SWIFT is an acronym that is often bandied about in the world of financial transactions - but what exactly does it mean and how does it affect you?
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication: It is an organisation that was founded in Brussels in 1973 to establish some common processes and standards for financial transactions. We’ve put together a short guide to answer the biggest question about the SWIFT network and how it works.
What is the SWIFT network?
The SWIFT organisation provides a secure network that allows more than 10,000 financial institutions in 212 different countries to send and receive information about financial transactions to each other. Before the SWIFT network was put in place, banks and financial institutions relied on a system called TELEX to make money transfers. TELEX was slow, and the system lacked the security necessary for a time when technology was making rapid progress.
Who uses the SWIFT network?
The majority of SWIFT system members are banks, but it is also used by trading institutions; money brokers and security broker dealers; clearing systems; investment management institutions and more. To actually become a member of SWIFT itself (along with gaining the shares and voting rights that membership bestows), the institution must hold a Banking License.
How does the SWIFT system work?
The SWIFT network does not actually transfer funds, but instead it sends payment orders between institutions’ accounts, using SWIFT codes. It was SWIFT that standardised IBAN (International Bank Account Numbers) and BIC (Bank Identifier Codes). SWIFT owns and administrates the BIC system, meaning that it can quickly identify a bank and send a payment there securely. You can get the BIC and IBAN number associated with your bank account from your bank - or it might even be printed on your debit card.
What does SWIFT mean for you?
As long as your bank is affiliated with SWIFT then the network can be used to quickly and securely communicate a payment order - meaning your money will be in the designated account without any hassle. TransferWise uses the SWIFT network to send and receive currencies from certain countries: Canada, Japan, South Africa, and the US.
SWIFT is just one of the organisations and systems that have changed modern banking for ever. If you are interested in this, take a look at our article about how technology has disrupted modern banking - and how the banks are changing in response.