SWIFT was recently in the news due to the fact that several Russian banks were cut off from the main international payment gateway because of the war. SWIFT is a widely used messaging network used by financial networks. Today we are going to explain the meaning and significance of the SWIFT code.
SWIFT Full Form
Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is the full form of SWIFT.
SWIFT Payment System
- SWIFT is a messaging network used by financial institutions to securely send information and directions through a standardized system of codes.
- SWIFT has become a pivotal part of the global financial infrastructure but it is not a financial institution itself.
- SWIFT does not hold or transfer assets. Its function is to make safe and efficient communication between members possible.
SWIFT allots each financial organization with a unique code that has either eight characters or 11 characters. This can be called the bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code. In order to understand how the code is assigned, we can take a look at Italian bank UniCredit Banca, headquartered in Milan. It has the eight-character SWIFT code UNCRITMM.
First four characters: the institute code (UNCR for UniCredit Banca)
Next two characters: the country code (IT for the country Italy)
Next two characters: the location/city code (MM for Milan)
Last three characters: optional, but organizations use them to assign codes to individual branches.
The SWIFT code is a Business Identification Code (BIC) assigned to banks as a simple cross-border payment method. International transactions made by a bank utilize the SWIFT code. The code serves as an international digital language to get overseas transactions executed. This idea creates a fast and uncomplicated process. A bank has to choose SWIFT to get the code and to be a member of the network. This entire system is electronic and utilizes a cloud platform to speedily transmit codes between banks.
Does Each Bank have a SWIFT Code?
No, every bank does not have one. Every bank does, however, have the choice to get one. If the bank has no intention to enter into cross-border transactions, then it would not require SWIFT. Banks that do undertake cross-border transactions can utilize SWIFT for international transactions. There is no requirement for any bank to be a part of the SWIFT network.
What is BIC ?
BIC is an abbreviation for Business Identifier Code which can be assigned to every business. The SWIFT code is a kind of BIC code assigned by SWIFT. By definition, they are not the same. In real life both terms mean the same thing. When a business is asked for the BIC, they are being asked for the eleven-character code that SWIFT allots. The SWIFT code is the BIC allotted by SWIFT and demonstrates that the bank is a member of the network.
How is IBAN Different ?
IBAN is the International Bank Account Number. It is also a code required frequently to send money overseas. The SWIFT code is a type of international bank ID. The IBAN depicts the accounts within a bank. Both are needed for transactions.
Why is the IBAN Required ?
The IBAN is required to start and end a transfer.
How do I Locate my Bank’s SWIFT Code?
There are several ways to locate it.
- An internet search shows numerous sites that have banking codes from the world over.
- You can ask your bank for it directly.
- Banks often have their codes in the international banking section of their website.
SWIFT Message Types
- Customer Payments and Cheques
- Financial Institution Transfers
- Treasury Markets: Foreign Exchange and Derivatives
- Collections and Cash Letters
- Securities Markets
- Treasury Markets: Precious Metals and Syndications
- Documentary Credits and Guarantees
- Travellers Cheques
- Cash Management and Customer Status
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Society for Worldwide Interbank Financial Telecommunications (SWIFT) system.
It is a messaging network used by financial institutions to securely send information and directions through a standardized system of codes.
IBAN is the International Bank Account Number.
What is BIC ?
BIC is an abbreviation for Business Identifier Code.