How Does a Swift Money Transfer Work? - iBlogs (2024)

Posted on Sunday, February 6th, 2022 | By IndusInd Bank

Need to transfer money abroad? Today, most of us can do that online or by simply walking into the bank. But have you ever wondered what happens behind the scenes? Well, most international transactions worldwide are facilitated by SWIFT or the Society for Worldwide Interbank Financial Telecommunications.

It’s a massive messaging network that banks use to accurately, swiftly, and securely share and receive information, such as bank details or money transfer instructions. For perspective, on 10th November 2021, a whopping 41.36 million financial messages were transferred through SWIFT!

Let’s look at how SWIFT makes seamless international money transfers possible.

The SWIFT Network

First things first, SWIFT banking doesn’t really transfer money across borders. It instead communicates transaction orders from one institution to the other via codes. With over 11,000 partner financial institutions spread over 200 different countries, SWIFT is currently the most prominent international payment network. This means you can practically transfer SWIFT money from anywhere around the world.

The SWIFT Code/BIC Code

Every financial institution under the SWIFT network is assigned a unique SWIFT code of 8 to 11 characters. This helps them identify the financial institution, country, location, and even an individual branch participating in the transaction. The code essentially acts as an address to deliver SWIFT messages, making the fund transfer possible.

The Transfer Process

The SWIFT money transfer process varies slightly depending on whether the two participating banks have an established relationship or not. Let’s take a look at both cases.

Case 1: The Banks Have An Established Relationship

Step 1: The sender’s bank sends a message via SWIFT to the beneficiary bank that includes the payment instructions and the sender’s contact details.

Step 2: The sender’s bank debits the funds from the sender’s account.

Step 3: The sender’s bank credits the amount to the commercial account of the beneficiary’s bank.

Step 4: The beneficiary’s bank finally credits this to the beneficiary’s account.

Since both the banks have a direct relationship, transferring the funds is easier. If not, the transaction usually occurs via another intermediary bank.

Case 2: The Banks Do Not Have a Previously Established Relationship

Step 1: The sender’s bank debits the funds from the sender’s account and asks the intermediary bank to transfer the funds to the beneficiary’s bank.

Step 2: The intermediary bank debits funds from the commercial account of the sender’s bank, applies transfer charges and credits the funds to the commercial account of the beneficiary’s bank.

Step 3: The intermediary bank asks the beneficiary’s bank to transfer funds to the beneficiary’s account and provides them with the required details.

Step 4: The beneficiary’s bank then credits the funds to the beneficiary’s account.

Note: In the case of international transactions via SWIFT, sometimes currency conversion charges are applied too.

The Final Word

As SWIFT transfers are more convenient when your bank has established relationships with other banks, it’s best to transfer money with a bank that has partnered with SWIFT.

We, at IndusInd Bank, for instance, have a vast correspondent network allowing you to receive funds in 16 different currencies. What’s more, with us, you make transfers at competitive exchange rates too! Get in touch with us and transfer your money today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.