SWIFT Money Transfer Guide for Exporters
Efficient cross-border transactions are essential for exporters to maintain uninterrupted cash flow and expand their global reach. Although there are multiple payment systems that facilitate international money transfers, their effectiveness relies on a critical framework called a messaging system.
In banking, SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications. It serves as a messaging system enabling money transfers between banks across national borders. Exporters leverage SWIFT to send and receive card or electronic payments to and from different bank accounts.
It is important to note that SWIFT is not a banking system or financial institution that moves money from one bank account to another. Rather, it is a payment messaging system that sets up the framework for the money to be moved between the two bank accounts.
Banks and financial institutions partner with SWIFT to utilise its payment messaging system. Currently, 11,000 banks and financial institutions are members of SWIFT, facilitating over $150 trillion in transactions annually.
How Does SWIFT Work: The Anatomy of a SWIFT Code
SWIFT works by assigning specific codes to each member organisation, which contain specific information about the sender, receiver, and intermediary banks involved in a transaction. Here's a breakdown of a typical SWIFT code, which is either 8 or 11 characters long:
- The Bank Code (4 letters): The first four characters of a SWIFT code represent the institution's unique identifier. They could be letters or numbers, such as "BARC" for Barclays Bank or "HSBC" for HSBC Bank.
- The Country Code (2 letters): The next two characters represent the country where the institution is located. For example, "CA” for Canada, GB" for the United Kingdom, or "FR" for France.
- The Location Code (2 letters or digits): Next are two characters that identify the institution's location within the country. They can be letters or numbers and may denote a specific city or region. For instance, "LX" for Luxembourg, "NY" for New York, or "SG" for Singapore.
- The Branch Code (optional—3 letters or digits): If the institution has multiple branches in the same location, it helps direct the transaction to the correct branch. As this code is optional, not all SWIFT codes include the branch code, making them 8 characters long instead of 11.
Examples Of SWIFT Code
Here is the breakdown of two SWIFT codes for a better understanding:
SBININBB101: This code refers to the State Bank of India’s Mumbai office. "SBIN" is the bank code, "IN" stands for India, "BB" indicates Mumbai, and "101" denotes the branch in a specific locality.
DEUTDEFF500: This SWIFT code belongs to Deutsche Bank's Frankfurt branch in Germany. "DEUT" represents the bank, "DE" is for Germany, "FF" signifies Frankfurt, and "500" might indicate a specific branch within Frankfurt.
Initiating a SWIFT Transfer: A Step-by-Step Guide
Initiating a SWIFT transaction involves multiple parties. These are:
- Sender: The sender is the individual or entity initiating the transfer of funds.
- Sender’s Bank: The sender's bank, also known as the originating bank, is the financial institution from which the funds are being sent.
- SWIFT Network: The SWIFT network is a secure messaging system used to transmit payment instructions between financial institutions worldwide.
- Intermediary Banks (Correspondent Banks): Intermediary banks, also called correspondent banks, act as intermediaries in the transfer process.
- Recipient's Bank (Beneficiary Bank): The recipient's bank, also known as the beneficiary bank, is the financial institution where the funds are ultimately deposited.
- Recipient: The recipient is the individual or entity receiving the funds.
Here is a step-by-step guide for making a SWIFT money transfer:
Step 1: Contacting The Bank
Contact your bank or log in to your online internet banking portal and initiate a SWIFT transaction. The initiation will require entering details such as the recipient’s name, bank name, address, SWIFT/BIC code, currency, and transfer amount.
Step 2: Verification
Your bank will verify all the details and if you have enough funds in your bank account.
Step 3: Debit
Once all the sender and receiver information is verified, the bank will debit the funds from your bank account. The debit will follow a confirmation message or reference number.
Step 4: Credit
Your bank will transfer the payment initiated through SWIFT to the recipient’s bank. Once the recipient’s bank verifies all the information, it will credit the funds to the recipient’s bank account.
Sometimes, your bank may not have a direct relationship with the recipient's bank, requiring the transfer of funds through an intermediary bank. If this is the case, be sure to provide the intermediary bank's details, including its name, address, and SWIFT code.
Decoding the Timeline and Tracking for SWIFT Transfers
SWIFT transactions usually take 1-5 business days to complete. However, most transactions take close to a working day from initiation to fund credit. There have been instances of delays which happen due to the following reasons.
- Incorrect recipient information
- National and bank holidays
- The banking infrastructure and processing time of included banks
- The involvement of an intermediary bank
- System outages or technical errors
Here are some of the methods to track your SWIFT payments after initiation.
- SWIFT Payment Reference Number
Your bank will provide this number once the amount is debited. You can quote this number and see the status by logging into your bank’s online portal or contacting your bank’s customer service.
- SWIFT Tracking Tools
The official website of SWIFT has designed a basic SWIFT tracking tool. You can enter the required information about the transaction to track the live status of your SWIFT payment.
Fees And Charges Associated With SWIFT
Fees associated with SWIFT money transfers can vary depending on several factors, including the sender's and recipient's banks, the amount being transferred, the currency exchange rates, and any intermediary banks involved. Here's a breakdown of common charges in a SWIFT transaction:
- FIRA Fee
The Foreign Inward Remittance Advice (FIRA) is a document used in India to acknowledge the receipt of funds from abroad. The fee to source the certificate ranges from $5-$50.
- Wire Fee
This fee is charged by the sender's bank (originating bank) for processing the international transfer. It covers the cost of transmitting the payment instructions through the SWIFT network and may vary depending on the bank and the transfer amount. Generally, it is between $30-$150.
- FX Margin
FX margins represent the difference between the interbank exchange rate (the rate at which banks exchange currencies among themselves) and the rate offered to the customer. FX margin is generally Rs 0.90/USD.
- Transaction Fee
The SWIFT transaction fee typically refers to the fees charged by banks or financial institutions for processing international wire transfers through the SWIFT network. It generally ranges from $5-$50.
- Double Currency Conversion Rate
Sometimes, the sender’s bank account is in a different default currency from the transfer currency. Hence, the sending bank may convert the funds into an intermediary currency before converting them again to the destination currency. For this, the sending bank charges a double currency conversion rate.
Here is a detailed table of various charges applied by banks for SWIFT money transfers:
| Particulars | Cost Range |
|---|---|
| Wire Fee | $30-$150 |
| FX Margin | Rs. 0.90/USD |
| Double Currency Conversion Rate | 3%-5% on the exchange rate |
| Transaction Fee | $5-$50 |
| FIRA Fee | $5-$50 |
Best Practices for Efficient SWIFT Transactions
Here's a guide to help you navigate SWIFT transactions effectively:
Selecting the right bank
The bank you select for initiating your SWIFT transactions must have extensive relationships with global banks to facilitate seamless international transfers to a wide range of destinations. Furthermore, the bank must have affordable SWIFT charges without compromising on service quality.
You can also choose newer fintech platforms, such as Skydo, that offer unique features and user-friendly interfaces. Furthermore, platforms such as Skydo offer flat fees and zero FX margin to maximize your earnings.
Preparing Documentation
Ensure that you have up-to-date KYC documents, including proof of identity, address, and legal entity information, as required by your bank and regulatory authorities. Furthermore, ensure that you have all the information about the recipient, including their full name, address, bank name, SWIFT code, and account number, to facilitate the smooth processing of the transaction.
Conclusion
SWIFT is one of the most widely used payment messaging systems that allows exporters to make seamless transactions without having to visit their bank branches physically. However, as the process includes numerous factors, such as SWIFT codes, initiation process, charges, etc., it is important to understand every aspect.
By following the comprehensive guide outlined in this blog, exporters can streamline their financial transactions, optimise currency conversions, and minimise associated costs. From selecting the right bank to preparing meticulous documentation, every step plays a pivotal role in ensuring smooth and efficient SWIFT transactions.
Q1. Is SWIFT the same as a wire transfer?
Ans: No, they aren’t the same. SWIFT is a messaging network financial institutions use to securely and efficiently transmit information and instructions related to financial transactions. On the other hand, a wire transfer is a method of electronically transferring funds from one bank account to another.
Q2. What are some of the essential documents for a SWIFT transfer?
Q3. SWIFT vs. Bank Transfers: What's the difference?
Q4. What are the supported countries and partner banks for SWIFT in India?
Q5. Is SWIFT transfer safe?
Q6. Which banks use SWIFT transfer?
