How Does SWIFT Money Transfer Work

Money transfer refers to moving finances from one person, group, organization, or institution to another. There are various money transfer mediums that you can use, including banks, credit unions, financial technology companies, and mobile wallets. Transferring money can happen through various ways such as wire transfer, ACH, check, and so on via certain technologies. SWIFT is one of the most used technologies to send money. We will see how SWIFT money transfer works shortly.

We all understand the importance of money transfers in the world. It would be challenging to survive in this world if there were no means to send money. The world economy would be horrible since people would find it difficult to purchase goods and services remotely. Nowadays, you can buy something remotely due to digital money transfer methods that facilitate faster money transfers.

Money transfers can happen domestically or internationally. SWIFT is usually essential for international money transfers. Most international money transfer services rely on banks either directly or indirectly. Again, the transfers happen online, although we still have people who send money through traditional methods such as checks and money orders. Online money transfers are fast and convenient since you can transfer anytime using your phone or computer. For example, you can instantly send money through PayPal to someone in the UK from the US.

What is SWIFT?

It is essential to understand what SWIFT is before progressing with more discussions. SWIFT is a short form that represents Society for Worldwide Interbank Financial Telecommunication. The system started in the 1970s with a few banks. Today, it is a network of 11,000 financial companies in over 200 countries.

SWIFT transfers refer to electronic payment order messages transmitted between the banks in an electronic format. The money you are sending does not move physically to the recipient during the process. Therefore, the SWIFT transactions must be complete in 2 to 5 working days.

SWIFT payments can be local or international money transfers between banks and currencies supporting the SWIFT network. The process is an excellent option to transfer money to someone else’s bank account. Essentially, SWIFT transfers allow you to send finances from your banking accounts (checking, savings, IRA, etc.) to any other bank account globally, using any currency supported by both institutions.

The good thing with SWIFT money transfers is that you can send funds to your friends and relatives, pay international invoices, buy real estate abroad, and send money home if you live and work abroad. Remember that you should have a bank account connected to SWIFT to allow you to receive social payments, salary, and all payments from your partners, social payments, friends, and relatives.

How Does SWIFT Work?

It is crucial to understand how SWIFT transfers operate. As I mentioned earlier, SWIFT transfers involve electronic money transfers between accounts connected to the Swift system. The transfer starts with the sender triggering an international transfer from your web or mobile app that your banking services provider runs. After that, your banking service provider deducts money from your bank account and then sends a request to the receiving bank to put the sent amount in your recipient’s account using a SWIFT message.

The transfers are not instant as they can take between 1-4 working days to complete. The time taken to complete the transaction varies from one time zone to another, and different banking procedures. The funds take that much time since they must undergo anti-fraud and anti-money laundering checks.

Usually, both banks have commercial bank accounts that help them clear the transactions within the day and physically send a fraction of the money that has been processed with SWIFT payments between them. Also, transferring money can happen through a third party who processes the payments on behalf of the two banks.

 We usually have a network of large correspondent banks that can route transactions via their systems and/or other 3rd party banks at a small fee. That happens if the sending bank has no direct relationship with the receiving bank. If that happens, then the transfer can take longer to complete.

Basically, SWIFT transfers are essential for sending money between banks. Suppose you are sending money between accounts of the same branch. In that case, you only need to send money with a checking account number instantly. The funds reflect immediately or within a few minutes unless there are technical issues with the transfer.

How do you send SWIFT transfers?

There are various things you require to carry out SWIFT transfers. You require the IBAN if you are sending funds using the European SEPA network. Although the transfer process is still the same, SWIFT transfers to non-European countries require the BIC/SWIFT code.

To send money through SWIFT, you need to open the Send Wire Transfer menu and enter the necessary recipient details, the amount to transfer, and confirm. Once the transaction goes through, you will get a notification. Similarly, if it does not succeed, you will know where to rectify it and complete the transfer.

What do I need to receive SWIFT transfers?

swift money transfer

You do not have to do much to receive SWIFT payments. You only need to provide the sender with your Beneficiary Account name, IBAN, or SWIFT code, whichever is suitable. The SWIFT code is a specific identifier of your account service provider in the SWIFT network. The IBAN (International Bank Account Number) identifies a specific bank account. Generally, you require the following.

  • Name of the recipient.
  • Recipient’s physical address.
  • Recipient’s account number or IBAN.
  • Name and address of the receiving bank.
  • SWIFT code of the bank (also called BIC).

Once you provide all those details, you can wait for your funds to arrive. However, you should ensure that you provide the correct details to prevent errors. Funds may disappear if they land in the wrong accounts.

How much does a SWIFT transfer cost?

You might be asking yourself how much the transfer costs. Well, the cost of the transfer method varies with the financial company you use. However, you need to understand that there are two types of fees that you must pay. They include;

  • Normal fees
  • Exchange Rates

If you use a correspondent bank (third party bank), you will part with correspondent bank fees. Again, if you want to fasten your transfer, some banks can also charge a priority payment fee. Generally, a SWIFT transfer can be expensive. Interestingly, we have financial companies which do not charge SWIFT transfer fees.

Who owns SWIFT?

It is important to note that SWIFT is not any company’s product as member banks own it. The network is a joint service owned by more than 2,000 banks and financial companies. However, the National Bank of Belgium is the overseer of the money transfer system in partnership with other central banks worldwide. These include the US Federal Reserve and the Bank of England.

The system admits new members, whereby you need to follow simple steps to complete the mission. The following are the steps to follow.

  • Start by creating your swift.com user account.
  • Register your organization.
  • Start a formal application.
  • Provide the necessary data and documents. 
  • Familiarize yourself with the Customer Security Programme (CSP).
  • Get the legal acceptance and have your BIC created.

Various companies can join SWIFT, including banks, treasury market infrastructures, brokers/dealers, fund participants, corporates, exchanges, custodians, and investment managers.

Do you need SWIFT for local transfers?

SWIFT transfers are usually for international transfers since the SWIFT codes help to identify the receiving banks. However, when transferring money to a local bank, you can send money with an account and routing number. There are two ways you can transfer money to local banks. They include the following.

i) Wire transfer

Wire transfers allow you to send large amounts of money to other financial companies. The transfer allows the sending and receiving financial companies to communicate to facilitate the transfer. You require the routing and the account numbers of the receiving bank account. Big banks usually have separate routing numbers for each state.

Wire transfer is possible online and at a physical branch. The transfer method attracts fees for sending and receiving funds. Wire transfers can complete within 24 hours.

ii) ACH transfers

ACH means Automated Clearing House. In the US, it is a system that allows you to send finances through a third party, i.e., the Automated Clearing House. Unlike wire transfers that involve direct communication between the sending and receiving financial company, ACH transfers use a third-party platform to facilitate the transfers. ACH transfers are also called Direct Deposits.

The good thing about ACH transfer is that it does not charge fees. If you find a company charging fees for ACH transfers, the amounts are usually small. Again, if you decide to send instant ACH transfers, you must part with some fees. Standard ACH transfers can take 2-4 business days.

Bottom line

SWIFT is a short form that represents Society for Worldwide Interbank Financial Telecommunication. It is an electronic system that facilitates international money transfers. The system is a product owned by member financial companies and is overseen by the National Bank of Belgium. You can make a SWIFT transfer online using your smartphone or computer. Your bank or any other financial company must be a network member to use the service. The SWIFT transfer is not necessary for local transfers. 

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