SWIFT — Decoding the Global Web of Financial Connectivity

Backspace Tech
6 min readJan 25, 2024

Global Payments Platform Sees Stellar Year of Growth

  • Connections Surge: A record-breaking 11,500+ banks and financial institutions are now part of the world’s leading cross-border payments network.
  • Reaching Further: Transactions can seamlessly flow across borders in 200 countries and territories, nearly every corner of the globe.
  • Always On: Businesses and individuals can rely on the network’s 100% uptime for uninterrupted money transfers.

These numbers paint a picture of the remarkable growth and success of a key player in the global payments landscape.

In this column, we will delve deeper into the world of SWIFT. We’ll explore what it is, its origin, how it works, and much more!

What is SWIFT?

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, operates as a global financial messaging network facilitating secure communication and electronic messaging among financial institutions worldwide. SWIFT payments involve transactions through an intermediary bank, providing a channel for sending and receiving electronic payments internationally.

The SWIFT network is a versatile platform, enabling individuals and businesses to send and receive international funds through electronic or card payments. This system accommodates transactions involving different banks for the payer and payee, emphasizing its role as a secure messenger facilitating financial communication between banks.

It’s crucial to note that the SWIFT network does not transfer funds and is not a banking system. Instead, it acts as a conduit for transmitting payment orders between banks using SWIFT codes. This framework ensures a swift, accurate, and secure process for transferring money overseas.

History — From Telex Turtles to SWIFT Speedsters

Before the advent of the SWIFT network, banks relied on a system known as TELEX for wire transfers. However, this method proved sluggish and needed more security during rapid technological advancement. Unlike SWIFT, TELEX lacked a standardized set of codes for identifying banks and transaction types, leading to confusion and frequent human errors.

TELEX messages were transmitted in a free format, requiring senders to articulate each transaction in full sentences, subsequently interpreted and executed by dedicated receivers. Recognizing the need for a more efficient and secure system, the SWIFT network was conceived.

Established in 1973 as a member-owned organization based in Brussels, Belgium, SWIFT aimed to create common processes and standards for financial transactions. This initiative arose from the necessity for a universal and consistent method of transferring money.

239 banks from 15 countries, collaborated to form a cooperative society, giving birth to the SWIFT network, that operates on a global scale.


The SWIFT Code, also known as the Bank Identifier Code (BIC), SWIFT ID, or ISO9362, is an exclusive code designated for global banks and financial institutions. Its purpose is to uniquely identify a particular bank during international transactions. SWIFT codes consist of either 8 or 11 characters and the distribution of these characters is outlined as follows:

Code Illustration:


Here’s how it breaks down:

CHAS: The first four characters represent JPMorgan Chase Bank.

US: The fifth and sixth characters indicate the country, the United States.

33: The seventh and eighth characters specify the city, New York City.

XXX: The final three characters are used to identify a particular branch.

How Does a SWIFT Payment Work?

Initiation of transaction

(Customer or entity starts a financial transaction)

Bank deducts money

(Sender’s bank debits funds from sender’s account)

Preparation of SWIFT message

(The sender’s bank creates a standardized message with transaction details)

Sending of SWIFT message

(Sender’s bank sends message through SWIFT network to recipient’s bank)

The recipient bank processes the transaction

(Recipient’s bank verifies details, ensures compliance, and credits recipient’s account)

Funds available

(Recipient can access funds for withdrawal or further transactions)

The Nostro and Vostro Accounts

Since both banks maintain a record of deposited funds, this results in the creation of two corresponding sets of ledgers, referred to as Nostro and Vostro accounts.

  • A Nostro account is an account that a bank in India (for example) has in a foreign bank, in the currency of that country.

For example, SBI having a Nostro account in Bank of America in US dollars. This helps SBI to do business with customers and other banks in the USA.

  • A Vostro account is an account that a foreign bank has in a bank in India (for example), in Indian rupees.

For example, Citibank having a Vostro account in HDFC Bank in Indian rupees. This helps Citibank to do business with customers and other banks in India.

In essence, Nostro and Vostro are just different ways of looking at the same account. NOSTRO means “ours” and VOSTRO means “yours”. So, SBI’s NOSTRO account is Bank of America’s VOSTRO account, and vice versa


Here comes a small twist!

Scenario 1: If both banks are friends (have a commercial relationship),

Then both banks see the same money in their piggy banks, just called by different names. This makes transferring money smooth and direct.

Scenario 2: When both banks are not friends?

That’s where things get tricky. They need a middleman, like an intermediary bank, to pass the message and money along. This adds fees and takes longer!

Note: More the middlemen involved, the more expensive it gets!

Who Uses SWIFT?

SWIFT, initially established to facilitate communication regarding treasury and correspondent transactions, has evolved beyond its original purpose. Its services are now utilized by a diverse range of entities, including:

· Banks

· Brokerage institutes

· Trading houses

· Security dealers

· Asset management companies

· Clearing houses

· Depositories

· Corporates

· Treasury market participants

· Individuals or businesses involved in international wires or money transfers.

· Foreign exchange

· Non-banking financial institutions

In essence, SWIFT is employed by a broad spectrum of financial institutions, businesses, and individuals engaged in various aspects of global financial transactions.


ACH (Automated Clearing House), and SWIFT serve as mechanisms for fund transfers, yet they exhibit distinct characteristics:

Duration and Fee

How Long Does SWIFT Take?

The speed of a SWIFT transfer depends on a few key factors:

  • Banks involved: Transfers between banks that directly connect through the SWIFT network may be faster than those involving intermediary banks.
  • Transaction details: Simple transfers in the same currency may be quicker than ones involving currency conversions or regulatory checks.
  • Destination country: Transfers to certain countries known for stricter regulations or longer banking hours may take longer.

Generally, SWIFT transfer takes,

  • A few hours for straightforward transfers between close partners on the network.
  • 1–3 business days for most international transfers.
  • Up to 5 business days for complex transfers involving intermediaries or strict regulations.

Delays might occur due to time zone differences, compliance checks, or technical issues.


Sending and receiving SWIFT payments may involve several fees, which can be broadly categorized into:

1. Sender (Payer) Fees:

Transaction Fee: Charged by the sender’s bank for initiating the transfer, typically a flat fee or a percentage of the amount sent.

Currency Conversion Fee: If currencies are converted, the bank may charge an additional fee based on their exchange rate and any markups.

Intermediary Bank Fees: If intermediary banks are involved, they may charge their fees, which can increase the total cost.

2. Recipient (Payee) Fees:

Incoming Transfer Fee: Some banks charge a fee for receiving international transfers.


In a nutshell, SWIFT’s journey beyond borders is far from over. As technology evolves and the financial landscape shifts, its role in facilitating secure, seamless global transactions will only become more crucial. SWIFT stands poised to connect not just banks, but individuals, businesses, and communities across the globe.

Hold on!

We’ve explored the European Payment regulation (PSD), the crucial financial infrastructure of the United States (ACH), and now the worldwide payment player (SWIFT).

In the weeks ahead, we’ll decipher, unravel, and interpret payment systems, and regulations, globally!

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P.S: What topic do you think we should explore next? Let us know in the comments.



Backspace Tech

Backspace Tech offers Fintech-as-a-Service to automate,simplify, and disrupt the payment industry by handling chargeback requests through a plug-and-play model.