What’s SWIFT? (Not the musical sensation, the other one)

One of the most important decisions business owners face on a daily basis is deciding who to work with. It’s obviously about profits and costs, but also comes down to trust and plain chemistry. The last thing we want is for geography to choose our business partners for us. But international payments tend to be expensive and complicated, leading many small and medium-sized businesses (SMBs) to avoid working with overseas vendors just to save themselves this headache. 

That’s why we launched international payments, to give small businesses in the U.S. the ability to pay all their vendors using the same process for domestic and cross-border transactions. So, the only thing you need to consider is which vendor gives you the most bang for your buck. We’ll take care of getting those bucks to them. 

Still, when making an international payment, you’ll need one of two things: an IBAN or a SWIFT. We’ve already covered almost everything you need to know about IBANs in an earlier article, but if your first thought when hearing the word SWIFT is hitting the dance floor, you may want to continue reading this one. 

So, what is SWIFT? 

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications—just saying this out loud made us want to take a nap, so the acronym is definitely in order. 

Seriously, though, SWIFT is a messaging system that enables electronic communication between member banks and financial institutions all around the world. The communication is facilitated by SWIFT codes. 

What are SWIFT codes, then? 

SWIFT codes, also known as bank identifier codes (BICs), allow member institutions to easily and safely communicate, share information, and, yes, transfer money across borders (which is why we’re talking about them in the first place). 

You can think of a SWIFT code as a bank’s ID number, allowing all parties to know they are in touch with the right institution and, therefore, can communicate freely and safely. 

What does a SWIFT code look like? 

A SWIFT code is composed of eight or 11 digits or letters and contains the following components:

• Bank code: A four-letter abbreviation of the financial institution’s name. 
• Country code: Two letters indicating the country in which the financial institution is located. 
• Location code: Two alphanumeric characters identifying the city in which the financial institution’s head office is located. 
• Branch code: This component is optional and includes three characters identifying a particular branch of the financial institution.

Just to give you an idea, a JP Morgan Chase SWIFT code looks like this: CHASUS33XXX, with the Xs representing the branch information, which may vary.

How are SWIFT codes different from IBANs?

IBAN is primarily used in Europe, while SWIFT is used in the U.S., Mexico, and Canada, among other locations. 

Unlike IBANs, SWIFT codes are used for more than just transferring funds, as they facilitate various types of secure communications between member organizations. 

Also, while IBANs always refer to a specific account, SWIFT codes are used to identify an institution or branch. Therefore, you’ll also need to provide an account number separately to send an international payment via SWIFT. 

So, are SWIFT codes the same as routing numbers? 

No. A routing number is used for domestic bank transfers within the U.S., while SWIFT codes are typically used for international transactions or communications between member institutions worldwide.

How do I know if I need a SWIFT code to send an international payment? 

As of 2022, the SWIFT system serves over 11,000 member institutions from more than 200 countries and territories, so it’s very likely your vendor’s bank has one.

In addition to the U.S., among the countries that require a SWIFT code for incoming international transfers are:

• Japan
• Denmark
• Latvia 
• Ghana
• Sweden
• The United Arab Emirates

While several dozen countries use the IBAN system for international transfers, SWIFT is often used alongside it, so most bank accounts in Europe have both a SWIFT code and an IBAN. In some cases, both numbers are required for an international wire. 

But, there’s no need for guesswork. If you send an international payment through Melio, you’ll be prompted to provide the relevant information according to the payment’s destination country.

Should my vendor worry about sharing their SWIFT code? 

No. SWIFT codes are publicly available online and through each bank and are not considered confidential. They don’t refer to a specific account and cannot be used to access funds, only to allow banks to communicate among themselves. 

How do I find my vendor’s SWIFT code? 

The easiest way is to ask your vendor. Even if they don’t know it, they can quickly find it on their bank statement, contact their bank, or check their online account. Please remember you will also need their account number to complete a transaction through SWIFT. 

If your vendor didn’t provide you with a SWIFT code, you can use an online service to find the missing information, assuming you have the rest of their bank details. 

Ready to send an international payment? 

Now that you’ve learned about SWIFT codes, you can start paying your international vendors online. Simply sign up to Melio for a straightforward, cost-effective, and fast solution to all your business payment needs.