What is SWIFT? SWIFT meaning and how it works

Gabriela Peratello

SWIFT is an acronym that’s often used in banking — but what exactly does it mean and how does it affect you?

We’ve put together a short guide to define SWIFT, and answer the biggest questions about the SWIFT network and how it works.

First of all, what does SWIFT mean?

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication.

Alright, but what does SWIFT mean in banking? SWIFT is an organization — founded in Brussels in 1973 — that establishes common processes and creates standards for financial transactions¹.

We’ll cover what exactly is SWIFT — and answer key questions like what is a SWIFT payment, in just a moment.


What is the SWIFT network?

Now that we’ve been over the SWIFT definition, let’s guide you through what’s the meaning and importance of SWIFT in banking.

During the second half of the 20th Century, banks around the world were relying on TELEX transfers to make international transfers.

The TELEX system was slow and lacked the security features necessary for a time when technology was making rapid progress.

That’s when banks from around the world got together and created a consistent, universal solution for getting money moved through different countries. That solution is known as the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

SWIFT provides a secure network that allows more than 11,000 financial institutions in over 200 different countries to send and receive information about financial transactions to each other².

Who uses the SWIFT system?

Most of the members of the SWIFT system are banks, but there are other financial institutions who can use it³, such as:

  • Brokers and dealers
  • Clearing systems
  • Investment managers
  • Payment and treasury related market infrastructures
  • Corporates, non-bank financial institutions

What is SWIFT used for?

One of the key services SWIFT provides is global financial messaging, carrying over 5 billion secure financial messages a year, to make sure that payments moving between banks on different sides of the globe arrive safely.

SWIFT is key to the way most traditional banks process international transfers, as they know they can rely on the standards and security used within the SWIFT payment and messaging network.

Other SWIFT banking and business uses include¹
  • Providing back office interface and integration solutions to businesses sending and receiving SWIFT payments
  • Setting out and supporting compliance standards for financial businesses — reducing the risk of financial crimes
  • Training and supporting corporate businesses, and financial markets, which use SWIFT payments regularly

SWIFT and sanctions

SWIFT is a global and politically neutral organization, with responsibilities to help its members respect and comply with local and international laws — including any sanctions imposed as a result of legislation around the world.

That means that the SWIFT network may be important in the imposition of financial sanctions on countries involved in war or aggression.

On 1 March 2022, SWIFT was called upon by the international community, including the US, EU, Canada and UK governments, to disconnect a range of Russian banks from the SWIFT network as a result of Russia’s invasion of Ukraine.

Later, the range of sanctions was reassessed to include some Belarussian banks, in response to Belarussian support of Russia’s aggression in Ukraine⁴.

Removing banks from SWIFT isn’t unprecedented — it happened previously with some Iranian banks, for example. Sanctions like these aim to disconnect banks from international financial infrastructure, making it harder for them to send and receive payments.

This pushes up costs, and slows things down for the banks and countries involved, harming the economy, and — in an ideal world — causing aggressive governments to rethink their policies⁵.

How does the SWIFT system work?

When it comes to making a peer to peer international payment, you can think of the SWIFT network a bit like traveling from one country to another.

It’s not always possible to take a direct flight. Which means you may need to go through a few connecting flights until you get to your destination.

SWIFT works essentially the same way. Your money will travel from one country to another, but to do that there are often correspondent banks involved.

The SWIFT network doesn’t actually transfer funds, but instead it sends payment orders between institutions’ accounts, using SWIFT codes.

It was SWIFT that standardized IBAN (International Bank Account Numbers) and BIC (Bank Identifier Codes) formats. SWIFT owns and administers the BIC system, meaning that it can quickly identify a bank and send a payment there securely.

If you need to track a SWIFT payment, you’ll need a MT-103 document. You can read all about it in our MT-103 guide

How does SWIFT make money and what does that mean to you?

SWIFT is a member owned organization, where financial institutions like banks, brokerages, and foreign exchange services are the members.

Members pay an annual fee to be part of SWIFT. There are also fees for secure messages carried by SWIFT to facilitate payments. The cost of these messages depends on the message type and length, and the relationship SWIFT has with the bank itself.

As long as your bank is affiliated with SWIFT, the network can be used to securely communicate a payment order and get your money from one place to another.

However, as a consumer you should know that the costs of using SWIFT are ultimately passed on to you in the form of fees that apply when you send an international transfer.

SWIFT fees are a bit tricky for consumers, because until you know the exact payment route your money is being sent on you may not be able to build a full picture of the costs involved.

That can mean that at the time you confirm your international transfer with your bank, you can’t be completely sure how much your recipient will get in the end.

Whenever you send an international payment you’ll need to be aware that:

  • SWIFT fees are often levied by correspondent and recipient banks — and these costs may not be known in advance
  • If your SWIFT transfer involves 2 currencies, your overall costs may rise because banks often apply poor exchange rates and pocket the difference
  • SWIFT transfers can take up to 5 working days in some instances — and if for some reason the payment was rejected and needs to be sent back to you, the refund will also take 5 additional working days (and it wouldn’t be surprising if fees were added as well)

If you’re sending money through SWIFT, it can be quite pricey, especially for smaller amounts of money. And, as noted, if your SWIFT transaction will need to go through intermediary banks, each of them normally will levy their own fee.

Though most banks will give you the ability to choose whether you, the recipient, or a combination of both foot the bill for these additional fees, the costs can still add up.

On top of that, if your money will need to be exchanged for another currency, banks can add their own spread (profit) to the rate they offer you. A further cost.

Don’t worry about intermediary banks and mark-ups on the exchange rate, make a Wise transfer instead

It makes sense to be worried about the fees adding up. This is why Wise can be a good alternative to traditional banking when it comes to making international payments. Wise is a cheap, fast and secure way of moving money overseas.

🎯 With Wise you’ll get to
  • Send money internationally without intermediary banks
  • Know upfront how much each transfer will cost you
  • Track your transactions with the Wise app or website

It’s important to note that for some operations, such as sending USD to other countries where dollars aren’t the main currency, Wise will also use the SWIFT network. But for this type of transaction you’ll be informed if this system will be used and how much it’ll cost you.

Make a fast Wise transfer

SWIFT is just one of the organizations and systems that have changed modern banking forever. And it’s worth it to do your homework to make sure you know what you’re getting when your bank uses the SWIFT network to make an international transfer.


  1. SWIFT
  2. SWIFT - History
  3. SWIFT - Who can join?
  4. SWIFT - Community update
  5. SWIFT - SWIFT & sanctions
  6. Photo by Annie Spratt on Unsplash

Sources checked on 05.10.2022

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