Understanding What a SWIFT Code Is and How It Works

SWIFT handles +44 million transfers, also called encrypted messages, daily. It is the most used system to transfer funds globally. Whether you're a finance professional or simply someone who occasionally sends money abroad, understanding SWIFT codes is important.  

In this article, you can explore the ins and outs of SWIFT codes, how to find them and a comparison to other alternative banking identifiers. You can also understand the broader role of SWIFT in global finance and its impact on cross-border financial activities. By the end, you will have a solid grasp of this fundamental component of international banking.  

What is a SWIFT Code? 

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was created in 1973. This vast network enables financial institutions to send and receive information securely and smoothly.  

The SWIFT code is composed of a distinctive combination of letters and numbers, between 8 to 11 characters. It is made up of four sections: the bank code (four letters), the country code (two letters), the location code (two letters or numbers) and an optional branch code (three letters or numbers). If there are additional information needed for the transfer, the code can be up to 11 characters long. 

It should always follow this format:  
[bank_country_code][space]bank_name[space]branch_code 

Finding SWIFT Codes 

SWIFT codes are unique identifiers also known as Bank Identifier Codes (BIC). If you are engaged in international financial operations, understanding how to find these codes is essential to make your operations faster.  

• Bank Websites and Statements 

• One reliable source is the bank itself. Banks usually provide this information on their official websites, often under the 'Contact Details' or 'International Transfers' sections. SWIFT codes can also be found on bank statements, making it convenient for account holders. For a more personal approach, you can always contact the bank's customer service team. 

• Online SWIFT Code Directories 

• Several online resources offer comprehensive directories of SWIFT codes, allowing users to search by bank name or country. Some websites provide a checker tool to verify code accuracy. It is important to use reputable sources to avoid errors or security risks. You can use directories like Wise, The SWIFT Codes and Bank.Codes. 

• Common Mistakes to Avoid 

• SWIFT codes are prone to errors and the most common ones include mistyping the code and using incorrect formats. Mistakes like confusing 0 and O, double-clicking the same number, clicking the wrong letter on the keyboard or adding additional spaces can be avoided if you copy and paste the code directly. Double-check all details, especially the recipient ones, before initiating a transfer to prevent delays and additional fees.   

SWIFT vs Other International Banking Identifiers

 
In international banking various identification systems help with cross-border money transfers. SWIFT is the dominant worldwide payment method but it's worth looking at how they stack up against other bank identifiers.  
 
IBAN (International Bank Account Number)  
The IBAN is a unique identifier for international payments, primarily used in Europe, the Middle East, North Africa, and the Caribbean. Unlike SWIFT codes, which identify banks, IBANs pinpoint specific banking accounts, ensuring safe transfers.  

Sort Codes  
Sort codes are unique identifiers used for domestic transfers within the UK and the Republic of Ireland. These six-digit codes identify the bank and facilitate payment routing within these nations.  They're commonly used for tasks like setting up direct debits or making one-off payments to individuals or businesses within the same country. 

ABA Routing Numbers  
Routing numbers are similar to SWIFT codes for domestic transactions within the US. The nine-digit numerical code is used to identify financial institutions in the United States. These are frequently used for activities such as setting up direct deposits for paychecks or automatic bill payments.