SWIFT MT103 Transfer Explained: Detailed Example, Structure, and Payment Process | MT103 vs MT103 STP

As someone who has created and processed numerous MT103 messages, I want to share my knowledge about handling this SWIFT MT message. Although SWIFT is migrating from MT to MX (ISO 20022-based) format, and PACS.008 is set to fully replace MT103 in the future, 66% of financial institutions still use this message format. Many professionals in the payments industry continue to create and process MT103 messages, making it a relevant topic for learning and career advancement. Interview questions about MT103 are still frequent, making knowledge of this format essential.

This article provides a comprehensive understanding of MT103 and its sub-format, MT103 STP, explaining their structures, purposes, and differences.

I believe you may have come across SWIFT payments before, but if not, here's a brief introduction to help you understand:

Understanding SWIFT and Its Role in Payments

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a cooperative association under Belgian law (S.W.I.F.T. SCRL). It is owned entirely by banks and financial institutions and provides the technical infrastructure and messaging formats for financial transactions. SWIFT messages facilitate various transactions, including payments, securities, direct debit, and intra-bank transfers.

The Relationship Management Application (RMA) and Accounting relationship:

Before we explore MT103, it's crucial to understand the concept of the Relationship Management Application (RMA). Developed by SWIFT, the RMA is a service that enables financial institutions to manage their business relationships and control which counterparties can send them FIN messages.

It acts as a mandatory filter, allowing banks to define granular authorizations for specific message types or categories that can be received from a particular counterparty. The RMA is a critical component in cross-border payments, as it ensures secure and authorized communication between financial institutions. Banks must establish RMA relationships with their counterparties to facilitate the exchange of financial messages, including those related to crossborder transactions.

In addition to the RMA, another important aspect of cross-border payments within correspondent banking is the accounting relationship. This refers to the arrangement between banks for the management of financial transactions and recording of balances. Each bank maintains a nostro account with its correspondent bank, which allows for the facilitation of cross-border payment transactions and the management of funds in different currencies.

Nostro accounts are maintained by a bank in a foreign currency in another bank's country. They facilitate cross-border transactions and simplify the process of making and receiving payments. The nostro account ensures that there is enough liquidity available for the correspondent bank to fulfill payment instructions from its customer banks.

Now, as we understand RMA and Nostro, let start with SWIFT MT103 message (ping me if still need help with above concepts).

What is SWIFT MT103?

MT103 is a standardized SWIFT payment message used for cross-border and domestic customer credit transfers. It conveys a funds transfer instruction where the ordering customer, beneficiary customer, or both, are non-financial institutions.

Key Characteristics:

• Used for single customer credit transfers.
• Enables straight-through processing (STP) when formatted correctly.
• Used when either the sender or beneficiary (or both) are non-financial institutions.
• Sent by the ordering customer's financial institution directly or via correspondents.

SWIFT MT103 Message Structure:

MT103 follows a structured format with various fields categorized into blocks:

Header block of the message includes below imporant fields which identifies who will be sender of the message and who the receiver:

Block 4 of SWIFT MT103 message includes transaction Details:

? This block holds all the necessary information about a transaction, both the money taken out (debit side) and the money put in (credit side).

? It includes important details like the sender's reference (a code to identify the sender), the date when the transaction is valued, the type of currency, the amount settled between banks, the person or company ordering the transfer, the bank sending the money, the bank representing the sender, the bank representing the recipient, any intermediary banks involved, the bank where the money is being transferred to, the person or company receiving the money, any additional information about the transaction, and details about any charges involved.

According to the SWIFT Message Reference Guide, the following fields in block 4 of the MT103 message are either mandatory or optional:

Mandatory fields for MT103

Optional fields for MT103

This section contains the core payment details, including:

• Sender’s Reference (20): Unique transaction identifier.
• Bank Operation Code (23B): Specifies the nature of the transaction (e.g., CRED for credit transfer).
• Value Date, Currency, and Amount (32A): Indicates the settlement date, currency, and amount.
• Ordering Customer (50K): Identifies the sender of the funds.
• Beneficiary Customer (59): Specifies the final beneficair/receiver of the funds.
• Details of Charges (71A): Defines who bears the transaction costs (OUR, SHA, BEN).

Step-by-Step Guide to a SWIFT MT103 Transfer:

Before diving into the process, it's essential to first understand the key assumptions behind the MT103 payment example:

1. Direct Correspondent Banking Relationship CITI Bank USA holds a Nostro account with BNP Paribas France, enabling a direct transfer without an intermediary bank. No need for an MT202 COV message since the funds are settled directly.
2. Sufficient Balance & Compliance Clearance Vineet has enough funds in his account to process the EUR 50,000 transfer. The transaction passes AML (Anti-Money Laundering) and KYC (Know Your Customer) checks. No sanctions or regulatory restrictions are flagged during screening.
3. Currency Exchange Considerations Vineet’s account in CITI Bank USA supports multi-currency payments or has a sufficient EUR balance. If the account is in USD, CITI Bank will convert USD to EUR before processing the transfer. The exchange rate used is based on CITI Bank's forex rates at the time of the transaction.
4. Correct Beneficiary Details Uplabdhi’s IBAN (International Bank Account Number) and bank details are accurate. Any errors in the beneficiary details could result in rejection or delay.
5. Use of Standard SWIFT Messaging Format The MT103 message follows SWIFT formatting rules, ensuring successful processing. The UETR (Unique End-to-End Transaction Reference) is included for tracking.
6. Processing Time & Charges As the payment is SHA (Shared Charges), Vineet covers CITI Bank’s transfer fees, while Uplabdhi bears BNP Paribas’ receiving fees. The payment is expected to be processed on the same business day if initiated before the cut-off time.
7. Bank Operating Hours & Cut-Off Times The transaction is initiated during CITI Bank USA’s operating hours and within the SWIFT cut-off time to avoid delays. BNP Paribas France is open and operational to process the incoming payment.
8. No Additional Intermediary or Regulatory Holds The transaction does not require further approval from central banks or financial regulators. No additional correspondent banks are needed, reducing potential delays.

These assumptions ensure that the payment process runs smoothly, efficiently, and within standard banking practices.

MT103 Customer Credit Transfer Process

Step 1: Initiation of Payment by Vineet

• Vineet, residing in the USA, wants to transfer EUR 50,000 to Uplabdhi in the UK.
• He holds an account with CITI Bank, USA, while Uplabdhi's account is with BNP Paribas, France.
• Vineet submits the transfer request via online banking, mobile banking, or by visiting a CITI Bank branch.

Step 2: CITI Bank USA Processes the Payment

• CITI Bank verifies: Vineet's identity and account balance. Compliance checks (AML, KYC, and sanction screenings). Whether BNP Paribas, France, is directly reachable via SWIFT.
• Since CITI Bank USA holds a Nostro account with BNP Paribas, France, the payment can be sent directly without intermediaries.

Step 3: SWIFT MT103 Message Creation

CITI Bank, USA, creates an MT103 message with the following details:

• Sender: CITI Bank USA (CITIUS33XXX)
• Receiver: BNP Paribas France (BNPAFRPPXXX)
• Transaction Reference: Unique ID for tracking.
• Amount & Currency: EUR 50,000.
• Ordering Customer (50K): Vineet’s details (Name, Address, Account Number).
• Beneficiary Customer (59): Uplabdhi’s details (Name, Address, Account Number).
• Charges (71A): SHA (shared between sender and beneficiary).

If you're having trouble reading the MT103 message in the image, you can refer to the formatted version below in code format:

{1:F01CITIUS33XXX1234567890}{2:I103BNPAFRPPXXXXN}{3:{121:5a8c3d21-1234-4abc-8efg-9hijklmnopqr}}{4:
:20:PAY20250315VINEET
:23B:CRED
:32A:250315EUR50000,00
:33B:EUR50000,00
:50K:/US987654321098765432
Vineet Sharma
456 Liberty Avenue
New York, NY 10005
USA
:59:/FR112233445566778899
Uplabdhi Kapoor
789 Champs-élysées
Paris
France
:71A:SHA
-}        

Step 4: SWIFT Network Transmission

• The MT103 message is transmitted via SWIFT from CITI Bank USA to BNP Paribas France.
• A Unique End-to-End Transaction Reference (UETR) is assigned for tracking.
• BNP Paribas France receives and processes the message.

Step 5: BNP Paribas France Credits the Beneficiary

• BNP Paribas verifies: Payment message integrity and authenticity. Uplabdhi’s account details and compliance checks.
• Once validated, BNP Paribas credits EUR 50,000 to Uplabdhi’s account.
• A payment confirmation is generated.

Step 6: Notification & Confirmation

• BNP Paribas Notifications: Sends an MT900 (Confirmation of Debit) to CITI Bank USA, confirming the debit from their nostro account. Sends an MT910 (Confirmation of Credit) to Uplabdhi, notifying her of the credit to her account.
• CITI Bank USA Notification: Updates Vineet about the successful transaction.
• Final Outcome: Uplabdhi receives the funds in her account with BNP Paribas.

Final Notes

• Processing Time: If STP (Straight-Through Processing) applies, the transfer is near-instant (same day). If manual checks are needed, it may take 1-2 business days.
• Fees: Vineet pays CITI Bank USA’s transfer fee. BNP Paribas may charge Uplabdhi a receiving fee.
• Tracking: Vineet can track the payment using UETR via SWIFT gpi.

This is a direct payment process with no intermediaries, as CITI Bank USA has a Nostro account with BNP Paribas France. If intermediaries were needed, a correspondent bank would be involved, requiring an MT202 COV message in addition to MT103.

Now, let's look at a different type of MT103 message: MT103 STP

What is MT103 STP?

MT103 STP (Straight-Through Processing) is a standardized version of MT103 designed to minimize manual intervention. It follows a restricted set of fields and format options to enhance automated processing.

Key Differences Between MT103 and MT103 STP:

1. Field Restrictions: MT103 STP has stricter validation rules to ensure automatic processing..
2. Specific Country Rules: For certain countries, MT103 STP mandates IBAN validation.
3. Limited Use of Fields: Some fields are restricted to format option A, like fields 52, 54, 55, 56 and 57 may only be used with letter option A and field 53 may only be used with letter options A and B.

MT103 vs. MT103 STP – A Quick Comparison

Importance of MT103 in the Current Banking System

Despite the ongoing transition to ISO 20022, MT103 remains widely used due to:

• Global Adoption: Many banks (more than 60%) still rely on SWIFT MT messages.
• Legacy System Integration: Existing banking infrastructure continues to support MT103.
• Interview Relevance: Understanding MT103 can be beneficial for securing roles in payment operations.

Ending note:

MT103 and MT103 STP are crucial message formats in cross-border payments. While MT103 offers flexibility, MT103 STP ensures streamlined processing with reduced manual intervention. Despite SWIFT’s migration to ISO 20022, professionals in the payments industry must understand these message formats due to their continued relevance in banking operations. By mastering MT103, you can enhance your expertise and increase your job opportunities in the payments domain.

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?? Resources to Boost Your Knowledge:

• A Beginner’s Guide to Cross-Border Payments
• Ebook on ISO 20022: The ultimate guide to financial messaging.
• Cross border payments Course: Unlock Offer use code: LEARNNOW2025SWIFT

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