How Does Swift Work?
The swift system provides for their membership a secure platform for transmitting messages between banks and other financial institutions. The swift system also provides a set of syntax standards for financial messages, connection services and software that allows the actual transmission of messages over the swift network.
Furthermore, the swift system also guarantees that all financial messages between banks and other financial institutions are authenticated, plus provides validation and verification checks on all inter-bank communications. Each bank and financial institution will operate send and receive swift terminals, which are manned by professionally trained operators.
Each member is given their own designated swift address code, so for example Standard Chartered Bank, Singapore has a swift address SBLCSG22 and Citibank New York has a swift address of CITIUS33. Therefore, if Standard Chartered Bank, Singapore wish to send a swift transmission to Citibank, New York, the swift operator will enter the Citibank New York swift address ensuring the message goes to the correct destination.
Interestingly, the Financial Times in 2018 criticised the Society for Worldwide Interbank Financial Telecommunications for inefficiency. Accordingly, Swift introduced the Global Payments Innovation, (GPI), and now most payments are being successfully completed in under thirty minutes. Today, GPI is being utilised by over 1060 banks and financial institutions dealing in in excess of 150 currencies.
Swift has continued to grow exponentially year on year and as of August 2020 were processing an average of 37.2 million fin messages (financial messages), an increase of 10.4% on the previous year. In 2018 figures showed that 31.3 fin messages being processed on a daily basis, an increase of 56% from 2013.
It should be noted that when engaging in financial conversations, it is important not to included technical jargon relating to swift, as it tends to complicate proceedings.
Swift Message Designations
Each swift message has its own specific designation, and in all cases swift messages are preceded by the letters MT, (Message Type), and three numbers. To take an example an MT101, MT102 and a MT103 are designated as cash payments as explained below.
All swift messages should be formatted in accordance with the contents as laid out in the official swift handbook.
Examples of swift messages are shown below:
- MT101 has been designed for corporates and allows for bulk payments
- MT102 has been designed for multi payment instructions between banks and financial institutions.
- MT103 has been designed for a single customer credit transfer.