What Is the Swift Banking System? 

How does Swift work?

To properly route these payment messages between financial institutions, Swift assigns a unique Swift number to identify each organization within the network. When a transaction is subsequently initiated by an account holder at a bank or other business, that request is converted into a specialized syntax (blocks of structured data) and routed using the relevant Swift codes of the two organizations.

The message’s contents will vary depending on its type, but it will typically indicate the transaction details (e.g., account numbers, names of account holders, transaction amount, currency, charge details).

The Swift coding system

The Swift code — also known as a bank identifier code (BIC), Swift ID, or ISO 9362 code — is a string of either 8 or 11 characters, depending on whether the site involved is a headquarters or branch office, respectively. Within the identifier code itself, these characters indicate the:

• Financial institution (first four)
• Country (following two)
• City (following two)
• Branch location (optional final 3)

What does sending money via Swift look like? 

From the end user’s perspective, sending money via Swift is surprisingly easy. Consider, for example, the (fictional) case of Rare Aer Inc., a seller of compressed oxygen gathered from the most exotic locales globally. For its Ancient Wonders product, the business purchases 20 cylinders of pyramid-harvested air monthly from Egyptian firm Anubis Airomatics for $17,500.

Rare Aer contacts its US-based financial institution, AMBank, to initiate a payment to Anubis. Fortunately, AMBank is part of the Swift network, as is EGBank, the financial institution of Anubis Airomatics. As such, AMBank sends a Swift message to EGBank regarding the $17,500 payment, containing the relevant Swift codes, account numbers, and transaction amount. AMBank then deducts $17,500 from Rare Air’s bank account.

Meanwhile, EGBank credits that $17,500 to its commercial account with AMBank and credits that amount (minus any processing fees) to Anubis Airomatics’ specific account. From the perspective of the buyer and seller, minimal effort was needed.

Swift’s governance and function

What and where is the Swift cooperative? 

The Society for Worldwide Interbank Financial Telecommunications, headquartered in La Hulpe, Belgium, is a member-owned co-op managed by a board of 25 directors. 

• The co-op’s shareholding structure is reapportioned every three years based on the messaging volumes of the member businesses, helping to ensure that the most active members have the most say. 
• And one-third of the board seats become vacant yearly and are filled via shareholder elections.

In addition, the Group of Ten (G10) central banks and the National Bank of Belgium jointly oversee the organization, focusing on risk management, confidentiality, and security.

Swift’s role in the global financial landscape

While Swift can support domestic transactions, the platform is predominantly used for international communications, supporting (according to Swift) more than 11,500 institutions in over 200 countries worldwide. The network routes over 44 million messages daily, meaning that this transaction count will exceed 11 billion in a given year.

Swift Banking System FAQs

1. Why is Swift considered the dominant global financial messaging system?

Beyond the impressive message volumes already covered — over 11 billion per year — Swift estimates it routes transactions equivalent to the gross domestic product (GDP) of the entire globe every three days. Comparatively, the largest global network — the Cross-border Interbank Payment System (CIPS) — processed only 6.6 million transactions in 2023, moving roughly $17 trillion.

2. What are the main services offered by Swift?

Evolved far beyond its humble beginnings, Swift now offers a variety of solutions, such as:

• Payment services: comprising the network, software, and communications hubs needed to route transactional data between financial institutions with speed and transparency
• Standards management: working with the member community to develop rules, best practices, and maintenance for various messaging standards
• Integration support: creating solutions to connect back office systems with the Swift network
• Risk and compliance: offering tools for fraud control, sanctions screening, compliance analytics, and more

3. What types of financial institutions are members of Swift?

Swift includes a broad range of member organizations, including:

• Banks
• Corporations
• Financial technology (Fintech) organizations
• Government entities and public treasuries
• Market infrastructures (exchanges and depositories)
• Money brokers
• Securities institutions (including brokerages and asset managers)

4. What is SwiftNet and how does it work?

SwiftNet refers to the core messaging service and underlying network that route financial communications between the Society for Worldwide Interbank Financial Telecommunication member organizations. These transmissions are routed via unique Swift codes given to each member and encoded using a proprietary syntax structure and common message types.

5. How does the FIN messaging service differ from InterAct and FileAct?

6. What is the purpose of Swift Web Access?

Swift Web Access delivers a secure channel for users to interact with the online services and applications offered by financial institutions within the network, routing this activity through SwiftNet rather than the open Internet. This approach helps institutions better monitor user accounts while promoting more readily accessible yet secure communications.

7. How do banks connect to the Swift network? 

Member financial institutions can access the network through various channels offered by Swift, including:

• Specialized software
• Application programming interfaces (APIs)
• Integration gateways
• Cloud-based services
• Swift virtual private network (VPN) connections

8. Can banks send money internationally without using Swift?

Yes. There are a number of alternative methods that a business can use to support its global transactions, including:

• Ripple: a blockchain-based network
• CIPS: a system focused primarily on transactions involving Chinese Yuan
• Structured Financial Messaging System (SFMS): a platform managed by the Indian Financial Technology and Allied Services (IFTAS)
• System for Transfer of Financial Messages (SPF): a network developed by the Central Bank of Russia

Of course, some nations and regions restrict which networks can be accessed by financial institutions within their borders, so not all of these options may be available to you.

9. How does Swift support anti-money laundering (AML) and KYC compliance?

To help limit the impact of fraud and other malfeasance directed against its members and their end customers, Swift engages in AML research, helping to build best practices and identify market vulnerabilities. It also developed a Compliance Analytics suite of products, including its Correspondent Marketing tool. This solution provides exhaustive reports that can be leveraged to support Know Your Client (KYC) reviews, flag suspicious transaction patterns, and document compliance with international regulatory standards.

Further, Swift maintains a KYC Registry that lets over 7,000 global institutions exchange customer-related data and documentation in a secure, standardized format.

10. How does sending a Swift transfer differ from sending a wire transfer? 

Functionally, there isn’t much difference from the end user’s perspective. The sender initiates both transaction types at their financial institution of choice and requires the sender to provide specific details regarding the receiver’s bank and corresponding account.

While Swift and wire transfers are sometimes used interchangeably, there is some nuance between these exchange types. In particular, wire transfers cover a broader range of transactions, including ones made outside the Swift network.

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