Thanks to SWIFT that today, tracking the swift movement of money internationally from bank to bank is so much easier. What is SWIFT? It is the Society for Worldwide Interbank Financial Telecommunication, the world's largest electronic payment messaging system. SWIFT is a huge messaging network for securely moving the money and sending and receiving information for instructions and is used by financial institutions like banks. SWIFT doesn’t even touch the money; it just makes it move.
There are a number of other message services like CHIPS, Ripples, etc. but SWIFT is still dominant simply because they keep adding new message codes to transfer different financial transactions.
How does it work?
SWIFT is the network which helps to transmit information and instructions securely between financial institutions through a standardized system of codes.
Each financial institution is allocated a unique code that has either 8 or 11 characters. The code is generally called the Bank Identifier Code (BIC) or SWIFT code, or SWIFT ID. To understand how the code is assigned, let’s understand the components of SBI Bank of India. It has the 11-character SWIFT code SBININBBXXX.
- Bank Code (A-Z) - 4 letter code. The first four letters are the short version of a bank’s name. For SBI, it is SBIN.
- Country Code (A-Z) - 2 letter code. The next two letters are the name of the country in which the bank is located. The Country Code for SBI is IN which indicates India.
- Location Code (0-9) (A-Z) - A 2-digit code that could be either two letters or numbers. These characters help to know where the bank’s head office is located. The Location Code for this is BB which indicates Bombay.
- Branch Code – This is not mandatory and it states the branch instead of the head office. The Branch Code for this is XXX.
GAINS for SWIFT
SWIFT is a very handy network and is leading to gains only for itself and the financial institutions because of the many services that they offer too. These services assist businesses and individuals to complete their business transactions smoothly and accurately. Some of the services offered include:
SWIFT provides access to various applications which help in real-time forex transactions, clearing and settlement instructions for payments, forex, and other securities transactions.
Business Intelligence is considered to be the Holy Grail these days. SWIFT also provides dashboards integrated for customers to provide volatile, real-time easy access to data which helps in easy reporting and real-time messages.
Managing compliance is essential. SWIFT came into the picture to bring in secure transactions. Therefore, compliance services are being offered by SWIFT by providing reports and cheaper and less complex utilities like Know Your Customer (KYC), and Anti-Money Laundering (AML) with easy sanctions.
THREATS for SWIFT
With the rise in fintech approaches, SWIFT has automated the instructions for clients having huge volumes of transactions and this automation is only on the rise. Initially, SWIFT was being considered a full-proof and secure method of transacting but the financial processes are highly prone to criminal attacks. Also, this automation comes at a cost and day to day overheads. SWIFT may need to plug in the loopholes of these problem areas for their clients.
The Bottom Line is that SWIFT has maintained its position in the global processing of transactional messages and will continue to do so with its unique offerings.