The SWIFT Payment Network & Its Alternatives

Everything you need to know about SWIFT plus the alternative networks revolutionising payments.

Today, it seems like funds can be transferred instantly across borders. But the vast majority of international payments take place between banks using the SWIFT network. Still called a “wire transfer” by some, the SWIFT network is the infrastructure underlying international money transfers.

Read on to learn more about what a SWIFT payment actually involves and the alternatives available to businesses today.

What is the SWIFT network?

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, has been in operation since 1973. It established a common process that standardised international payments. 

Before the SWIFT network, banks used the TELEX system. Similar to wire telegraphs, TELEX transmitted text-based information between banks to notify them of funds transfers (hence the phrase “wire transfer”).

Today, SWIFT includes 10,000 financial institutions in 212 countries and provides a secure and consistent way for banks to make international transfers.

How the SWIFT network operates

Unlike other modern payment methods, SWIFT isn’t a peer-to-peer money transfer system. Instead, it transfers information over its network of banks. 

Firstly, SWIFT creates a payment order for a money transfer and sends it across its bank network. This is the 8-11 character SWIFT code that identifies the destination bank (also known as a Bank Identifier Code or BIC).

Then, once a sender’s funds are connected to their destination account, a transfer is initiated and money is transferred between various financial institutions until it arrives at its destination account.

However, using incorrect transfer details (such as the wrong SWIFT code) can result in delays or even cause payments to fail.

SWIFT costs and charges

There are two main costs when making a SWIFT payment. Firstly, since it transfers funds between banks in its network, each intermediary bank may charge a processing fee or commission. The sender bank may cover these extra costs but it’s important to check first. Unfortunately, there is no standardisation of fees and costs among the SWIFT network.

Secondly, if a transfer involves a currency transfer there will inevitably be a charge for this. Banks often give exchange rates 4-5% higher than the interbank rate on SWIFT payments. These high fees can take a large proportion out of smaller transfers and, when transferring large amounts, they can end up being a significant sum.

SWIFT transfer timeframes

Nearly 50 years ago, the SWIFT network was set up as a faster and safer way to transfer funds internationally. However, it can in fact be comparatively slow especially when compared to modern payments systems.

SWIFT payments typically take 24-48 hours to complete. However, they can take anything up to five working days to complete depending on a variety of factors including national holidays, weekend days, and the time of day when the transfer was initiated.

The faster and lower-cost alternative to SWIFT

SWIFT revolutionised international payments, but it’s long overdue an upgrade. Thankfully, fintechs are stepping up and revolutionising the world of payments.  Innovative technological solutions which are often API driven can be readily incorporated into existing financial infrastructure to enable faster, cheaper and more reliable payments.