How the SWIFT international payment system works


How does money travel around the world? In most cases, it does not travel as cash in your wallet, but via data lines of the international payment system SWIFT. The digital network is behind almost all domestic and international transfers.

SWIFT connects 11,000 banks worldwide

Have you ever thought about how to transfer money to the recipient — for example when your parents transfer the pocket money to your bank account? You are probably completely right to suspect that this must somehow work over the Internet.

However, it must also be ensured that no unauthorised person can intercept the money when it is traveling online. And with tens of millions of transfers per day, banks must be able to process the transfer data automatically. You therefore need a system that can process a very large number of transfers very quickly and is also highly secure.

This is exactly where SWIFT comes in. The name stands for “Society for Worldwide Interbank Financial Telecommunication” — SWIFT is therefore an organization that takes care of the transfer of financial data between individual banks worldwide. Around 11,000 banks worldwide are connected, which are also owners of SWIFT.

The SWIFT network and the SWIFT code are at the heart of the system. The SWIFT network is, so to speak, an extra secure mini Internet within the worldwide Internet. You can imagine it this way: The Internet is a world-spanning information highway and SWIFT is a special lane that is separated from the other lanes by a wall and which can only be accessed through special entrances secured with a code. This high-security data trail connects banks all over the world.

If you want

Transfers on the SWIFT network

Banks primarily send transfers via the SWIFT network. In doing so, they must use the specified data format. To make it clear which banks are senders and recipients of transfers, each participating bank needs a SWIFT code. This is also known as BIC (Business Identifier Code). The code consists of 8 or 11 numbers or letters and identifies the bank, the country and the location where the bank is based.

example: Deutsche Bank's branch in Hamburg has DEUTDEHH as BIC. The first four characters “DEUT” stand for Deutsche Bank, followed by “DE” for Germany and “HH” for Hamburg.

This makes SWIFT virtually the digital postal service provider for payment transactions: In the case of a transfer, the sending bank sends the payment order with account number, name of the payee, amount and the purpose specified by the payer to the recipient bank — and the bank then credits the money to the recipient's account.

If you want

Auch interessant: