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What is a SWIFT code?

What is a SWIFT code?

Dec 15, 2023
Checkout.com

If your business sends international payments to and from the US, you’ll need a SWIFT code. This service helps banks build an intermediary network while providing a safe and secure way for your business to transfer funds internationally. 

But what are SWIFT codes? And when do you need one? This page will explain everything you need to know about SWIFT and BIC codes, including information about how Checkout.com can help you tap into international markets using these systems.

What is a SWIFT code?

A SWIFT code, also known as a SWIFT number or Business Identifier Code (BIC), is like a global ID for banks and financial institutions, helping in recognizing and distinguishing these institutions worldwide. SWIFT codes are crucial for sending money between banks across borders, particularly for international wire transfers and SEPA payments. If you're making an international money transfer from the United States, you’ll need the recipient's SWIFT/BIC code.

What is the format of a SWIFT code?

A SWIFT/BIC code is an alphanumeric code of 8 to 11 characters, serving to identify your country, city, bank, and branch. Here's what each part of the code generally represents:

  • Bank Code (A-Z): Usually four letters that stand for the bank's name in a shortened format
  • Country Code (A-Z): A two-letter representation of the country where the bank is located.
  • Location Code (0-9, A-Z): Consisting of two characters, a mix of letters or numbers that indicates the bank's headquarters.
  • Branch Code (0-9, A-Z): A sequence of three digits that specifies a particular branch. 'XXX' is used to denote the bank's main office.

The branch code is similar to the routing number used in the US. Certain SWIFT codes use 'XXX' instead of a branch code, which means the transfer is directed to the bank's central office.

The international standard governing SWIFT/BIC codes is ISO 9362, which is why you might find the term ISO 9362 used interchangeably with SWIFT. ISO regulates the structure of SWIFT codes, dictating the use of letters, numbers, and the specific length of these codes.

When do you need a SWIFT code?

You’ll almost always need a SWIFT/BIC code when you're sending or receiving money between banks across borders, especially through international wire transfers or SEPA payments. That’s because banks use SWIFT codes to handle transfers coming from other countries.

Countries that may require a SWIFT/BIC code to send money include:

  • Sweden
  • India
  • Sri Lanka
  • Nigeria
  • Thailand
  • Turkey
  • Romania
  • Philippines
  • Denmark
  • Japan
  • Switzerland
  • Russia
  • Pakistan
  • Ghana
  • Malaysia
  • Latvia
  • UAE

Where do you find the SWIFT code?

You can find a SWIFT code in several places, such as:

  • Bank account statements
  • Online banking customer portal
  • Bank's website
  • Contacting the bank via phone

Is BIC the same as SWIFT code?

Yes. BIC and SWIFT codes are essentially identical and serve the same purpose. SWIFT stands for "Society for Worldwide Interbank Financial Telecommunication," representing the messaging system used globally, while BIC stands for "Bank Identifier Code," which is the actual code that this service provides.

Think of SWIFT as the name of the system itself, while BIC is the specific coded identifier used within SWIFT to confirm a bank's identity. However, both terms are used interchangeably when talking about the code necessary for transactions.

How does the SWIFT code work for international payments?

SWIFT was originally designed to create a more efficient and secure way for banks to communicate, especially when dealing with international payments. So, think of SWIFT as a messenger between banks – it breaks down payment instructions from the bank sending money to the one receiving it.

When banks and clearing systems use a SWIFT code, they can figure out where to send money internationally, including the payer’s bank, the payee’s bank, and the location of where the funds should go.

Sometimes, a SWIFT payment might need an extra stop at an intermediary bank due to different banking rules in various countries, which helps to ensure the transaction goes through smoothly. 

Nostro and Vostro Accounts

For SWIFT to work properly, banks open accounts with each other called Nostro (ours) and Vostro (yours) accounts.

Nostro refers to an account that a bank holds in a foreign location with another bank, while Vostro is how a bank refers to accounts that other banks have with them.

When two banks have Nostro and Vostro accounts with each other, SWIFT transfers are direct and immediate. However, if banks don't share this relationship, the SWIFT network needs an intermediary bank's help.

Once a correspondent bank (having relationships with the two banks involved) is found, the SWIFT transaction can proceed. The more banks involved, the more fees, longer processing times, and increased risk in these international transactions.

Explore international payments with Checkout.com

If you're not yet tapping into international business payments, it's time to do so. And Checkout.com offers a seamless solution that leaves no excuses.

With Checkout.com, you can process business payments in over 150 currencies across 150+ countries. We empower you with a vast array of payment methods — from ACH and credit cards to digital wallets, direct debit, and bank transfers — enabling effortless cross-border transactions aligned with your customers' preferences.

Our solution has a track record of improving acceptance rates, reducing foreign transaction costs for your customers, and eliminating hefty bank surcharges and international fees by processing transactions locally.

So, contact our sales team for more information about how Checkout.com can help your business scale and reach new markets.

Unlock your payments potential today

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December 15, 2023 14:47
December 15, 2023 14:47