top of page
  • Writer's pictureLearn&Chill Team

What is SWIFT and How do SWIFT payments work?

Updated: Jun 12, 2022

Ever happened to transfer money overseas?

If so, you know that there is definitely one thing you need to know to be able to successfully complete the transfer (and hopefully make someone happy).

This one thing is the SWIFT code.

Ever wondered what SWIFT is?

I did not until recently when a large coalition of states decided to ban some Russian banks from SWIFT. At that point I got curious and decided to dig deeper into it.

SWIFT stands for Society for Worldwide Interbank Financial Telecommunications and in the official website they define themselves as The global provider of secure financial messaging services.

In very few words SWIFT is a messaging platform for financial institutions but is not a financial institution. It is not responsible for the transaction clearing and settlement, it does not hold or transfer assets.

How does SWIFT work?

Financial institutions need to exchange tons of information (not only payments related ones) and in order for this massive communication to happen smoothly two factors need to be in play:

  • financial institutions need to use the same communication channel

  • financial institutions need to speak the same “financial language” so to understand each other regardless where geographically located

SWIFT provides the infrastructure (which is called SWIFTNet) for all cross-border inter-banking communication and the language (called SWIFT MT) to encode all information into specific, standard and structured codes.

The infrastructure needs to be able to support an ever growing need of communications while keeping very high standards of security and reliability.

The language needs to be able to represent an ever growing type of information to best support all financial institutions communication needs.

How does SWIFT work in practice?

Let’s assume that user-A, living in the US and customer of the US-Bank-A, wants to transfer money to user-B, living in France and customer of the FR-Bank-B.

Trying to make it as simple as possible, money transfer consists of 2 steps:

  • Step 1. US-Bank-A sends a secure SWIFT message to FR-Bank-B through the SWIFT network. Among many info, the message contains user-A and user-B account numbers, US-Bank-A and FR-Bank-B SWIFT codes, currency of the transaction, transaction date, etc.

  • Step 2. Upon receiving the message, FR-Bank-B finalises the transaction (clearing and settling) and deposits the money into user-B account

Providing a reliable, secure and efficient messaging system, SWIFT makes the financial transactions faster and smoother.

A few numbers might give an idea about size and volumes:

  • More than 11,000 financial institutions communicate through SWIFT

  • More than 200 countries and territories communicate through SWIFT

  • More than 42 million SWIFT messages sent per day during last 2021

What about competitors?

SWIFT is by far the biggest player but not the only one. Main competitors are:

  • CIPS. Sponsored by China with the main intent to increase the footprint of the Chinese currency in cross-border financial transactions. It offers messaging and clearing services.

  • SFMS. Sponsored by India. It offers messaging services only.

  • SFMS. Sponsored by Russia. It offers messaging services only.


Each of us is lucky enough to be exposed to many learning opportunities every day. Sometimes we catch them, sometimes not.

I started this blog to slow down, focus, reflect on these learnings and make them available to myself and whomever can be interested.

My previous posts:

28 views0 comments

Recent Posts

See All
bottom of page