Have you ever wondered how money and financial transactions make their way across borders and end up at the right bank or financial institution? You have the Worldwide Interbank Financial Network Association for that.
never heard of it? You probably know it by the acronym SWIFT (commonly written “Swift”), the huge financial artery that connects banks, financial institutions, and governments around the world.
So, what is Swift and how does it work?
What is Swift?
Swift is the main secure transfer order method that banks use to request payments from other institutions. Founded in 1973 and headquartered in Belgium, Swift is the primary mechanism for financing international trade, making cross-border payments, and transferring money internationally.
In 2021, about 42 million transactions were sent through Swift each day, up from 32 million sent daily in 2015. The Swift Network accounts for trillions of dollars in financial transactions and is a vital link in global commerce.
How does Swift work?
Although Swift is responsible for trillions of dollars worth of financial transactions each year, Swift is not actually responsible for transferring funds. Instead, Swift is like a messaging and routing service that sends and facilitates payment commands.
Within the Swift network, each bank is assigned a unique code containing either eight or eleven characters known as a Bank Identifier Code (BIC) (also known as a Swift code or Swift ID). To use Swift, you must know the BIC code of the bank you want to send money to.
For example, let’s say you want to send money from your Capital One account to your friend in Amsterdam, who deals with ING Bank NV. To send money to them, you will need your friend’s name, account number and the unique ING Bank NV Swift Code for that particular Amsterdam branch.
Once this information is provided, Captial One sends a payment request to ING Bank NV via the Swift network. Once ING Bank NV receives Swift’s request for payment, it can begin the process of clearing funds to and from the respective accounts.
Remember that Swift is not responsible for accounts, actual funds, or money transfers. It sends and receives messages to arrange these payments.
How fast is Express Pay?
A standard Swift payment can take anywhere from one to four days. Transfer speed depends on several factors, including anti-fraud and anti-money laundering. Moreover, the speed of the transaction can also slow down if the banks through which you are trying to send money do not have a direct relationship. In this case, your Swift transaction will pass through an intermediary bank, slowing down the process and adding to the transaction cost.
If you are sending money internationally, you are using Swift
If you’ve ever sent money internationally, it’s very likely that you’ve used Swift, whether you know it or not. However, in the modern era, Swift is not the only way to send money across borders, as the advent of cryptocurrency has made it easier than ever to send money anywhere in the world with relative ease.
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