The most common way to send money internationally is using the SWIFT network. Banks use this network to communicate with each other and exchange instructions. What exactly is this network, and how does it work? This article will answer your questions and explain the system in detail.
What Is SWIFT?
It stands for Society for Worldwide Interbank Financial Telecommunications. It is the messaging system that most banks use to send and receive instructions.
When many people hear SWIFT, they mistake it for a payments network, but that’s not what it is. It’s actually a messaging system that financial institutions use to pass instructions. For instance, whenever you wire money abroad, your bank will instruct the receiving bank to deposit the intended amount in the recipient’s account. Once the deposit is confirmed, it deducts the equivalent amount from your account.
Every banking institution has its unique SWIFT code or Bank Identifier Code (BIC), just like every individual has a phone number for communication. You’ll need this code to send money to a foreign bank or receive money from a foreign account to yours.
What Does A SWIFT Code Look Like?
It consists of 8 to 11 characters in this format: AAAA–BB-CC-123.
- The first four characters identify the specific banking institution
- The next two characters identify the country where the bank is located
- The next two characters identify the location
- The last three characters are a unique number for the banking branch (this is optional because, sometimes, all branches of the same financial institution in a region share the same code)
CHASUS33ARP is a fitting example.
- CHAS identifies JPMorgan Chase & Co.
- US stands for the United States of America
- 33 refers to New York state
- ARP identifies a specific JPMorgan branch in New York City
When Was SWIFT Introduced?
It was introduced in 1973 when over 200 banks across 15 countries decided to create a unified network for transmitting information. Prince Albert of Belgium transmitted the first message on the network in 1977, the same year it grew to include over 500 banks.
The network gradually became dominant and now includes over 11,000 banks across most countries. It is funded by member financial institutions.
Before SWIFT, most banks used the TELEX communication system. It consisted of a network of teleprinters that owners used to send printed messages to each other. Unlike SWIFT, which was developed specifically for financial service providers, this system was built for a general purpose.
Why Do You Need A SWIFT Code?
This code is what banks use to identify themselves on the network. Without it, sending instructions to the correct bank will be impossible, meaning your transaction won’t go through. Hence, banks will always request this number to process foreign transfers.
Where Can I Find the Code?
- Website: Your financial institution should have a list of all the branch codes displayed on its official website.
- Contact: You can call or email your institution’s customer service team to request it.
- Banking Statement: You’ll usually see the code on a banking statement that you request.
- Online aggregators: Many websites aggregate the codes of banks across the globe and display them to visitors.
How Much Time Does A SWIFT Transfer Take?
The transfer usually takes between one and four working days. The exact time depends on the recipient’s location, time zone, and the currency.
Conclusion
At this point, you should be able to explain to anyone if they ask you What is a SWIFT code? We have provided details on how the network works and why you need a code to transfer money through it. Most banks that process foreign transfers support the network, so you shouldn’t have problems with it.
