By Remitbee - Nov 24, 2020
The Society for Worldwide Interbank Financial Telecommunication or SWIFT code is a standard format for Bank Identification Codes (BIC) that are used to identify banks and financial institutions across the globe.
Many banks use SWIFT codes to communicate with each other and send money overseas. The code contains 8-11 characters of both letters and numbers which you must provide to complete any transaction. Both parties will need each other’s SWIFT codes in order to transfer money successfully.
These are typically international wire transfers or Single Europe Payment Area (SEPA payments) but banks also use these codes to exchange messages with each other.
AAAA (4-digit bank code) BB (2-digit country code) CC (2-digit location code) 123 (branch code)
Bank codes are usually a shortened version of the bank’s name, the location code indicates where the bank’s head office is. You can find your bank’s SWIFT/BIC code on account statements or online.
SWIFT and BIC codes are one in the same. There are other terms used by banks functioning internationally such as:
CHIPS (Clearing House Inter-Bank Payment System) NCC (National Clearing Code) BSC (Bank Sort Code) IFSC (Indian Financial System Code)
While SWIFT codes are used to identify a specific bank during an international transaction, an International Bank Account Number (IBAN) is used to track an individual account involved in the global transaction.
Both IBAN and SWIFT are key to locating and completing overseas transfers, and “they both play an essential role in the smooth running of the international financial market.” IBAN is generally 35 characters of both letters and numbers to identify a person’s bank account.
AA (Country code) 11 (Check number) 2222 2222 (Bank identifier) 3333 3333 33 (Account number)
IBAN’s are not mandatory for all countries such as Australia and Canada; to avoid using complex codes you can also use simplified domestic codes like routing and account numbers.
For local payments, you’ll need a routing transit number or RTN, which is a nine-digit number that can come from the Automated Clearing House (ACH), the National Automated Clearing House Association (NACHA), or American Bank Association (ABA). These numbers tell you where a payment is being transferred to and can usually be found on your bank’s website.
In 1997 the International Organization for Standardization (ISO) was made, the “international standard-setting body composed of representatives from various national standards organizations” first developed a system of standardization for IBAN’s. The European Committee for Banking Standards (ECBS) noted that there was too much flexibility with the ISO standards so an improved version was made that required the IBAN for each country to be a certain length with uppercase letters only.
SWIFT was formed in 1973 which assigned each financial organization with their own unique code. This still remains to be the method that the majority of international fund transfers are successfully completed with. “One of the main reasons for this is because the SWIFT messaging system allows banks to share a significant amount of financial data, including the status of the account, debit and credit amounts and details related to the money transfer.”
Access to both SWIFT codes and IBANs are key to completing an efficient transfer overseas, without either the security of your transfer will be at risk.
By Surina Nath