What are SWIFT payments?

Posted on the 18th August 2016 in SME blog

What are SWIFT payments?

SWIFT, the Society for Worldwide Interbank Financial Telecommunications, is an internationally used messaging service that provides a standardised messaging system between banks across the world. SWIFT went live back in 1977 and today is used by more than 11,000 financial institutions who use it to send out over 25 million messages a day.

What does that mean?

Internationally standardised messaging means that every transaction between every financial institution is recorded in exactly the same way, providing all the details in a clear and transparent manner.

  • Every financial institution has its own unique code that provides information on the name and location of the bank.
  • Each transaction contains a unique reference number, bank operation code and details of charges incurred during the transaction.

Why is SWIFT important?

Because SWIFT uses internationally standardised messages, it is a transparent way for institutions to communicate between each other and securely relay the details of any transaction. There are a number of known benefits to using SWIFT:

  • Transparency. SWIFT payments clearly detail the amounts involved in the transaction, the route it takes between banks, the details of all charges and the nature of the payment (along with many other details). This information allows all parties involved to track the transaction and to understand the costs and time period involved.
  • Traceability. Because SWIFT details the route of the transaction between banks and the amount of money involved, it provides clear and recognised proof of payment.
  • Consistency. Due to the consistency of how messages are structured, payment information is easy to decipher regardless of country or language barriers.

How does that affect me?

We create a SWIFT message for every single payment you make with Money Mover meaning that your payments can always be traced.

So what’s the downside?

While SWIFT provides an unparalleled level of transparency between financial institutions, it isn’t perfect. SWIFT messages are a comparatively expensive way of sending funds (though Money Mover absorbs the cost in the all-inclusive fee we apply when you make a payment with us). It is much cheaper to use the local low-cost infrastructure to make cross-currency payments, but this comes at the cost of the transparency and traceability that is at the core of what we do.

SWIFT payments are wire transfers, and wiring funds to certain countries, including the United States, Australia and Hong Kong, may incur additional, unexpected fees. Since the money passes through its infrastructure, any intermediary bank which comes into contact with the payment is able to take a fee – normally referred to as a ‘routing charge’ – without the consent of either sender or recipient. (I alluded to this earlier when I pointed out that the SWIFT message will detail charges incurred during the transaction. Think of it as a frustrating and unavoidable little fee to “thank” them for helping your money on its way!) For this reason, it is very likely that, for certain payment routes, the amount the recipient receives will be less than the sender sent. This fee is never particularly large (generally between USD 10 and USD 50), but it is frustrating and inconvenient for both payer and payee when payments arrive short. Furthermore, it is possible (but unusual) to be charged multiple times if your payment gets routed through more than one institution.

What we think of SWIFT

Reading about the downsides of SWIFT, you may have been alarmed at the thought of banks being able to dip into your transactions. The reality is that this isn’t actually that bad. The benefits of SWIFT far outweigh the small fees taken by intermediary banks, and the problem is so well known that experienced international traders make allowances for the issue. Payers do this by adding a small sum to the payment they’re sending to cover possible routing fees. Should payments arrive a bit short, many recipients will write off the routing charge as a cost of doing business.

Here at Money Mover, we value transparency and security above all else. Knowing where your money is at all times during the transaction process is a comfort that is worth a small fee simply because you know what’s going on. This is particularly important to our clients, who tend to send larger sums of money. In our opinion, paying USD 10 is a small price to keep track of your USD 100,000 payment. Furthermore, as previously covered, there is an internationally recognised security of using SWIFT to send money, partly due to its traceability which proves that money has left your company and provides the route it took to arrive to the recipient. With SWIFT, there is no chance of your money getting ‘lost’.

To start making savings on your international payments today register with Money Mover here

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