SWIFT: Need to Know

published on 07 November 2022

4-minute read

SWIFT, the Society for Worldwide Interbank Financial Telecommunications, is a member-owned global cooperative providing secure financial messaging services.

When you initiate an international payment you're likely paying by the SWIFT network. In this article, we'll look at the basics you need to know when dealing internationally! 

Get the Message

The SWIFT network allows members to send secure messages to one another about transactions. SWIFT doesn't provide accounts, nor does it accept or receive funds – the process of crediting and debiting bank accounts is a separate process which well look at later!

When making a SWIFT payment you need to reference the SWIFT/BIC Code, a unique code assigned to each SWIFT member containing 8 or 11 alphanumeric characters:

  • Bank Code (XXXX)
  • Country Code (XX)
  • Location Code (XX)
  • Brance Code (XXXX)

An example is Barclays UK SWIFT code BUKBGB22, where BUKB represents Barclays, GB is the country code, and 22 is the head office identifier.

SWIFT Code Example
SWIFT Code Example

Speed, Costs, and Tracking

SWIFT payments are usually very fast, settling on the same day or up to two days. It is common for transactions to incur a charge, especially if an intermediary bank is involved. The options for how to deal with these charges are:

  • Shared (SHA): intermediary bank charges are deducted from the payment amount
  • Ours (OUR): intermediary bank charges are paid by the payer

Sending payments as Charges Shared is the most common approach and will be far cheaper (or free) compared to sending Charges Ours

Delays can occur, and mostly happen because of national holidays or incorrectly inputted beneficiary bank details, such as the SWIFT code or account holder's name.

SWIFT payments are traceable meaning that it's possible to determine the status of any transfer and identify any delays along the way. 

The Oku Markets platform allows clients to download SWIFT MT103 (funds transfer instruction) message copies which can be sent to a beneficiary as evidence of a payment being made or, to help a beneficiary bank with the allocation of funds.

Harry Mills, Founder & CEO Oku Markets

Nostro & Vostro

SWIFT messages contain instructions about transactions, so how does the money actually move from one bank account to another? 

Funds are deposited in accounts that banks hold with other banks for the purpose of making and receiving international transactions. These accounts are called Nostro/Vostro accounts, with the names coming from the Latin words for Ours and Yours.

  • Nostro account: an account that a bank holds on the books of a foreign bank 
  • Vostro account: an account that a foreign bank holds on a bank's books

Example: Barclays has a USD account with Citi in New York – this is Barclays' Nostro account and, from Citi's perspective, their Vostro account. 

When two SWIFT member banks have a direct commercial relationship, the Nostro/Vostro account balance is updated with each SWIFT transaction. Where there is no direct relationship (i.e. no accounts held between each party), an intermediary bank(s) is used, also known as a correspondent bank.

Need our help?

If you regularly make or receive international payments then perhaps we can help. Our payments platform covers 30+ currencies, to 200+ countries, and is secure, fast, and stable. 

All Oku Markets clients benefit from multi-currency accounts with unique IBAN and account details. When you send payments, your recipient will receive a transfer with your name as the sender, not ours. Likewise, when you invoice your customers using your Oku Markets account details, it is your name and your unique account number they pay into, not a pooled account.

We're proud to work transparently with our clients, and we work hard to break the asymmetry of knowledge and information in the FX market. 

You can contact us for a review of your currency processes and for our guidance and suggestions at [email protected] or 0203 838 0250.

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