Sending money internationally is relatively straightforward. You can call your bank, go in-person, or log in to your bank’s online portal and initiate a transfer to anywhere in the world. But how exactly do these transactions work, and what kind of infrastructure supports them? In most cases, the SWIFT banking system is an important part of the process.

Unlike other prominent networks that enable funds transfers, SWIFT doesn’t move or hold funds, yet it remains a vital part of international financial systems. Here’s what you should know about SWIFT: what it is, where it operates, and why it’s so important.

What’s in this article?

• What does “SWIFT” stand for?
  
• What is SWIFT?
  
• Who uses SWIFT?
  
• Who owns the SWIFT banking system?
  
• What are SWIFT codes?
  
• How does SWIFT work?
  
• What other services does SWIFT offer?
  
• How Stripe Payments can help
  

What does “SWIFT” stand for?

“SWIFT” stands for “Society for Worldwide Interbank Financial Telecommunications.”

What is SWIFT?

SWIFT is a network that banks use to communicate with each other securely, mainly to give instructions for transferring funds between accounts. While SWIFT is an important component of the global payments system, the network itself is used only for sending and receiving messages. SWIFT doesn’t hold funds, issue or manage accounts, or provide settlement functions for transactions.

SWIFT’s history

SWIFT was conceived as an answer to Telex, its predecessor. Telex was an early communication system for financial institutions which was widely regarded as cumbersome and error-prone, with slow processing times. In 1973, SWIFT was founded in Brussels, with 239 participating financial institutions from 15 countries, figures that increased within 4 years to 518 institutions from 22 countries. Currently, SWIFT is used by more than 11,000 banking institutions located in more than 200 countries. In 2024, member institutions sent an average of 53.3 million SWIFT messages per day.

SWIFT’s role in economic sanctions

Because membership in SWIFT allows countries to easily conduct international financial transactions, exclusion from SWIFT is an economic sanction that can be used against countries whose actions are condemned by the global community. For example, when Russia invaded Ukraine in 2022 many banks in Russia and Belarus were removed from the SWIFT network, including Bank Otkritie, Bank Rossiya, Novikombank, and VTB Bank.

Who uses SWIFT?

Although SWIFT was founded to support communications about treasury and correspondent transactions, the messaging system’s capabilities reach far beyond that original scope. Over the years, SWIFT usage has expanded and the network now offers services for the following organizations and individuals:

• Banks
  
• Brokerage institutes and trading houses
  
• Securities dealers
  
• Asset management companies
  
• Clearinghouses
  
• Depositories
  
• Exchanges
  
• Corporate business houses
  
• Treasury market participants and service providers
  
• Individuals or businesses making international wires or money transfers
  
• Foreign exchange and money brokers
  

Even though there are other systems that operate in the same market, SWIFT continues to grow, becoming the dominant network for international payments. This is largely due to the system’s scalability, security, standardization, and reliability.

Who owns the SWIFT banking system?

SWIFT is a member-owned cooperative whose shareholders represent around 11,500 member organizations. Headquartered in La Hulpe, Belgium, the system is overseen by the central banks of the G10 countries, the European Central Bank, and the National Bank of Belgium. SWIFT shareholders elect a board of 25 directors, who govern the organization and oversee management of the SWIFT system. The board of directors is responsible for:

• Managing the day-to-day operations of the SWIFT organization
  
• Expanding and promoting the SWIFT system globally, with an emphasis on maintaining neutrality
  
• Providing oversight on the security, operational reliability, business continuity, risk identification, and resilience of the SWIFT infrastructure
  

What are SWIFT codes?

SWIFT codes are unique bank identifier codes (BIC) that SWIFT assigns to each financial institution using the network. They are comparable to international bank account numbers, but specifically for banks. Also known as SWIFT IDs or ISO 9362 codes, SWIFT codes have either 8 or 11 characters. Here’s a breakdown of what the characters represent:

• First four characters: This is the code for the financial institution.
  
• Fifth and sixth characters: These denote the country code for where the institution is based.
  
• Seventh and eighth characters: The seventh and eighth characters are the city code for where the institution is located.
  
• Ninth, tenth, and eleventh characters: These final characters are optional, and can be used to identify individual branches of banking institutions.
  

How does SWIFT work?

SWIFT codes are at the core of the SWIFT system’s functionality. This standardized code structure enables financial institutions to communicate in a universal language and accurately send and receive transactional messages.

To better understand SWIFT transactions, it helps to think of them less as “transactions” and more as “transmissions.” Again, SWIFT is not a financial institution and does not hold funds nor facilitate the movement of funds between financial institutions. SWIFT moves messages, not money, between institutions. These messages, however, are instrumental in the movement of funds, since they allow banks and other financial entities to easily and safely communicate with each other about funds transfers.

What other services does SWIFT offer?

In addition to acting as a messaging system, SWIFT has expanded over the years to offer a range of services that support businesses and individuals as they conduct business transactions. Some of the services SWIFT offers include:

• Business intelligence: SWIFT offers reporting utilities and dashboards for clients that give them a detailed, actionable, real-time view of their messaging and other activity, with filtering options available based on geographic region, message time, and other factors.

• Compliance services: SWIFT offers services that address financial crimes and compliance.

• Messaging and connectivity solutions: SWIFT’s main focus is to provide a network for transmitting messages between parties in a secure, accurate, and reliable way. That mission is supported by products such as messaging hubs, network connections, and software that facilitate users’ ability to send and receive messages.

How Stripe Payments can help

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