In banking, a SWIFT Code is also known as a Bank Identifier Code or BIC. They are a set of letters and numbers that are and identifies a specific bank, like how a plate number identifies a particular vehicle. For example, the barclays SWIFT code is unique only to the Barclays bank in London, England. You can use the SWIFT code for banking activities and are especially useful for international transactions. Banks also use SWIFT codes to send information to each other.
The Significance
SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. Since its inception in the 1970s, SWIFT codes have become an integral part of global finance. Not only is it a vital medium for secure communication between financial institutions, but it has also become a key tool in enforcing financial laws and maintaining the financial infrastructure.
For example, SWIFT has been actively involved in anti-money laundering efforts. One of the ways SWIFT tackles this issue is through artificial intelligence. Analysts spend 80% of their time trying to detect financial crimes instead of addressing them. Part of the challenge is how organizations often change their money laundering schemes to avoid detection. AI, however, can crack these codes faster and detect transaction patterns or activities that are inconsistent with the norm of typical clients, thereby flagging potential frauds.
SWIFT also provides the Market Infrastructure Resiliency Service or MIRS. MIRS is a back-up platform that financial institutions can use in case of severe operational disruption, which can include technology failures or even natural disasters. In such cases, MIRS can serve as a robust alternative to continue banking operations.
How it Works
Each financial institution has a unique SWIFT code with either 8 or 11 characters. Some call the SWIFT Code as the BIC, SWIFT ID, or ISO 9362 code, but they all mean the same. Retake the Barclays bank as an example. The barclays swift code is BARCGB22. The breakdown of this code is as follows:
- The first four characters are the institute code. It is essentially a short version of the bank’s actual name, hence “BARC” for “Barclays.”
- The next two characters are the country code where the bank is. Barclays is in the United Kingdom, whose country code is “GB.”
- The next two characters are the city code, where the bank head office is. The Barclays head office is in London, whose city code is “22”. The city code can also be letters. Milan, for example, has a city code of “MM.”
- Lastly, there is an optional set of three characters. A bank may use these last three additional characters to identify branches. For the main office of Barclays, you can use either BARCGB22 or BARCGB22___ as the SWIFT code.
Sending Money
As the customer, you can imagine the SWIFT system as going from one airport to another, especially since the SWIFT system is mostly for international transactions. Sometimes you need to take several connecting flights from different airports to get to another country. The same goes for international transactions; your money will hop across countries, and the banks are the connecting airports. These connecting banks exchange payment orders using SWIFT codes.
As an example, consider Person A, who banks at Barclays, want to transfer funds to Person B who banks in UniCredit Banca in Milan. Person A will use Person B’s banking details, such as their name and account number, the currency, and the UniCredit Banca SWIFT code for its branch in Milan. The transaction can go through intermediary banks like connecting flights. When UniCredit Banca receives the SWIFT message about the fund transfer, it will clear and credit the transaction to Person B’s account.
Things to Know
You can incur extra costs when doing transactions using SWIFT. The correspondent and recipient banks can impose additional fees. Even the intermediary banks will charge you extra fees. If you are transferring money to someone with a different currency, there will be a foreign exchange rate that can be around 5% higher than the actual rate for the banks to profit. Moreover, sometimes the transfer can take up to 5 working days. Because of these extra fees, it is more advisable to use the SWIFT network when sending large amounts of money.
Although SWIFT is already approaching 50 years, several financial institutions still use it because of its reliability. Whether you are sending money for personal or business matters, it pays to know the SWIFT code of your recipient bank to ensure you have a secure and reliable transaction.
Grammatical and sentence errors
This information is too old to use. Please change to something relevant and new.
This article is written by David Smith, a copywriter and content strategist. He helps businesses stop playing around with content marketing and start seeing the tangible ROI quickly. He loves reading books and car racing.