What is SWIFT Wire Transfer?

Stuck on deciding a way to transfer money overseas? Although we know online transactions are taking over the world, what is the best way to choose a wire transfer? SWIFT Wire Transfer is becoming prominent and dominant each passing day, but what is it? Well, a wire transfer which is done through the messaging network, Society for Worldwide Interbank Financial Telecommunication or SWIFT, is known as a SWIFT Wire Transfer. This wire transfer is one of the most common ones used to transfer money abroad. Many banks and financial institutions are a part of the SWIFT network, which works behind most international money transfers.

To know about what exactly SWIFT wire transfer is, there’s a lot to learn, including its fee, how it works, the challenges it faces, and more. To receive a better understanding of the same, we urge you to read this blog till the very end. 

Key Understanding of the SWIFT Network 

To begin an understanding of SWIFT wire transfer, one must understand some of the key points of the SWIFT Network. Shared below are some of the most important overview highlights of the SWIFT Network to help you understand the facilitator of one of the most dominant global wire transfers. 

1. A member-owned cooperative, Society for Worldwide Interbank Financial Telecommunications (SWIFT) provides safe, reliable, and secure financial transactions for all its members. 
2. With the SWIFT network, card and electronic payments are made available for businesses and individuals regardless of the fact that the vendor or customer might use a different bank than them. 
3. SWIFT system functions by assigning a unique ID Code, which is a BIC number, to each individual member institution that identifies the bank name, the country, the city, as well as the branch. 
4. SWIFT is currently the most widely used large streamlined method for international payments to occur. 
5. Moreover, SWIFT can also be used to impose economic sanctions, such as how it has been used on Russia and Iran. 

Also Read: LATEST TCS ON FOREIGN REMITTANCE FOR EDUCATION SECTION

How does a SWIFT Wire Transfer Work? 

SWIFT works behind the scenes as a network involving banks and financial institutions to help individuals and businesses make international monetary transactions. Now how does this work? 

Let’s understand. 

Before that, did you know that swift wire transfer or swift banking doesn’t actually transfer money across borders? That’s because it uses a code to execute or communicate transaction orders from one bank to another. This code is known as a bank identifier code, which is assigned to each bank or financial institution. 

SWIFT BIC 

A SWIFT code is usually made up of 8 to 11 characters. Taking an Italian bank code: UNCRITMM, for example, below is how a BIC number can be identified and understood.

• The first four characters of the code are the institute code. 
• The two characters after that are the country code. 
• Then, the following two characters are the location/city code. 
• And the last three characters, although optional, are usually assigned to identify the individual branches. 

Now, comes the transfer process using this code, between banks that have an established relationship with each other, and between those banks that do not have an established relationship with each other. 

Also Read: HOW TO TRANSFER MONEY TO A FOREIGN UNIVERSITY?

Transfer Process Between Banks Who Have an Established Relationship

In simple terms, what happens here is that the sender’s bank sends a transactional message to the beneficiary bank using the SWIFT network, which includes all the instructions including the sender’s contact information. The sender’s bank debits the amount from the sender’s account; credits the amount to the commercial account of the beneficiary bank; which the beneficiary bank finally credits to the beneficiary’s account. 

Transfer Process Between Banks Who Do Have an Established Relationship

Here is where things get a bit complicated. An intermediary bank is introduced here that coordinates the transfer of funds from the sender’s bank (which has debited the amount from the sender’s account) to the beneficiary’s account in the beneficiary’s bank. Transfer charges are applied here. In the case of international transfers, a currency conversion charge might also be applied.

Requirements to Transfer Money Using SWIFT System

To transfer money using the SWIFT system, or to make a swift wire transfer, the main details and requirements are mentioned below. 

• You will require the name and details of the beneficiary
• The SWIFT code of the beneficiary’s bank 
• The account number of the beneficiary
• And most importantly, the amount you want to transfer

Duration of a SWIFT Wire Transfer 

One can’t say that a swift wire transfer is in fact swift. It’s not instant. For the transfer to be complete and the funds to reach the destination account, it can take from 24 hours to 5 days. It all depends on the circumstances and the locations of the transfer. In case, the transfer is between banks that do not have an established relationship, the process can become even more lengthy, given the presence of an intermediary bank in between. 

SWIFT Wire Transfer Fee 

Taking a foreign country, the United States of America, for example, the respective transfer fee of swift wire transfers for popular Indian banks are applicable, which are mentioned below.

Name of the Bank	SWIFT Wire Transfer Fee
HDFC Bank	INR 500
SBI	INR 925
ICICI Bank	INR 750
Kotak Bank	INR 500
Axis Bank	INR 500

Also Read: HOW TO DO MONEY TRANSFER FROM USA TO INDIA?

Who Uses the SWIFT System? 

The SWIFT system can provide its services to the following 

• Banks
• Depositories
• Brokerages
• Corporate Businesses
• Exchanges
• Dealers of Securities 
• Asset management companies
• Individuals sending money transfers internationally
• Treasury market participants and service providers

Challenges of SWIFT Wire Transfer 

One of the major challenges for the SWIFT wire transfer is the handling of huge transactional volumes when it comes to processing them and manually entering all the instructions. It’s neither practical nor feasible. Therefore, there is a need for the introduction of automation that the system needs to incorporate, though the system might face an increase in operational costs. Handling the aforementioned is surely a challenge for the SWIFT wire transfer system. 

FAQs

Closing on this detailed guide on SWIFT wire transfer, this blog sheds light on the increasing prevalence of international money transfers. You can reach out to Fly Finance for any finance-related queries, including the transfer of money, for study abroad purposes.