How a SWIFT payment works: banks, messages, timing and fees

What SWIFT actually is

SWIFT is a secure messaging network that connects thousands of banks and financial institutions around the world. The name comes from the Society for Worldwide Interbank Financial Telecommunication, a cooperative owned by its member institutions. The single most useful thing to understand about SWIFT is that it carries instructions. It does not hold money and it does not move money by itself.

When people say they have sent a SWIFT payment, what they mean is that their bank has sent a standardised, authenticated message to another bank telling it to credit an account. The money itself moves through accounts that banks hold with each other. SWIFT is the language and the secure channel those banks use to agree what should happen.

This distinction explains much of the behaviour that confuses payers. A message can arrive in seconds while the funds sit in a queue at a bank that has not yet finished its checks. A payment can be visible on a tracker and still not be credited. The message and the settlement are related, but they are separate events.

The banks involved in a typical wire

A SWIFT payment can involve two banks or several. The roles have standard names, and you will see them in confirmations and in queries from your provider.

• Ordering institution. The bank or payment provider acting for the payer. It receives your instruction, checks it, debits your account and sends the first message.
• Correspondent bank. A bank that holds accounts for other banks, usually in a particular currency. A small bank in one country may not have a direct relationship with your beneficiary's bank, so it uses a correspondent to reach it.
• Intermediary bank. Any bank in the middle of the chain that passes the payment on. In practice the terms correspondent and intermediary are often used for the same institution.
• Beneficiary institution. The bank that holds the account of the person or company being paid, and that finally credits the funds.

The currency usually decides the route. A US dollar payment between two banks outside the United States will normally pass through a bank with access to dollar clearing in New York, because that is where dollar accounts between banks are ultimately settled. A euro payment will often clear through a bank with access to euro settlement in Europe. Each extra bank in the chain is another place where the payment can be checked, delayed or charged.

A payment step by step

Here is an illustrative journey for a US dollar payment from a company in Canada to a supplier in Singapore. The details vary by bank, but the shape is common.

1. You enter the payment with your provider: beneficiary name, address, account number, bank identifier, amount, currency, purpose and reference.
2. Your provider validates the details, screens the payer and beneficiary against sanctions lists and checks that the payment fits the expected activity on your account.
3. Your account is debited and the provider's bank sends a customer credit transfer message to its US dollar correspondent.
4. The correspondent runs its own screening. If the message is clean, it debits the sending bank's account on its books and passes the payment on, either directly to the beneficiary bank or to another intermediary.
5. The beneficiary bank receives the message and the cover, checks the account name and number, runs its own compliance checks and credits the supplier.

Every bank in that chain is subject to its own regulators and its own risk appetite. A payment that passes three banks without comment can still be stopped at the fourth. That is why a clear purpose and a matching beneficiary name matter at the very start of the process.

The messages: MT103 and pacs.008

For decades the standard SWIFT message for a business or personal payment was the MT103, the single customer credit transfer. It has fixed fields for the ordering customer, the beneficiary, the banks in the chain, the amount, the value date, the charge option and a short free-text field for remittance information. Many treasury teams still ask for "the MT103" as proof that a payment was sent, and the term is used loosely to mean a payment confirmation.

Cross-border payments between banks on SWIFT have migrated to ISO 20022, a richer data standard, although the term MT103 remains in everyday use. The equivalent message is the pacs.008, the FI to FI customer credit transfer. It carries the same core information but with structured fields, longer names and addresses, and more room for remittance and purpose data. Structured addresses split street, town, postcode and country into separate fields, which helps sanctions screening and reduces false matches.

For a payer, the practical effect of ISO 20022 is that the data you supply is more likely to reach the beneficiary bank intact. Under older formats long names and references were often truncated. Under the new standard there is more space, and banks increasingly expect it to be used. Giving full legal names and complete addresses matters more each year.

SWIFT gpi and the UETR

SWIFT gpi is a service layer that most large banks have adopted for cross-border payments. Each gpi payment carries a Unique End-to-end Transaction Reference, or UETR, which stays with the payment from the first bank to the last. Banks in the chain update a central tracker as they process it, so the ordering bank can see where the payment is, whether any charges were taken and when it was credited.

The UETR is the single most useful piece of data when you are chasing a payment. It lets every bank in the chain find the same transaction without arguing about which reference is the right one. If you send payments regularly, store the UETR against each payment in your own records. There is a separate guide on payment tracking with a UETR that covers the status codes in more detail.

Why timing varies

There is no single answer to how long a SWIFT payment takes. Some arrive the same day. Others take several working days. The factors that drive the difference are fairly predictable once you know them.

• Cut-off times. Each bank sets a daily deadline for processing payments in each currency. An instruction released after the cut-off is processed on the next working day.
• Time zones. A payment from Vancouver to Hong Kong spans a time difference of more than half a day. By the time a Canadian afternoon payment reaches Asia, the beneficiary bank may already be closed for the day.
• Holidays. A payment needs working days in the sending country, the currency's home market and the receiving country. A holiday in any one of them can add a day.
• Number of banks. Each intermediary adds processing time and another set of checks.
• Compliance reviews. A query from any bank in the chain pauses the payment until it is answered. This is the most common cause of a long delay.
• Beneficiary bank practice. Some banks credit as soon as the message arrives. Others batch incoming payments or hold them for manual checks on name and account.

When planning a deadline, such as a supplier's shipment release date, work back from the beneficiary's local working day and allow room for a query. Releasing a payment early is cheap insurance.

Where the fees come from

A SWIFT payment can attract charges at several points. Your own provider may charge a fee for sending. Correspondent and intermediary banks may deduct a handling fee from the amount as it passes through. The beneficiary bank may charge its customer for receiving an incoming international payment.

Who bears these charges depends on the charge option in the message. OUR means the payer covers all charges. SHA means the payer pays the sending charges and the beneficiary bears the rest. BEN means all charges come out of the payment. Even with OUR, some banks in the chain still deduct, so it is not a guarantee of full receipt in every corridor. The guide to OUR, SHA and BEN works through examples.

Currency conversion is a separate cost. If you pay in a currency your account is not held in, someone converts it, and the exchange rate used will include a margin. It helps to know who is converting: your provider before sending, an intermediary along the way, or the beneficiary bank on arrival. Converting at the start, at a known rate, gives you the most control over what the beneficiary receives.

Getting a wire right first time

Most failed or delayed wires trace back to the information supplied at the start. A short checklist catches the common problems.

• Use the beneficiary's full legal name exactly as it appears on their bank account. Trading names and abbreviations cause rejections.
• Give a complete address, including town and country. Screening systems use it to rule out false matches.
• Check the account number or IBAN format and the bank identifier against the beneficiary's own bank details, ideally on their letterhead or invoice.
• Confirm the currency the beneficiary's account can receive. Sending dollars to a euro-only account forces a conversion you did not choose.
• Write a specific purpose and a reference the beneficiary can match, such as an invoice number.
• Keep the supporting document, such as the invoice or contract, ready in case a bank asks for it.

Change requests deserve special care. If a supplier writes to say their bank details have changed, confirm the change through a known phone number before paying. Fraudsters target exactly this moment.

General information

This article is general information about how SWIFT payments work. It is not legal, tax or regulatory advice, and practices differ between banks and corridors. Message standards and market practice continue to change, so confirm current requirements with your provider.

CCYFX provides International payments by bank wire for businesses. See the International payments page for further background.