The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a vast messaging network used by banks and other financial institutions to quickly, accurately, and securely send and receive information such as money transfer instructions. Every day, nearly 10,000 SWIFT member institutions send approximately 24 million messages on the network.
Brussels-based SWIFT was formed in 1973 by a group of seven banks, and it went live four years later. It replaced Telex, the then existing system used to send financial messages, which was prone to human error. Under SWIFT, the automated messages in standard format drastically reduced the room for error.
Now, SWIFT is trusted by over 11,000 financial institutions—banks, brokerages, mutual fund firms, and securities dealers—in more than 200 countries.
What is SWIFT? How It Works?
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications. It is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes.
Each financial organization a unique code that has either eight characters or 11 characters. The code is called interchangeably the bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code. If a customer wants to transfer money from the home branch to an international account, both the bank account details and the SWIFT code of the recipient’s home branch are required to authorize the transaction.
To understand how the code is assigned, let’s take an example of Italian bank UniCredit Banca, headquartered in Milan. It has the 8-character SWIFT code UNCRITMM.
- First four characters: the institute code (UNCR for UniCredit Banca)
- Next two characters: the country code (IT for the country Italy)
- Next two characters: the location/city code (MM for Milan)
- Last three characters: optional, but organizations use it to assign codes to individual branches. (The UniCredit Banca branch in Venice may use the code UNCRITMMZZZ.)