-International Capital Settlement System-

Communication tools of financial institutions in various countries

What is SWIFT?

I still remember that in early 2022, several European and American countries issued statements, announcing that several Russian banks were prohibited from using the SWIFT international settlement system, which attracted global attention. What exactly is SWIFT?

This is a global interbank financial telecommunications association. Founded in 1973, headquartered in Belgium, its main function is to transfer settlement information among global banking systems.

With SWIFT, banks do not need to communicate with each other in pairs, and access SWIFT in a unified way, which reduces complexity and improves efficiency. SWIFT defines the standard, which makes the communication format between banks in various countries unified, and everyone transmits information in the same context, thus eliminating the ambiguity in understanding.

SWIFT also sells software and services to financial institutions. Behind this information is actually the international trade data of large enterprises in various countries and regions.

How does SWIFT work?

For example:

The importer of country M pays a sum of money to the bank account of the European exporter through the bank, and there must be a "channel" to transmit this signal during the remittance process. This "channel" is the global payment system. At present, the most commonly used payment system in the world is SWIFT international settlement system.

There are differences in financial standards of financial institutions in different countries. When trading with overseas financial institutions, domestic financial institutions need a recognized and standardized "transit station", and SWIFT international settlement system is equivalent to a "transit station" to provide standardized information services for cross-border payment settlement.

What other systems besides SWIFT?

If a financial institution is banned from using SWIFT, it is like being cut off from the global interbank market. It may affect the country's global capital flow and trade development.

Being outside the SWIFT international settlement system does not mean that international cross-border transactions have completely stopped. At present, there are bilateral and multilateral international settlement systems, such as Single Euro Payment Area (SEPA) and RMB Cross-border Payment System (CIPS), which are used for cross-border financial services between different countries and regions.

However, the SWIFT international settlement system has been in operation for decades, and it has a high recognition and dominant position in the international market.

SWIFT format and query

SWIFT consists of eight or eleven English letters or Arabic numerals, which are used to distinguish different financial institutions in financial transactions.

Each member bank of the association has its own SWIFT code, which is equivalent to the ID number of the bank. During wire transfer, the remitting bank can remit the money to the receiving bank by sending a payment message according to the SWIFT code of the receiving bank.

Must be provided in overseas payment. You can check it on the bank statement, or call the bank to ask.