name)

• The recipient's address (use a business address if the recipient is a business)

• The recipient bank's name and address

• The recipient bank's SWIFT code

A SWIFT code has eight to 11 characters. It identifies the sending and receiving banks. SWIFT codes are also called Bank Identifier Codes (BIC). Each part of the code gives a specific detail:

• A four-letter bank code

• A two-letter country code

• A two-character location code

• A three-character branch code (not always included)

You can often find your bank's SWIFT code on its website, in online banking, or on your bank statements. If you're not sure, ask your bank directly.

SWIFT codes aren't the same as International Bank Account Numbers (IBANs). You may need both for international payments, but they do different jobs. An IBAN identifies a specific bank account. A SWIFT code identifies the bank.

Step 2: Request the transfer and understand the fees

Once you have the recipient's SWIFT code and the other details, you can start the transfer through your bank. You can often do this online, or in person. Before you submit, though, it helps to understand how SWIFT fees work.

SWIFT payments often use correspondent banking. This happens when your bank and the recipient's bank don't have a direct relationship. In that case, the payment goes through one or more intermediary (correspondent) banks. Each bank in the chain can charge a handling fee. That's why the total cost can be hard to predict upfront.

There are two main types of fees:

• Transaction fees: Your bank may charge a flat fee or a variable fee. If intermediary banks are involved, each one can add its own handling fee.

• Foreign exchange fees: If currencies need to be exchanged, you'll also pay an FX fee. The rate is based on the interbank rate (the rate banks use when they exchange currencies with each other), plus the mark-up your bank adds. Banks can add up to 3.5% on top of the interbank rate.

Banks usually let you choose who pays the fees. It can be you, the recipient, or a split. It's best to agree this upfront, so the recipient gets the amount they expect.

Airwallex offers businesses a more cost-efficient way to make international money transfers. We don't charge transaction fees on international payments, and our FX rates are much lower than high street banks'.

Step 3: Confirm the recipient country and currency

Next, your bank will ask you to confirm the recipient's country and the currency you want them to receive. If that currency is different from yours, you'll pay FX fees for the conversion.

From there, your bank and the recipient bank arrange the transfer using SWIFT messages. The transfer usually clears within one to five business days. Still, timing can vary. It depends on how many intermediary banks are involved, time zone differences, and whether either country has a banking holiday.

Who uses SWIFT and what for?

Many types of organisations use SWIFT when they need to transfer money across borders. In the US alone, multinational enterprises employ more than 44.3 million workers¹. These companies operate across countries, continents, and currencies, so they need efficient payment infrastructure.

Organisations that often use SWIFT include:

• Banks

• Cross-border businesses

• International employers

• Global franchises

• Securities dealers

• Asset management companies

• Clearing houses

• Depositories

• Foreign exchange brokers

Companies usually use SWIFT through their bank's online portal. You enter the recipient details and bank details (including the SWIFT code). Then you submit the payment instruction. SWIFT routes the message to the right banks for processing and settlement. Most businesses don't use SWIFT directly. Instead, their bank sends and receives the SWIFT messages for them.

There are other international payment methods for sending money worldwide. These include networks like Fedwire, Ripple, and Clearing House Interbank Payments System (CHIPS). However, SWIFT is still the most widely used for international transfers.

SWIFT payment considerations and alternatives

SWIFT has been a key part of international payments for 50 years. Even so, as more businesses work across borders, many now want faster and more cost-effective ways to move money globally.

Advantages of the SWIFT payment system

SWIFT has several strengths that have made it the default choice for international transfers:

• Global reach: With 11,500+ institutions across 200+ countries, SWIFT connects almost every major bank worldwide.

• Security: SWIFT uses a private, encrypted network, with strict security controls and compliance standards.

• Standardisation: One common message format helps reduce errors and lets banks communicate reliably across borders.

• Transparency: SWIFT gpi gives end-to-end tracking for participating banks, which improves visibility into payment status.

Drawbacks to consider

Even with these strengths, SWIFT also has limits that can be tough for businesses:

• Slow transfer times: SWIFT reports that 90% of payments reach beneficiary banks within an hour. Still, some transfers can take up to five days or more. Common causes include intermediary banks, compliance checks, or last-mile delays. If you need to pay staff and suppliers on time, business transfer delays can create real issues.

• Unpredictable fees: Banks charge different fees for SWIFT transfers. That makes it hard to know the final cost in advance. You and your recipient may also face unexpected payment fees. As a result, your recipient could get less than you planned.

• Limited real-time tracking: If your bank doesn't use SWIFT gpi, you may not be able to see where your payment is during processing.

How Airwallex compares to SWIFT transfers

Airwallex gives businesses a modern option instead of traditional SWIFT transfers. With our global payment infrastructure, you can send money to 150+ countries in 60+ currencies. Plus, over 90% of transactions use local payment rails rather than SWIFT.

Here's how the two compare:

With an Airwallex Global Account, you can hold, send, and receive funds in multiple currencies, all from one platform. Our FX & Transfers solution gives you access to interbank rates and same-day transfers to most major markets.

If you'd like more options, explore our guide to SWIFT alternatives for businesses. You can also find out more about how to streamline your payment processing.

Frequently asked questions (FAQs)

Who owns the SWIFT banking system?

SWIFT is a cooperative owned by roughly 2,400 member financial institutions worldwide. It's headquartered in Belgium. It's governed by a Board of Directors with 25 representatives from banks around the world, plus an internal Executive Committee.

Do all banks use SWIFT?

No, not all banks use SWIFT. Most major banks have a SWIFT code. However, smaller banks and credit unions may not connect to the network, or they may use other international routing codes. So, it's worth checking that both your bank and the recipient's bank support SWIFT transfers before you send a payment.

What's the difference between SWIFT and BACS?

SWIFT is a global messaging network for international payments. BACS (Bankers' Automated Clearing System) is a UK domestic payment system for direct debits and credits. BACS only processes GBP payments within the UK, and it usually takes two to three business days. SWIFT supports cross-border, multi-currency transfers between banks worldwide.

How long does a SWIFT transfer take?

A SWIFT transfer usually takes one to five business days, although some arrive sooner. Timing depends on factors like the number of intermediary banks, time zone differences, banking holidays, and the currency pair. Banks that use SWIFT gpi can often process payments faster, with better tracking.

Sources and references

1. https://www.bea.gov/news/2024/activities-us-multinational-enterprises-2022

2. https://www.elon.edu/u/imagining/time-capsule/150-years/back-1830-1860/

3. https://www.swift.com/our-solutions/a-to-z