Can You Actually Send Money Through SWIFT? SWIFT Explained

Many people mistakenly believe SWIFT is a system for transferring money. In fact, SWIFT is a communication system, a secure messaging network, that enables banks to communicate and exchange information about financial transactions. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications, and it was established in 1973. Currently, it is used by over 11,000 banks, financial institutions, and corporates. It operates in over 215 countries.

Characteristics of the SWIFT System

The characteristics of the SWIFT system are:

• Standardized Message Formats: SWIFT uses a set of strict standards that enable standardized messages to be generated and received by bank computers and local clearing systems in a fully automated way.
• High Security: Using ‘public key infrastructure’ (PKI), SWIFT guarantees the security of the messages.
• High Availability: The system is designed for zero downtime, supported by operations centers and regional processors to ensure continuous availability.
• Messaging Exchange: The concept of automated messages passing all the way from the generator of the payment through to the receiver is known as messaging exchange, reducing errors and manual intervention.
• STP: It's defined as the process of crediting the beneficiary accounts and debiting nostro accounts based on the information from SWIFT message.

Advantages

The advantages of the SWIFT system include:

• Efficiency: Standardized message formats facilitate automated handling and STP.
• Security: High-security measures ensure the safe transmission of sensitive financial data.
• Reliability: The system’s design ensures high availability and continuous operation.
• Speed: Beneficiary banks receive messages quickly, facilitating faster transaction processing.

SWIFTNet Messaging Services

SWIFTNet is SWIFT’s IP-based platform which provides single window access to all SWIFT services through a consolidated infrastructure, offering the potential for STP. It includes several advanced messaging solutions:

• SWIFTNet FIN: The core messaging service enabling secure and reliable exchange of individual structured financial messages. Value-added processing includes message validation, delivery monitoring, prioritization, message storage, and retrieval.
• SWIFTNet InterACT: Allows users to exchange messages on a real-time or store-and-forward basis using extensible mark-up language (XML) standards, aimed at mission- or time-critical applications such as Continuous Linked Settlement (CLS).
• SWIFTNet FileACT: Developed for the exchange of bulk messages, supporting any content or format contained in the XML transmission file.
• SWIFTNet Browse: Based on the ‘https’ Internet standard protocol, offering secure browser-based access to service providers’ websites.

SWIFT Message Standards

SWIFT standards are used extensively in international cash management (and international banking in general). The traditional MT messages are the ones used by most banks and corporates today, although all new developments by SWIFT are being developed in the newer ISO 20022 XML-based standards, the MX messages.

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Detailed SWIFT Message Series

• MT 1xx: Customer Payments and Cheques MT 101: Request for transfer, enabling customers to send payment instructions to their banks. It is also known as a request for a third-party payment. MT 103: Single customer credit transfer, used for direct funds transfer instructions. MT 103 can be subdivided into MT 103 core, MT 103+, and MT 103 REMIT. MT 110: Advice of cheque(s), used to advise the drawee bank of cheque details.

• MT 2xx: Financial Institution Transfers MT 200: Financial institution transfer for own accounts, used to move funds between a bank's accounts. MT 202: General financial institution transfer, used for ordering fund movements between financial institutions. MT 202 COV: Enhances transparency in financial institution transfers related to underlying customer credit transfers. MT 210: Notice to receive, an advance notice to account servicing institutions about incoming funds.

• MT 3xx: Treasury Markets – Foreign Exchange, Money Markets, and Derivatives This series includes messages related to foreign exchange, money market transactions, and derivatives trading.

• MT 4xx: Collection and Cash Letters Messages in this series handle collections and cash letters, streamlining processes related to the collection of payments and handling of cheques.

• MT 5xx: Securities Markets MT 5xx messages cover securities trading, including instructions for buying, selling, and settling securities.

• MT 6xx: Treasury Markets – Precious Metals and Syndications This series deals with transactions in precious metals and syndicated loans.

• MT 7xx: Documentary Credits and Guarantees MT 7xx messages are used for documentary credits, letters of credit, and guarantees.

• MT 8xx: Travellers’ Cheques Messages in this series handle the issuance, settlement, and reporting of travellers' cheques.

• MT 9xx: Cash Management and Customer Status MT 900: Confirmation of debit, advising an account owner of a debit entry. MT 910: Confirmation of credit, advising an account owner of a credit entry. MT 940: Customer statement message, transmitting detailed account balance and entries. MT 941: Balance report, providing balance information. MT 942: Interim transaction report, providing transaction details for a specified period. MT 950: Statement message, offering end-of-day balance and transaction details.

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