- The Society for Worldwide Interbank Financial Telecommunication (Swift) is a global network connecting banks to communicate messages about activities like money transfer in a safe and secure way
- Swift assigns each bank an eight- or 11-character long code, known as the bank identifier
- Banks, Securities Dealers, Clearing Houses, Exchanges, and Corporate Business Houses are some of the users of the SWIFT network.
What is the SWIFT payment system?
The Society for Worldwide Interbank Financial Telecommunication (Swift) is a global network connecting banks to communicate messages about activities like money transfer safely and securely, using a code. About 11,000 members of SWIFT send nearly 33.6 million transactions every day.
How does the SWIFT system work?
Swift payments are payments done through the network. Swift assigns each bank an eight- or 11-character long code, known as the bank identifier. It is similar to the IFSC code used for domestic interbank transfers, with Swift being used for international transfers. For example, if someone in India wants to send money to a person in the US, they would need the latter’s bank account number and the Swift code of the destination bank. The Swift code lets the US bank know of the transfer in real-time and eases its clearing.
Example of SWIFT code
To understand the process of assigning code better, let’s take an example of UniCredit Banca, an Italian bank, headquartered in Milan. Its swift code is UNCRITMM. Let us now understand how the code is formed.
The first four characters of the code denote the institute code, which is UNCR for UniCredit Banca in this example.
The next two characters stand for the country code, which is IT for Italy in this case.
The next two characters stand for the location or the city code, which is MM for Milan in this example.
The last three characters are optional, but some organizations use it for defining individual branches.
Who uses SWIFT?
SWIFT network has expanded over the years, and presently the following institutions use the system.
- Securities Dealers
- Clearing Houses
- Corporate Business Houses
- Brokerage Institutes
- Asset Management Companies
- Treasury Market Participants
- Foreign Exchange & Money Brokers
Services offered by SWIFT
SWIFT offers many services to businesses and individuals that facilitate accurate and seamless business transactions. Some of the services provided by the SWIFT network are:
Applications: SWIFT network offers access to several applications such as real-time instruction tally for forex and treasury transactions, security market infrastructure, and banking market infrastructure.
Compliance Services: SWIFT connections also aim to provide services related to financial crime compliance. It offers Know Your Customer (KYC), Anti-Money Laundering (AML) and Sanctions.
Business Intelligence: Recently, SWIFT has introduced reporting utilities and dashboards, which help the clients to receive a real-time view of tracking the activities, messages, reporting, and trade flow.
Messaging and Connectivity: The fundamental business of SWIFT aims at providing a reliable, secure, and scalable network that enables a seamless movement of messages. It achieves that with its various network connections, hubs, and software.