Are SWIFT payments right for your business?

As international finance infrastructures become more interconnected, cross-border payments are easier and safer than ever before. A primary player in international payments is SWIFT. Ahead, we’ll explain how a SWIFT payment works, how to pay with SWIFT and whether making payments over the SWIFT network is the right solution for your business.

What is the SWIFT payment system?

First, let's go over some background on SWIFT.

The Society of Worldwide Interbank Financial Telecommunications, or SWIFT, is a cooperative society of financial institutions that have a standardized system of communication. SWIFT provides services that allow businesses and individuals to make cross-border payments within a fast, secure environment. SWIFT is used on every continent, in more than 200 countries and territories connecting more than 11,000 financial institutions.

SWIFT itself is not a bank and does not hold transaction funds or process payments. Instead, SWIFT provides the language and the messaging platform that banks and other financial institutions use to communicate transaction details to each other.

Who uses SWIFT?

The SWIFT payment system is made up of different categories of institutions including banks, clearing houses, corporations and brokers. To join the SWIFT network, an institution undergoes a seven-step process that includes stringent security measures to ensure safe transactions.

SWIFT is commonly used in treasury markets, security transactions, foreign exchange (forex), clearing systems and depositories. You’ll see SWIFT within many banking market infrastructures and security market infrastructures, among others, because of  their specialized applications and tools targeted at specific markets.

Now, let's move on to SWIFT payments themselves and how they work.

What is a SWIFT payment?

A SWIFT payment is an international wire transfer that’s carried out via the SWIFT payment network. Banks work through the SWIFT system to communicate transfer details and payment instructions.

What is a SWIFT code?

A SWIFT code identifies banks or other institutions involved in a SWIFT cross-border payment. Both initiating and receiving institutions have unique SWIFT codes. You cannot make a SWIFT payment without SWIFT codes.

SWIFT codes are eight or 11-characters long and are made up of four main elements:

  1. Bank Identifier Code (BIC). Four characters identifying a business in the SWIFT network.

  2. Country code. Two characters identifying the country the business operates from.

  3. Location code or city code. Two characters identifying the city the business operates from.

  4. Branch code. The last three characters, when used, identify a specific branch.

For example, if you banked with Imagine Bank in Seattle, Washington, the SWIFT code full form would look like this: IMAGUS6SSEA


  • Country code: US

  • City code: 6S

  • Branch code: SEA

Using the correct codes for the corresponding banks is essential to how the SWIFT payment network functions. Similar to a routing number, you can easily identify your bank’s SWIFT code online or through a quick phone call to your bank.

Some online banking user platforms identify SWIFT codes right on their user dashboard. Banks may use different codes depending on the currency involved. Confirm the code with your bank before you pay with SWIFT to prevent payment disruptions.

Are SWIFT code and IBAN the same?

No, a SWIFT code and IBAN are not the same. Both SWIFT and IBAN (International Bank Account Number) are used to complete international payments. However, IBAN is a standardized numbering system that helps identify a specific international bank account, while a SWIFT code identifies the institutions processing the payments. You'll likely need your recipient's IBAN to process a SWIFT payment.

Learn moreWhat’s IBAN?

IBANs are sensitive business account numbers and should be kept secure. If you’re making payments to an international entity or individual, they'll provide your business with their IBAN when they fill out tax forms. SWIFT codes are readily accessible to those choosing to make a payment through the SWIFT network.

How a SWIFT payment works

There are generally three steps in the SWIFT payment process.

Step 1: You collect the recipient’s banking information. Provide your bank with the recipient’s bank account number, usually an IBAN, and their bank’s SWIFT code in full form. You can send a SWIFT payment online or in person depending on your bank.  

You can also conveniently make a SWIFT transfer directly within an accounts payable platform when making B2B payments.

Step 2: Your bank and the recipient’s bank communicate with one another via the SWIFT network to authenticate the payment. When both the receiving bank and the initiating bank receive the SWIFT message, they’ll begin processing the payment. Both banks track the details into their own identical, special ledgers known as the Nostro and Vostro accounts.

Nostro translates into "ours" in Latin, as in "our money that your bank has deposited," while Vostro translates to "Yours," as in "your money that we have deposited." If one of the banks does not have a connection to Nostro/Vostro accounts, intermediary banks act as an in-between for the bank that does not have access.

Step 3. The payee receives the payment. The payee receives funds into their account in their local currency.

How a SWIFT payment works when both the initiating bank and receiving bank are within the SWIFT network

How long does a SWIFT international transfer take?

Transfers through the SWIFT payment network take one to five business days. The time it takes to transfer is affected by two main factors: regulatory compliance and interconnectivity.

Regulatory compliance. Not all banks have the same fraud prevention and anti-money laundering procedures (AML), and the differences result in varying transfer times.

Interconnectivity. Additionally, not all banks are directly connected to the SWIFT network. Banks that do have a direct agreement will transfer money faster. Transfers that require one or more intermediary banks to complete the transfer take longer.

When banks aren't connected to the SWIFT network, they get help from intermediary banks to complete make the transfer.

SWIFT fees: How much does it cost to make a SWIFT payment?

There are two main fees that occur with a SWIFT payment:

  1. Transaction fees. SWIFT fees are determined by each bank or institution involved. There is a wide range of transaction fees. Outgoing transactions (where you are initiating the payment) are generally higher than incoming transactions (where you are receiving an international payment).

  2. Foreign exchange fee. When one currency is exchanged for another, foreign exchange rates apply. Banks charge a service fee to exchange one currency for another. Average exchange rate fees are 3 to 5% of the overall payment amount.

Who pays the SWIFT fees?

Financial institutions pay fees to SWIFT to participate in the network and use the messaging system. Each bank determines how to pass these fees on to their clients.

There are three options a payer and payee can choose to cover SWIFT fees:

  1. OUR. The payer agrees to cover all of the fees associated with the payment. The payer is billed separately and the payee receives the payment in full.

  2. BEN (short for Beneficiary). The payee agrees to cover the SWIFT fees. The payee receives the payment with all associated fees.

  3. SHA (short for Shared). Both the payer and payee cover the costs of the transfer. The payer covers the initiating costs while the payee covers the receiving and conversion rate fees.

The option you choose to cover SWIFT fees is documented in the details of the payment so that both parties are clear about who is responsible for what. This may be a conversation to have ahead of time so there are no surprises.

Is SWIFT payment right for your business?

Making payments internationally can be tricky and expensive if you don’t have the right tools. Cross-border payments introduce challenges that aren’t found in domestic payments, including language barriers, country-specific regulations and time zone differences.

Recommended reading: A guide to cross-border payments.

Using SWIFT to transfer funds significantly reduces many of the major barriers to making a successful cross-border payment.

The top benefits of sending SWIFT payments

  • Transparency. The very nature of SWIFT is standardized communications. All parties involved in a SWIFT payment have access to the same information. If there are questions about the status of a payment or what may be causing a delay, that information is available and traceable.

  • Tracking. Remittance data associated with a payment is important for the payer and payee so that they can track invoice information for each payment. SWIFT payment data includes many of these remittance details, reducing the amount of time it takes to reconcile.

  • Consistency. Standardizing payment information globally means that the payment details are the same whether you’ve paid your Canadian vendor or German contractor. A consistent experience for all payees means less guesswork for your finance team, so they can foster faster, more reliable AP cycles over time.

Related reading: (paying foreign independent contractors)

Challenges using SWIFT payments

While SWIFT is quickly improving the end-to-end experience of international wire transfers, there are still a few challenges that stem from the banks involved in the SWIFT payments.

  • Uncertain lead time. SWIFT international transfers can process within 24 to 48 hours but some can take up to five days. What’s more, delays introduced along the way can happen without warning, creating friction between the payer and payee.

  • Surprise costs. Fees vary from bank to bank. That means costs for a SWIFT transfer will vary from payment to payment. Not being able to assess fees and lead times at the outset of the transaction leaves a pretty big gray area in payment communications. Working with major banks that have direct agreements overseas helps to mitigate these challenges. However, if intermediary banks are necessary to complete a SWIFT payment, the fees and transfer times will add up.

Learn more about how SWIFT is making improvements to payment speeds and offering more robust data here.

How to pay with SWIFT using Routable

You can send SWIFT payments via your bank, but it doesn’t offer a cohesive look into all of your cross-border payments.

Using a payment platform like Routable lets you send SWIFT payments from the same place where you manage all of your B2B payments, whether they’re local or international. Routable integrates with your existing accounting software to keep your workflow efficient and simple, offering real-time, two-way sync so that you know exactly what you’ve paid, when you paid and to whom. You’ll also have access to flexible fees and the ability to seamlessly scale as your business grows with a single CSV upload for high-volume payments.

Learn more about how Routable makes cross-border payments easy.


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