What is a SWIFT or BIC code? How do they work?

When conducting overseas transfers, you are often asked to provide either a SWIFT Code or a BIC code. What exactly is SWIFT Code, and how is it different from BIC code? Here we delve deeper into the mechanics of SWIFT or BIC codes and their practical applications in the financial industry.

What is a SWIFT or BIC code?

With a diverse array of financial institutions around the globe, each operating under a different system and standards, SWIFT code was established to ensure a more secure and efficient international capital flow across borders.  

SWIFT, short for Society for Worldwide Interbank Financial Telecommunication, operates as a secure network that connects more than 1,100 financial institutions around the world. This code consists of 8-11 characters and functions as a unified financial messaging language, facilitating secure and standardised transactions among institutions. The term Business Identifier Code (BIC) is also used sometimes interchangeably with SWIFT. Each bank has its own unique code for identification. 

Are SWIFT or BIC codes the same thing?

While often used interchangeably, SWIFT and BIC codes are not entirely the same thing. While both are used for identifying financial institutions, they serve different purposes. SWIFT identifies specific banks or financial institutions globally, while BIC codes refer to a subset of SWIFT codes that specifically identify banks. These codes have an additional 3-digit branch code attached to them, making it easier to identify a particular branch within a financial institution. You can think of it like a phone number (SWIFT) and an extension (BIC) – both are essential for making a call, but serve different purposes. The table below breaks down the difference between the two.

How do SWIFT or BIC codes work?

When making an international wire transfer or sending financial messages between banks, the sender will provide their bank with the recipient's SWIFT or BIC code along with other relevant details such as account number, remittance currency and amount, as well as the payee’s account number or IBAN (International Bank Account Number). The sender's bank then uses the SWIFT network to communicate with the recipient's bank, using their unique BIC code for identification. This ensures that ‌funds are routed accurately and securely to the appropriate institution.

A SWIFT or BIC code consists of 8-11 characters and follows a format that identifies your bank, country, location, and branch. The SWIFT code can be broken down into 4 categories: Bank code (4 letters) + country code (2 letters) + location code (2 letters or numbers) + branch code (3 digits). Generally speaking, the branch code is unnecessary when conducting international transfers via the SWIFT network.

SWIFT or BIC codes enhance the security of international transactions by minimising errors and reducing the risk of misdirected payments. Their standardized format and global acceptance streamline the processing of cross-border transfers, enabling swift and reliable settlements between financial institutions worldwide.

When do you need a SWIFT or BIC code? 

Since there is no direct connection between banks across borders, they need to communicate via the SWIFT network to notify the receiving banks about the transfer.  Here are some specific scenarios where you may need to provide or use a SWIFT or BIC code:

• International wire transfers: When sending money from one country to another, banks require the recipient's SWIFT or BIC code to accurately route the funds to the intended account. This ensures that the transfer reaches the correct financial institution swiftly and securely.

• Cross-border payments: Whether it's for business transactions, personal remittances, or investment purposes, SWIFT or BIC codes are indispensable in facilitating cross-border payments. They help verify the identity of the recipient's bank and streamline the transfer process.

• Foreign currency transactions: When dealing with foreign currencies, having the recipient's SWIFT or BIC code is essential for initiating transactions in different financial systems. This code acts as a universal identifier that transcends national boundaries, enabling seamless currency conversions and transfers.

• International trade: Businesses engaged in global trade rely on SWIFT or BIC codes to make and receive payments for goods and services across international markets. These codes ensure that trade transactions are executed efficiently and securely, fostering trust and reliability in business relationships.

• Interbank communication: SWIFT or BIC codes are also used for interbank communication, enabling financial institutions to exchange messages securely and accurately. This standardised system enhances transparency and collaboration among banks, supporting the smooth functioning of the global financial network.

Do all banks have a BIC or SWIFT code for international transactions?

Most established banks and financial institutions do possess these codes, as they are crucial for conducting seamless international business. For smaller or regional banks, while they may still conduct international transactions through correspondent banks, they might not have their own dedicated SWIFT or BIC codes. These institutions might rely on intermediary banks to process their international transactions, leveraging the intermediary's SWIFT or BIC code to facilitate cross-border transfers.

The absence of a SWIFT or BIC code can present challenges for customers of such banks when engaging in international transactions, as these codes play a crucial role in ensuring the smooth and secure transfer of funds across borders. The existence of these codes often reflects the bank’s capability to engage in international business, positioning them as trustworthy partners for managing foreign payments and receivables. Customers of banks without a SWIFT or BIC code may experience delays, increased costs, or limited access to certain international banking services, as the lack of this standardised identifier can hinder the seamless flow of funds between different financial institutions worldwide.

How to find a SWIFT or BIC code? 

Finding a SWIFT or BIC code is a straightforward process, and there are several reliable resources at your disposal. One of the easiest methods is to check the official website of the bank in question. Most banks list their SWIFT or BIC codes in the international banking section, often accompanied by useful details regarding the types of transactions that can be processed using their codes. Additionally, you can reach out directly to your bank's customer service for assistance. They can provide you with the correct code and ensure that any unique requirements or variations are clarified, especially if you are dealing with different branches. 

Another option is to use dedicated online databases and search engines that specialise in SWIFT or BIC codes. SWIFTRef is the official platform that offers searchable databases where you can enter the bank's name or country to find the corresponding code. 

Alternatives to SWIFT or BIC code?

You may wish to consider using fintech products for cross-border payments. Unlike the conventional banking system that relies heavily on SWIFT, which can sometimes lead to delays and unexpected fees, Airwallex leverages cutting-edge technology and a network of local bank accounts around the world to facilitate faster and more cost-effective transactions. By utilising local payment rails, Airwallex allows businesses to send and receive funds in multiple currencies without the need for intermediaries, significantly streamlining the process. Over 85% of transfers can be credited the same day.

By opening an Airwallex Business Account, you can transfer 60+ currencies to 150 countries and regions, with over 110 of them through local rails instead of SWIFT. Combined with the competitive exchange rates offered by Airwallex (only as low as 0.2% above the interbank rate), you can effectively reduce the costs of overseas transfers.

Moreover, the Airwallex Business Account allows users to open local currency accounts in multiple countries and regions. When transferring money overseas, you can simply transact like a local, instead of going through the complicated procedures of international transfer. This not only speeds up the process but also eliminates all unnecessary fees.

FAQs:

1. Where can I find my SWIFT or BIC code?

In most cases, you can find the SWIFT code of a bank on its official website or bank statements. You may also contact the bank directly if necessary.

2. What is an IBAN number in relation to a SWIFT or BIC code?

SWIFT code and IBAN serve as two different types of identifiers for international transactions. SWIFT code is used to identify banks or financial institutions, while the IBAN is used to identify designated bank accounts.

3. What is a SWIFT banking system?

The SWIFT banking system is a global messaging network used by financial institutions to securely communicate and transfer funds internationally. It assigns unique SWIFT or BIC codes to identify banks and facilitates accurate routing of transactions, ensuring standardised and secure communication between banks to enhance the efficiency and security of cross-border transactions.