SWIFT, or the Society for Worldwide Interbank Financial Telecommunication is the network of 11,000 member financial institutions that enables fast, secure international wire transfers. To standardize messaging for each wire transfer and ensure funds are accurately delivered to the correct receiving bank, the network assigns a unique code to each bank that corresponds to the institution, country, location, and branch. Think of it as a financial Rolodex that over 11,000 banks share, making it easy to see who sent money to whom.
How do SWIFT codes work?
Let’s take a look at a SWIFT code up close to understand how its interlocking parts work together.
Say you’re trying to send funds to a business partner in Tokyo, such as the business banks at Bank of Tokyo-Mitsubishi UFG in Tokyo. The SWIFT code for the bank is BOTKJPJTXXX.
The first four characters correspond to the institution: BOTK is Bank of Tokyo. The next four characters indicate the country and city: JP is Japan, and JT is Tokyo. The last three characters indicate the branch.
It’s important to make sure that you have the correct SWIFT code for each wire transfer to ensure the payment reaches its intended destination.
History of SWIFT
SWIFT was formed in 1973 to help standardize international funds transfers and prevent security risks that traditional telegraphic transfers posed. Its inaugural year, it was initially supported by 239 banks in 15 countries. By the time the first message was sent in 1977, that had expanded to 518 banks in 22 countries.