A SWIFT code, also known as a Bank Identifier Code (BIC), is a unique eight- or 11-character code banks and financial institutions use to identify themselves during international transactions.
Managed by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), this code ensures that money is sent to the correct institution and account.
The SWIFT network doesn’t transfer funds but is a secure messaging system. It allows financial institutions to send encrypted transfer requests to one another, facilitating international money transfers.
While there are other ways to send money across borders, SWIFT codes are widely used. Terms like “SWIFT payment” or “SWIFT transfer” have become synonymous with international money transfers, even if a SWIFT code isn’t always necessary.
Key Features of SWIFT Codes:
- Global Reach: Used across more than 200 countries to process cross-border transactions.
- Standardized Format: Ensures consistency in identifying banks and their branches.
- Secure Transactions: Protects the integrity and accuracy of international money transfers.
How SWIFT Codes Work
A SWIFT code consists of eight or 11 characters, each representing specific information about the financial institution. For example, PayPal’s SWIFT code for the United States is PPALUS66XXX.
- First Four Characters (Bank Code): These letters identify the bank or financial institution (e.g., PPAL for PayPal).
- Next Two Characters (Country Code): These represent the country where the institution is located (e.g., the US for the United States).
- Next Two Characters (Location Code): These identify the bank’s location within the country (e.g., 66 for PayPal’s U.S. office).
- Optional Last Three Characters (Branch Code) indicate a specific branch. If absent, the code usually refers to the institution’s headquarters (e.g., XXX for the main office).
Institutions offering multiple services may use different SWIFT codes for each service. This consistency and precision make SWIFT codes integral to secure international banking.
When is a SWIFT Code Needed?
A SWIFT code is commonly required when sending money internationally. While the SWIFT network doesn’t move money directly, the sender’s institution uses the SWIFT code to securely notify the recipient bank of the transfer request.
Although alternatives to SWIFT codes exist, their global adoption makes them the most recognized method for international transfers.