SWIFT payments are very popular nowadays. They allow you to transfer money from your account to the account of an individual or legal entity in any currency to any country in the world. In the era of freelancing, remote work, entrepreneurship, cooperation of people from different places, SWIFT payments are used constantly. 

SWIFT is an acronym that stands for Society for Worldwide Interbank Financial Telecommunication. This system is used by banking institutions, startups and many other organizations to provide international money transfers & FX payments service.

How does the SWIFT payment system work?

From a technical point of view, SWIFT is a fast and secure channel for transmitting information about money transfers, payments and securities exchanges through a special network called SWIFTNet, which works on the same principle as the Internet. 

When a bank needs to send a payment to another bank, it prepares a message, encrypts it, and enters it into the SWIFT network through a special terminal. The counterparty then decrypts the message and sends it for processing.

If the sending and receiving banks have accounts with each other, the money is credited when the receiving bank receives a SWIFT message from the sending bank. However, if there is no direct agreement between the banks, one or more intermediary banks will be involved in the process, increasing the time and cost of the transfer.

SWIFT Code Definition & Meaning

When a bank or company connects to SWIFT, the system assigns a unique number – an identifier – of 8 to 11 characters. In technical terms, it is called SWIFT ID or BIC (Bank Identifier Code). This code allows you to uniquely identify the sender and receiver of messages in the system.

The meaning of the SWIFT code:

• AAAA – the first four characters consist only of letters of the Latin alphabet and serve as a designation of the financial organization. 
• BB – two additional letters identifying the country, e.g. IT for Italy, UA for Ukraine.
• CC – two letters indicating the location of the bank.
• XXX – branch code. In case of its absence, the head office of the bank is meant.

How long does a SWIFT payment take?

SWIFT payments are not instantaneous. Each transaction is checked by the bank for fraud, money laundering and other illegal activities, and this takes time. It is impossible to eliminate the verification process, as it makes transfers safer. 

Also, payments take longer on holidays and weekends, time zones, banking procedures and laws of different countries affect the speed. Most processes are now automated, but some transactions are still checked and confirmed by humans, so all payments are adjusted to the work schedules of bank employees.

Summing Up

SWIFT is valued for its convenience: the system does not store funds, so users do not need accounts to make transactions. In fact, it is simply a way to make payments securely. 

Although the system was developed and implemented by banks, it is now used by currency exchange services, currency brokers, financial institutions and other organizations.

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