SWIFT and its benefits

What is SWIFT?

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SWIFT is a global messaging system that runs on the network of financial institutions. The word SWIFT stands for “Society for Worldwide Interbank Financial Telecommunication”. Thousands of banks around the world use it to communicate, transfer information and financial transactions.

SWIFT is a non-profit organization or cooperative and is owned by its members, which are banks. This organization is managed by its members and was created to achieve the common goals of these members. The expenses of this organization are covered by membership fees and transaction fees. The members of SWIFT banks are foreign branches of banks and stock brokerage companies.

Before the introduction of SWIFT, banks used telex for international transactions. TELEX was a payment order system that relied on describing transactions in sentences, rather than codes, which was too difficult for banks and users to use.

In 1973, SWIFT was established with the aim of replacing non-standard communication methods at the international level with a universal standard method. So they came up with a system of codes that transmitted financial messages more efficiently than TELEX. In other words, currency transfers were done using encrypted codes instead of using unintelligible telex sentences. SWIFT is headquartered in Brussels, Belgium. Because this organization did not want to choose between London and New York as the main financial cities.

Swift is not controlled by any country. Rather, it is managed by a 25-member board of directors and is managed by the central banks of the G-10 countries, including: Bank of Canada, Deutsche Bundesbank, European Central Bank, Bank of France, Bank of Italy, Bank of Japan, Bank of the Netherlands, Bank of Ricas Surijs, Bank of It is run by the Swiss National Bank, the Bank of England, the United States Federal Reserve System, and the National Bank of Belgium.

As of 2018, half of all high-value international payments were made through SWIFT, to 212 different countries.

It should be noted that along with the political sanctions of Europe and America against Iran in March 2010, the official connection of the Central Bank with the SWIFT system was cut off, and this caused Iranian banks to use unofficial methods for their business transactions and exchanges, or Transfer money through intermediary banks in Turkey and UAE. In addition to increasing costs and low security, this method also reduced the speed of currency transfers.

Due to the embargo on Iran by the global SWIFT system, Qoqnous Trading Company can carry out all transfers using the SWIFT method for you.

In the rest of the article, stay with Qoqnous Trading to take a closer look at Swift and its advantages and disadvantages.

Swift Code

Swift Code is a type of exclusive mark to identify global banks. SWIFT code is used to communicate and send interbank messages, transfer money between banks, transfer internationally and send currency remittances. Swift code contains 8 to 11 characters. The 8-digit SWIFT code refers to the desired bank and does not specify the branch.

The first four characters of the SWIFT code indicate the identification code of the bank, which can only be letters. The second two characters indicate the bank’s country of origin, for example, it is IR for Iran. The third two characters show the location of the bank and the last three characters are the bank branch code, even without the last two digits, the SWIFT code is complete.

For example, the code of Bank Ekhtaz Novin Tehran branch is as follows: BEGNIRTHAFG

The first four characters, BENG, represent New Economy Bank.

IR character represents Iran.

The character TH represents the location of Tehran.

The AFG character represents the branch code.

How to transfer currency with SWIFT?

Currency transfer with SWIFT is one of the safe methods of currency transfer. All major banks in the world use the SWIFT method for currency transfers.

SWIFT provides an access point to each country through which they can connect to the global SWIFT system. Iran’s access point to SWIFT is located in the Central Bank of the Islamic Republic of Iran. All Iranian banks are connected to the SAP center in the central bank through lines, and messages are sent to banks abroad. By means of this system, foreign exchange transactions at the global level are done much faster, more reliably and at a lower cost. SWIFT actually provides an all-in-one platform through which international transactions are done seamlessly. It should be mentioned that Swift has sanctioned Iran and we are not able to use it!

The SWIFT network does not actually transfer money, but communicates between institutions using SWIFT codes. Thanks to SWIFT, we have standardized the IBAN (International Bank Account Number) and BIC (Bank Identifier Code) formats used for the actual transfer of funds.

For example, if a person wants to send money in one country to a person in another country. A message is sent from the source bank to the destination bank. In this message, the SWIFT code of the source bank and the amount of the amount are included. In this way, the money is deposited into the person’s account in the destination bank.

This system is only a messaging system and does not hold any funds or securities and does not manage its customers’ accounts.

An example for sending money with Swift

A person wants to send $100 from their US bank account to a bank account in Australia.

There are two scenarios based on the relationship between banks.

When banks have direct relationship with each other.

If banks are related to each other, it means that they have business relations with each other. In this case, currency transfers are simpler and faster.

The originating bank sends the SWIFT code or payment instructions to the destination bank, which are often received within minutes.
The desired person’s bank deducts 100 dollars from his personal account. (money is withdrawn)
The originating bank credits the commercial bank account held with the destination bank. (money comes in)
The destination bank will credit the Australian resident’s personal account. (money is deposited)

When the banks do not have a direct relationship.

In this case, things get a little more complicated. Since the two banks do not have trading accounts with each other, an intermediary bank is used to facilitate the transfer.

The target bank sends a SWIFT message to the destination bank and they find the appropriate intermediary bank. Suppose the name of the intermediary bank is M.

After doing this, the process will be as follows:

The originating bank deducts $100 from his personal account. (money going out)
The source bank asks Bank M to withdraw $100 from its trading account and increase the credit of the destination bank’s trading account by $100.
Bank M, acting as an intermediary, deducts a small fee (eg $1) from the transfer amount and credits the destination bank’s business account with $99.
Then the destination bank credits the person’s personal account with $99. (money is deposited)

These extra steps happen behind the scenes, which is why the process usually takes 3-5 business days and fees apply.

Sometimes, the two banks do not have a business account at the same intermediary bank, which means that more than one intermediary bank must be involved. As you can imagine, this increases processing time and of course costs more.

SWIFT Users

Licensed Financial Institutions (Supervised Financial Institution-SUPE)

Institutions that have licenses in the fields of payment, securities, banking, insurance, and investment services. Such financial institutions can send or receive all kinds of messages on the SWIFT network.

Entities active in the financial industry (Non-Supervised Entity active in the financial industry – NOSU)

These types of institutions can send all kinds of messages to licensed financial institutions, but they are not allowed to send or receive messages related to financial payments to other similar institutions.

User groups and companies (Closed User Groups and Corporate entities – CORP)

A set of SWIFT clients defined to use some SWIFT services and products, including companies, financial market supervisors, securities providers, etc. These companies are allowed to send and receive messages according to the criteria set by SWIFT.

SWIFT fee

SWIFT’s fees depend on various factors, and like PayPal transfers, they charge a percentage of the money transferred as a fee.

The SWIFT fee is determined based on the country of origin, country of destination, the distance from the origin to the destination, the amount of money and the duration of the transfer.

SWIFT fee payment is done in three ways:

OUR

In this method, the sender must pay the full amount of the fee.

SHA

In this method, our fee is divided between the sender and receiver. In this case, first half of the fee is deducted from the sender’s account, and after the money arrives at the destination, the other half of the fee is deducted from the remittance.

BEN

In this method, all fees are charged to the recipient. The fee is deducted from the amount transferred to the recipient.

What are the benefits of Swift?

The significant growth of Swift is due to its countless advantages, among which the following can be mentioned:

Standard:

This system is designed in such a way that by sending messages through the SWIFT network, it is possible to establish communication between the computers of two banks and it is possible to carry out all currency transfers.

Reliability:

Swift system is designed in such a way that the possibility of mistakes is very low and if the message is not set correctly and in accordance with the standards, the system refuses to accept it. Swift claims that it is 99.99% reliable, and the reason for this claim is that a Swift message has not been lost since the first day of the establishment of this network.

Security:

Messages exchanged in this system are automatically transmitted when received. The text of the messages is scattered and unintelligible before reaching the destination, and it is not possible to access the messages by hackers.

Speed:

The speed of message transmission in the Swift system is very high. Sending a message does not take more than a few seconds, and as soon as it is sent through the Swift network, the message is immediately delivered, read and executed.

Other advantages of Swift include the following:

reduction in costs
Easy access
Fast and simultaneous settlement of accounts

last word

SWIFT is used for currency transfers between two banks. When two banks are connected, the transfer is done as soon as the SWIFT message is received. The money from the first party’s account is transferred to the other person’s account through the banks’ commercial accounts, and the banks receive a fee for this transfer. If the two banks do not have a relationship, an intermediary bank facilitates this process. But note that you will be charged an additional fee for this. If there are two different currencies in the transfer, one of the banks will do the currency exchange and drastically reduce the transfer time. Dear businessmen and traders, they can communicate with Qoqnous business specialists for their currency transfers using the SWIFT method.