A comprehensive overview of SWIFT

Whether you're a bank, financial institution, or the average person, you've interacted with SWIFT in one way or another.

As more nations and business entities continue to use the SWIFT platform to facilitate global banking activities, it is increasingly important for those in the sector to understand the inner workings of the system and the variety of benefits it provides.

In this article, we'll provide a comprehensive overview of SWIFT, including its history, services, and importance in the financial industry.

What is SWIFT?

The Society for Worldwide Interbank Financial Telecommunication, otherwise known as SWIFT, is a global financial messaging network that connects over 11,000 financial institutions in over 200 countries.

It is the primary means by which international banking transactions take place and provides a secure and reliable infrastructure for financial institutions to communicate and transfer money across the globe.

History of SWIFT

SWIFT was founded in Brussels, Belgium in 1973 as a cooperative society comprising a number of international banks. From its humble beginnings, SWIFT has seen tremendous growth and innovation, with various messaging services being introduced and its network expanding to include banks from all around the world.

In the 1980s, the organisation implemented a number of standardisation initiatives, such as the SWIFT Code, which is now utilised as the standard format for identifying banks and financial institutions globally.

The 1990s and 2000s saw SWIFT expand its services and offerings even further, with the introduction of compliance services like sanctions screening and anti-money laundering.

The services offered by SWIFT

SWIFT offers a wide range of financial services, which include:

  • Secure messaging for financial transactions – you can read more about this below.
  • Cross-border money transfers.
  • Currency exchange rate information.
  • Sanction screening services.
  • Interbank payments and settlements.
  • Treasury services management.
  • Connectivity solutions to financial institutions.
  • ISO 20022 standard for financial messaging.

SWIFT Messaging Services

The SWIFT Messaging Services provides a comprehensive communication platform for financial institutions worldwide.

The services are powered by standardised message formats and protocols, such as SWIFT MT (SWIFT Message Types) and FIN messaging, to ensure interoperability and consistency across the network.

They also include features such as real-time transaction tracking and confirmation, message validation and formatting, and messaging audit trails.

In addition to its messaging services, SWIFT also offers SWIFT FileAct, a service that enables financial institutions to securely and efficiently exchange large data files.

What is a SWIFT MT103?

The SWIFT MT103 is a financial transaction message used for cross-border transfers between banks. It consists of 14 lines that serve specific purposes and hold specific information, as summarised below:

  1. Message type identifier
  2. Sender's bank's SWIFT code
  3. Receiver's bank's SWIFT code
  4. Date and time of the message
  5. Message reference number
  6. Related reference number (optional)
  7. Ordering customer's name and address
  8. Ordering customer's account number
  9. Beneficiary customer's name and address
  10. Beneficiary customer's account number
  11. Amount of transaction
  12. Currency of transaction
  13. Date of transfer
  14. Message signature

The ordering institution's bank identifier code (BIC), also known as Line 52A, is an important aspect of the SWIFT MT103 message. It serves to identify the bank that is sending the payment instruction and is used to determine the specific bank branch's responsibility. The BIC, consisting of 8 or 11 alphanumeric characters, is a unique code that identifies financial institutions on the SWIFT network.

Line 52A is present in various SWIFT message types, including the MT103 and MT2021, and holds the ordering institution's BIC. The ordering institution is the financial institution sending the payment instruction, usually the bank of the person or entity initiating the payment. The ordering institution is responsible for sending the payment instruction to the receiving institution, which is typically the bank of the person or entity receiving the payment.

The role of Swift in the financial industry

As explored above, SWIFT plays a vital role in the financial industry. Its robust offerings allow financial institutions to offer:

  • Facilitate cross-border payments and money transfers.
  • Exchange financial transaction information.
  • Meet regulatory and compliance requirements.
  • Enhance operational efficiency and reduce costs.
  • Access real-time payment tracking and confirmation.
  • Collaborate with other financial institutions and market infrastructures.
  • Improve security and prevent fraud.

By providing these services, SWIFT helps ensure the smooth functioning of the global financial system and supports the growth of international trade and commerce.

SWIFT and Integrated Finance

When choosing Integrated Finance, you become global by default.

How? Our Fintech infrastructure enables you to global trade with outbound payment coverage of over 130 currencies via the SWIFT network alone. In other words, whomever your customers need to pay or get paid is most likely already signed up for the network, making payments easier and communications between countries as seamless as possible.

In addition to enabling your customers to pay and get paid globally, you can also localise your product by offering domestic and instant payments to attract more customers, reduce transaction costs, and settle funds faster.

Schedule a live demo to find how you can offer both cross-border and local payments.

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