What is SWIFT and how does it work?

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eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!
what is swift

SWIFT is an acronym often used by most banks worldwide whenever you manage an international transfer. In general, it works as a messaging system that connects financial institutions through an extensive network around the globe. This code helps the communication process from one bank to another, no matter where they are. Hence, it secures all the way the money takes until it arrives at the right destination.

In this article, let’s explore all about the SWIFT code, how to recognize it, and how to find your code. Are you ready to learn more? Check it out below!

What is a SWIFT code?

SWIFT means Society for Worldwide Interbank Financial Telecommunication. It consists of 8 to 11 alphanumeric characters. This code identifies a specific bank when you want to send or receive an international remittance. Besides the identification function, it works as a guide to ensure the money will safely arrive at the right destination.

Sometimes, a financial institution may refer to it as BIC, but the purpose remains the same. Only the name changes from one country to another. Another well-known acronym is the IBAN, which shares a similar function by recognizing local and worldwide transfers to an individual bank account. Depending on the country, you might need not only the SWIFT code but also an IBAN code (e.g. financial institutions within Europe).

Now you already know the meaning, in case you see any of them during your next transfer. A SWIFT code classifies who and where each bank is, just like a postcode whenever a mailman delivers a letter. For instance, banks in the USA, Australia, or New Zealand will ask for it.

SWIFT origin

Before the arrival of the SWIFT code for international transfers, banks used TELEX as a payment order system. The identification was based on sentences instead of codes, which wasn’t an easy task either for financial organizations or users. Besides, this old system lacked some security features due to technology still under development.

Looking for a more efficient and safe way of managing the process of sending and receiving money abroad, SWIFT was established in 1973 (in parallel to BIC). This new standard for international transactions started in Brussels and went global four years later. Now, it covers more than 200 countries worldwide by connecting more than 11,000 financial institutions and companies overseas.

SWIFT structure

SWIFT is a unique code using 8 to 11 alphanumeric characters. The structure is simple, following this arrangement AAAABBCCDDD.

AAAA represents the bank code, usually a shortened version of the bank’s name. BB is the country code, while CC is the location code. DDD is optional, and it’s used to refer to the branch code. This space can be replaced by a triple X or can be empty.

What is a SWIFT code used for?

Let’s assume you are an entrepreneur in the United States and want to send money to an employee in Brazil. When you reach out to your bank, the institution will get your employee’s account number, branch name, and SWIFT code.

Once the transaction starts, your bank will send a message to your employee’s bank. After verifying the destination, the money will safely arrive in the account. In this case, you will also need the IBAN code since Brazilian banks recognize it for money transfers from other countries.

By relying on SWIFT, banks can count on a trusted network to send and receive transactions overseas. It reduces the risk of financial crimes and simplifies the identification process to guide the money. Not all countries are part of this system, but it’s almost universally accepted worldwide.

How can you find your SWIFT code?

It’s easy to identify your SWIFT code. You can check it on your bank statements, through your online account, or by calling the institution. If you want to verify your employee’s code before making a transfer, there are some online tools to search online. However, we always recommend that you double-check the info with the person who will receive the money.

Depending on how you manage your transactions — the amount or even the frequency of payments — they can be pricey. Besides additional fees from the bank, there is the currency exchange rate — which can add up to the costs. Husky can be a better cost-effective — cheap, fast, and safe — to overcome this when it comes to money transfers. After all, paying your employees overseas shouldn’t be extra weight on your wallet.

Whether you want to make a single payment or multiple batches using different currencies, Husky will help you save time and money. Start your free account now!

eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!