If you are making international transfers on a regular basis, you will eventually come across the SWIFT network. It is the payment technology that many services rely on to deliver your funds to all corners of the world.
There are many benefits to a SWIFT payment, but also a couple of downsides. So if you are going to use a service that is reliant on SWIFT infrastructure, you should know how it will affect your experience before getting started.
Read on, and we’ll explore the SWIFT network, to find out how it works and understand why it plays an important role.
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What is the SWIFT network?
The SWIFT network is an electronic messaging system used to wire financial transactions across the world. It is a gateway that connects thousands of banks and money transfer services, allowing them to send and receive payments on behalf of their customers.
SWIFT is an acronym for Society for Worldwide Interbank Financial Telecommunications, the organisation that is responsible for managing the network. It was originally established in 1977 as a member-owned cooperative that aimed to provide safe and secure financial transactions for its members.
Today, the SWIFT network facilitates a large proportion of all international transfers. Each day, nearly 11,000 member institutions send over 30 million transactions through the system. The value of these transactions vary in size, but no amount is too large or small for a SWIFT payment.
Why does it matter?
When you send money online with a service that uses the SWIFT network, there are a few benefits. Firstly, your funds are delivered safely to almost any bank in any country around the world. Also, the transfer speed is pretty reasonable at 3-5 days, providing a consistent experience overall.
However, a clear downside is that any transfer conducted via the SWIFT network may incur additional hidden charges by correspondent banks; the exact cost depending on the amount of the transfer and the recipient bank. In our experience, these fees can be as high as £25 per transaction.
In response, some transfer services have developed their own payment infrastructure outside of the SWIFT network. One of the best-known examples of this is TransferWise. By being somewhat independent they can often transfer funds quicker, at a lower cost, and without the risk of hidden fees.
Unexpected SWIFT fees: An example
As an example, let’s compare two transfer services; one that relies on the SWIFT network and one that does not.
Say that you wanted to conduct a business money transfer of 1,000 British Pounds (GBP) into Australian Dollars (AUD). You enquire with two money transfer services and receive their quotes. To ensure that you are getting a fair deal, hopefully, you also compared each against the mid-market rate.
The first service is Azimo, which uses the SWIFT network for facilitating many of its payments. After providing the bank account details of your recipient, your funds are delivered to Australia a few days later. However, upon receipt, you are surprised to discover that £25 was deducted by correspondent banks on-route.
The second service is CurrencyFair. Despite it occasionally using the SWIFT network, the majority of its payments to Australia are conducted through an independent network of accounts. As a result, when your funds are delivered, you are pleased to see the transfer amount has been received in full.
What to consider in your own transactions
From a practical perspective, if you are sending funds to a far off land, your chosen service is most likely going to use the SWIFT network. A service will typically only create its own payment network when it makes sense to do so – i.e. it has a lot of customers transacting into a particular country or currency.
Most services that use the SWIFT network don’t have any control over the charges applied by correspondent banks as a payment moves through the system. However, one notable exception is Paysera, who provides you with some flexibility about how these charges are allocated.
The reality is that some services rely solely on SWIFT, some their own network, and the vast majority on a combination of both. In our reviews, we try to provide some information on this. But at the end of the day, it’s best to enquire with the service directly, so you know what to expect.
The SWIFT network provides a range of benefits, such as delivering funds to a large number of countries and providing a safe and consistent experience. However, you may be disappointed by having unexpected charges applied by correspondent banks, of which your chosen service has little control.
If you have any questions or queries, let us know in the comments below.