SWIFT transfers explained: understanding codes, processes, and security in international financial transactions

The article was updated on 11.06.2024

Modern financial institutions offer many types of international payments, but only some are as popular as SWIFT payments. After all, the SWIFT network covers most countries on Earth and is quite flexible. 

Find out what is so beneficial about a SWIFT payment, how the SWIFT network works, and how you can make an international money transfer inside Genome. 

What is a SWIFT code?

Also known as a bank identifier code (BIC), a SWIFT code is an integral part of the SWIFT network. A SWIFT code is used to identify a specific financial institution when sending money between two parties. Thus, when a money transfer occurs, a SWIFT code helps to ensure that it will reach the right beneficiary. SWIFT codes are usually 8 or 11 characters long and contain numbers and letters.

Let’s take one of the bank identifier codes as an example to better understand how it works.

Here, we have the following SWIFT code: CHASDEFF123. All the information about the financial institution that will be receiving a money transfer is gathered here:

• CHAS is a part of a SWIFT code that represents a bank code. It is 4 characters long. In this case, it stands for JPMorgan Chase Bank, a financial institution;
• DE is a 2-character long country code where the bank is located. In this SWIFT code, DE stands for Germany;
• FF is used here to identify the location of the financial institution within a country. As we can see from this bank identifier code, FF stands for Frankfurt, where the bank branch is located;
• 123 – these numbers represent the exact bank branch the transfer is expected to reach. This part of SWIFT codes is optional and can be excluded.

IBAN vs. SWIFT

International Bank Account Number (IBAN) is also a well-known code within the banking industry, as it is also a part of the money transfer process. However, SWIFT codes and IBANs should not be mixed up, as they serve different purposes. And, of course, the IBAN has a different structure. Let’s compare the two: 

Points of comparison	SWIFT code	IBAN
Length	The length of a SWIFT code is either 8 or 11 characters.	Can be no longer than 34 characters.
The information included	Bank code, country code, location code, and the bank branch code.	Country code, check digits, BBAN (Basic Bank Account Number), and the account number.
Purpose	A SWIFT code is used to find the correct financial institution that will be receiving a transfer.	An International Bank Account Number is used to identify the bank account to which the funds will be credited during the transfer.
Use cases	A SWIFT code is featured in most international transfers, especially SWIFT ones.	The IBAN is mainly used by countries that adopted this technology, particularly for SEPA payments.

Note that a SWIFT code and IBAN are usually used simultaneously when instructing a SWIFT payment or other transfer types. However, a SWIFT code is used to identify financial institutions, while an IBAN helps to identify bank accounts. 

What are SWIFT transfers, and how do they work?

The SWIFT system is a messaging system used by banks and financial institutions to securely transmit information and instructions through a standardized code system.

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication and is one of the primary methods for sending international payments. 

The Society for Worldwide Interbank Financial Telecommunication was founded in 1973 to establish a financial messaging service that would be accessible around the world. The service started working 4 years later and, at that time, was covering 518 financial institutions from 22 countries.

SWIFT gradually expanded as other financial institutions started to become SWIFT members. According to SWIFT’s latest report, more than 200 countries and territories are connected to the Society for Worldwide Interbank Financial Telecommunication, making it a unique transfer system in terms of its reach. SWIFT has also improved its services by introducing SWIFT Go and SWIFT GPI (global payments innovation).

Moreover, it supports all the major currencies, although the US dollar remains the most widely used one. As of April 2024, the US dollars accounted for 58,9% of SWIFT payments worldwide. Other popular currencies are euros (12,6%), Japanese yen (5,5%), and Pound sterling (4,9%), although the gap between these and the US dollar is very large.  

How does the SWIFT payment work?

• A client requests the SWIFT payment at their bank;
• In turn, the bank sends a SWIFT message containing payment instructions through the SWIFT network;
• The message can also go through an intermediary bank, but not in all cases.
• The beneficiary’s financial institution receives the SWIFT message with payment instructions and credits funds to the recipient’s account;
• The SWIFT payment status is changed in the SWIFT system, and the client is notified of the result of the payment.

Role of the SWIFT messaging system

In addition to providing wide-reaching services, the SWIFT payment system also ensures that the transfer process is safe. The secure SWIFT network implements many security measures to ensure that the data passed through a SWIFT network is duly protected while the transfer speed remains high. 

The payment instructions in a SWIFT message are encrypted to protect it against fraud and ensure the integrity of the transaction data. Overall, SWIFT allows transfers to be processed in a secure and timely manner.

SWIFT payment vs. SEPA payment

SEPA payments are another popular method of cross-border payments offered by financial institutions. In some cases, SEPA can be an alternative to a SWIFT payment system, but both options are usually used for different purposes. Let’s compare a SEPA payment to a SWIFT transaction to learn what’s the difference.

Points of comparison	SWIFT system	SEPA system
Availability	The system is supported by many financial institutions in over 200 countries and territories and is a part of a global banking system.	The system is supported within the SEPA zone – 36 European countries, which are mainly the European Union.
Supported currencies	The SWIFT payment system supports all major currencies.	The SEPA system only supports payments in euros.
Costs	As a rule, transfers made via SWIFT cost more than SEPA ones.	SEPA payments are usually cheap, some financial institutions even offer them for free.
Execution speed	The speed of a transfer made via the SWIFT payment system varies. It can take 1-3 business days or longer if there’s more than one intermediary bank.	The regular SEPA transfers (SCT) are usually completed within a business day. SEPA instant transfers are completed within 10 seconds.

All-in-all, it will be more beneficial for a person to use SWIFT services in cases where the beneficiary is not located in the SEPA zone, or if the transfer currency is anything other than euro.

How to initiate a SWIFT transfer?

To send money using this transfer option, you need to find out if your bank offers these types of transfers. For instance, you can use Genome to make business SWIFT payments. To do so:

1. Open the Transfers menu and select the Bank transfer option;
2. Fill out the beneficiary’s details: their full name, account number, SWIFT code, country, and bank address (optional);
3. Select the currency you want to send money in;
4. Fill out the amount to send;
5. Write a description of the purpose of your payment.  

How to receive SWIFT transfers?

To receive such a payment:

1. Ensure that your bank accepts SWIFT transactions and can process the currency that the sender will use;
2. Open your banking app or website and find the details with your account details;
3. When there, find the details you need to share with the sender: your account number/IBAN, BIC, and bank location.

SWIFT transfers vs. other payment methods

How do SWIFT services compare to other payment methods? In some cases, the SWIFT system offers more benefits than other options. 

SWIFT payments and traditional wire transfers

The main distinction between a SWIFT transaction and a wire transfer is that the latter is mainly used for domestic payments (within one country). Thus, you can’t expect a global reach as you do with SWIFT payments. 

Also, a domestic wire transfer will only have one or two currency options, which are common for the country of a wire system. International wire transfers can provide more options in terms of currencies, but the SWIFT system offers all major currencies. 

Still, domestic wire transfers are usually completed within one business day and cost less than SWIFT ones. Thus, if you’re transferring funds within the US, a traditional wire transfer is a better option.

Advantages over check payments

As a payment method, checks are becoming less prevalent. According to the survey of US consumers conducted by the Federal Reserve Bank of Atlanta, only 8% of respondents reported that they preferred to pay bills with checks in 2022.

Needless to say, SWIFT services offer more advantages. Such payments are completed within 1-3 business days, are global, and provide real-time tracking.

Meanwhile, checks can take weeks to process and are more prone to fraud. At the end of the day, digital payment options, such as SWIFT, are more convenient.

SWIFT transfers and digital wallets

Digital wallets can significantly improve clients’ experience when it comes to SWIFT payments. After all, digital wallets are very advanced technological solutions for the financial world, offering app-based solutions, easier access to features, and faster execution of operations.

For instance, digital wallets can be used to initiate SWIFT transactions directly from inside the wallet app, which is faster and more convenient than using traditional banks.

Additionally, digital wallets usually act as third parties between a client and financial institutions, meaning more people can have access to this web and app-based technology than traditional banks. 

Benefits of SWIFT transfers

• Global reach. SWIFT covers almost all of the world (200+ countries), allowing financial transactions to be made in the most remote corners.
• Data protection. SWIFT’s secure financial messaging services ensure that the data transferred is encrypted and protected while the cross-border payments are tracked at multiple stages of its execution. Additionally, payments are consistent and have a low risk of encountering errors thanks to SWIFT’s standardized format.
• Versatility. One of the best qualities of SWIFT transactions is that they can be made in all major currencies.
• Speed. Although not the fastest transfer method, SWIFT financial transactions are executed relatively quickly – within 1-3 business days.

Common challenges and solutions related to SWIFT payments

The two main challenges that clients can face when using the SWIFT messaging system are the cost of such transfers and their speed. 

Fees and costs

As mentioned when we were comparing SWIFT with SEPA transfers, the former usually cost more. This is a result of the different fees that a client needs to pay to send a payment:

• The fee that a client’s financial institution deducts for transfer initiation;
• The fee charged by the beneficiary’s bank;
• The fees that correspondent banks can charge;
• The foreign exchange fee for an international transfer.

To avoid any issues, you will need to check and compare pricing for SWIFT transfers before partnering with banks or other financial institutions. Study the pricing thoroughly and ensure that it is transparent. Additionally, you always need to check for alternatives: other transfer options can be used to send certain payments for a lower price.  

Processing time

The execution timeframes for SWIFT messages are usually 1 to 3 business days, but they sometimes can take even longer. This is due to a couple of reasons.

• Big gaps in time zones between the sender’s and beneficiary’s countries;
• The time needed for currency conversion;
• Cut-off times for processing payment instructions;
• The number of bank intermediaries that take part in the process. The more intermediary banks are involved, the higher the chance that processing will take longer.

To avoid any inconveniences related to long transfer execution times via this messaging system, we advise you to plan your transfers ahead and keep in mind time zones and cut-off times. 

Choosing the right SWIFT transfer service

As you can see, SWIFT transfers can be very beneficial, and if it is a transfer option you know you’ll need, consider partnering with SWIFT-member financial institutions. 

Banks involved in the SWIFT network can differ: it can be your local central bank or an online-based payment service provider. 

We recommend checking the information that central banks or other providers post on their websites. Compare the fees, exchange rates, and the security of their services.

If you want a reliable and advanced partner for your SWIFT transfers, look no further than Genome. Our business clients have access to SWIFT and can receive and make payments to over 40 countries.  

Our tips for choosing a SWIFT transfer service

Here are some of the things you need to consider when selecting a provider for SWIFT transactions.

Researching financial institutions

When looking for a provider, make sure to check that it indeed provides SWIFT services in the country you’re located and can send money to countries where your beneficiaries live and work. Ensure that you have the necessary documents for the onboarding process. 

Genome’s onboarding process happens entirely online, and companies need minimum documentation to get a business wallet. Just check if your company is eligible for our international transfers. 

Comparing fees and exchange rates

As mentioned, multiple banks can have different fees when it comes to SWIFT. For instance, central banks can charge more due to their maintenance being higher. This is why it’s crucial to compare prices.

Genome’s international transfers for businesses offer not only SWIFT but other payment options. All the fees for using our services are transparent and listed on our pricing pages.

Considering technology and user experience

The payment process itself must be convenient and comprehensive and not take time from clients. Banks involved with SWIFT should have responsive customer support to help clients along the way. 

Genome ensures that our features are user-friendly and provides all of our services online – no branch visits or long queues! We offer a seamless and quick experience during all your operations.

Key takeaways

SWIFT offers several key benefits, including extensive global reach, enabling financial transactions in over 200 countries. They ensure data protection through secure, encrypted messaging, with cross-border payments tracked at multiple stages. If you need to send money abroad in different currencies, this option can be great for your business or personal needs. 

FAQs

What is a SWIFT bank transfer?

It is a transfer method provided by the Society for Worldwide Interbank Financial Telecommunication that allows sending funds to over 200 countries and territories around the world in different currencies.  

Is SWIFT a good way to transfer money?

Yes, SWIFT financial messages are a reliable and secure way to transfer money internationally. It is offered by many financial institutions and offers multiple currency options for transferring funds. ​

How can I make a SWIFT transfer?

First, you need to ensure that your bank or payment service provider offers such a transfer option. If it does, open the bank’s website or app and instruct the payment. You will need to fill out the beneficiary’s name, bank account number, SWIFT/BIC code, and bank details.