What is Swift?

If you’ve ever wondered how most banks exchange the information they need to conduct international cross-currency payments, Swift is the answer. Swift (which refers to the Society for Worldwide Interbank Financial Telecommunication) is the world’s leading financial messaging system. It’s a global messaging network that connects financial institutions and lets them to securely exchange financial transactions and other messages. 

Established in 1973, Swift has since become the industry standard for international financial messaging and is currently used by more than 11,000 institutions in over 200 countries. Swift payments are frequently made by businesses managing a remote payroll, paying international suppliers or paying international invoices from overseas companies they’re working with.

In this blog post, we’ll explore exactly what Swift is, how it works, its significance in the global financial system, and how you can use Crezco to make Swift and other international payments.

What is Swift?

Swift is a global messaging network that provides a secure and standardised platform for financial institutions to communicate with each other. It’s a cooperative model, meaning it's owned by its members, which include banks, broker-dealers, custodians, and other financial institutions. The cooperative model ensures that all members have a say in the governance of the system and that it remains focused on meeting the needs of its users.

Using Swift, these member institutions can exchange messages related to financial transactions, including payments, securities trades, and foreign exchange transactions. The messages are standardised using a common format, which makes it easier for institutions to process and reconcile transactions.

The SWIFTNet messaging system encrypts and authenticates messages to ensure confidentiality while the banks are exchanging information to process transactions. So, you can rest assured that your sensitive financial information will be kept secure when you make a Swift international transaction.

Read more: What is a telegraphic transfer?

How does Swift work?

Swift operates a messaging network that uses a standardised messaging format. This format provides a structured framework for financial institutions to exchange messages related to financial transactions. The messages are sent using Swift secure messaging platform, which encrypts and authenticates the messages to ensure confidentiality.

When a financial institution wants to send a message to another institution using Swift, it starts by creating a message using the Swift MT format. The message includes information about the payment, such as the parties involved, the amount being paid, and any other relevant details. The sending institution then sends the message to Swift, which authenticates and encrypts the message and routes it to the business receiving the international payment.

Types of Swift payments

There are several different types of SWIFT payments:

• The Swift MT 103 is a standard message used for making payments.

• The Swift MT 202 is used for sending and receiving interbank transfers. 

• The Swift MT 202 message is typically used for bank-to-bank transfers, making it a crucial part of the SWIFT payment system. 

• The Swift MT 199, which is used for sending free-format messages between financial institutions.

• The Swift MT 760 is used for sending bank guarantees. 

All of these types of Swift payments allow financial institutions to communicate and transact efficiently, ensuring the secure and standardised exchange of information.

What are the advantages of using Swift?

One of the most significant pros of using Swift is its global reach. The system is used in over 200 countries, making it an industry standard for international payments. Its standardised messaging format ensures that all parties use the same terminology and structure, reducing the risk of errors and misunderstandings.

Swift's secure messaging platform also lets financial institutions process transactions efficiently and cost-effectively. The system's standardised format makes it easier for institutions to reconcile transactions, reducing the need for manual intervention and streamlining the process.

There are no payment limits with Swift while FasterPayment and SEPA are limited to one million.

Tracking and recalling Swift payments is also possible, especially useful if someone has made a mistake.

Read more: What is a Swift code?

How long do Swift payments take?

Swift payments aren’t instant, and the time it takes for a Swift payment to be completed can vary. Typically, it takes between 1-5 business days for a Swift payment to process, but it can take longer depending on the complexity of the transaction and the banks involved. This is typical for international payments, but if you need to make a payment urgently, it's worth exploring other options that offer faster processing times.

Read more: How long do international bank transfer take?

Are there any alternatives to the Swift payment system?

Yes. While Swift has been the go-to choice for global messaging and international payments for several decades, new technologies are emerging that offer alternatives to the system. 

Blockchain, for example, offers decentralised and secure methods for exchanging information and processing transactions, potentially reducing the need for the Swift messaging network.

Using Crezco to make Swift payments

When you’re sending a non-native currency to an overseas account, you’ll need to make a Swift payment, and Crezco is the open banking payments platform which makes it easy to do so. In Crezco, you can choose whether to use Swift or an alternative to the Swift payment system when making international payments. 

With Crezco’s cross-border payment solution, you can enjoy competitive rates without worrying about any hidden fees. The open banking platform lets you make secure and frictionless payments to 100+ countries, in over 70 currencies. Plus, you can be confident that your payment will be made quickly and securely, with minimal effort required on your part. 

Crezco will also provide both you and the supplier with complete transparency, as both you and the supplier will get live updates when payments leave your account and arrive in theirs. You’ll also benefit from Crezco’s use of open banking and award-winning proprietary risk tools (Sentinel), which keep all your international payments safe and secure. 

In summary

Swift is a global messaging system that provides a secure and standardised platform for financial institutions to communicate and exchange international payments. 

Its global reach, efficiency, and security have made it an industry standard, connecting thousands of financial institutions worldwide. 

While new technologies may emerge, Swift remains a significant player in the world of cross-border payments, ensuring the secure exchange of information for financial institutions worldwide.

And with cross-border payment solutions like Crezco making it easier than ever to pay international employees and suppliers quickly and securely, international Swift payments are only ever a few clicks away.