SWIFT Payment: What is it and How Does it Work?

A simple guide on SWIFT Payment


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    So, you need to send money abroad, something you’ve never done before, and you have no idea where to start. The good news is that your bank will most likely offer an international payment method known as a SWIFT Transfer. SWIFT is a well-known, global provider of cross-border payments.

    This article will explain what a SWIFT payment is, how it works, and some of the fees associated with this type of transfer. We will also introduce you to Statrys, an alternative provider of online business account services that utilize a different method to transfer money internationally.

    What does “SWIFT” mean?

    SWIFT is the acronym for the Society for Worldwide Interbank Financial Telecommunications network. In simple terms, the SWIFT network is a member-owned system made up of banks and financial institutions worldwide for financial messages and transactions.
    The easiest way to understand what the SWIFT network is, comes down to understanding its history and why it was created in the first place.

    What is a SWIFT transfer?

    SWIFT transfers are synonymous with SWIFT payments. But sometimes you will come across financial institutions that refer to SWIFT transfers as telegraphic transfers (TT) or international wire payments.

    A SWIFT transfer is a message that has enclosed payment instructions from a payer or sending bank (Bank A) to a receiving bank (Bank B). In financial terms, a payment order from an issuing bank to the remitting bank, where a beneficiary will be receiving the transfer into their account. Bank A will be in a different country from Bank B.

    However, not all SWIFT transfers are as straightforward as this, because one unique feature of SWIFT transfers is that sometimes, more than two SWIFT member banks are involved in completing a transfer. These extra SWIFT member banks involved are known as intermediary banks or correspondent banks.

    For any given SWIFT transfer, anywhere from 2-5 SWIFT member banks across the world can be involved in moving funds to its destination. This can affect the costs of a transfer and timeframes for the transfer, but we will go through this later.

    Let’s now go through the process of SWIFT payments from the set-up, what happens during, and upon completion of a SWIFT payment.

    How does a SWIFT transfer/payment work?

    A SWIFT transfer at the time of set-up is a payment order (message) requested by the sending bank to the receiving bank. SWIFT requests are usually made on behalf of a personal banking or business customer looking to send money abroad, either in their denominated local currency or into the denominated currency of the country the funds are being received in.

    The actual process of sending money from point A to point B is a back-end process facilitated separately by the member banks involved in any given transfer, but first, let’s see what is needed to facilitate a SWIFT transfer.

    What do you need to facilitate a SWIFT Transfer?

    Other than the required personal contact details of the sender and receiver, a detail that is unique to SWIFT is the SWIFT/BIC code.

    We know what SWIFT stands for but what about BIC? BIC is the acronym for Business Identifier Code.
    This code locates any given member bank in the SWIFT network. Each SWIFT member bank has their own unique SWIFT/BIC code.

    The SWIFT/BIC code contains 8 or 11 alphanumeric characters. These characters just shorten the following features into a cryptographic code to identify the SWIFT member bank.

    • The institution (XXX)
    • The country (XX)
    • The city or location (XXX)
    • The branch (XXX) (optional)

    Here are some common SWIFT/BIC codes in Hong Kong:

    • Standard Chartered – SCBLHKHH
    • Bank of China – BKCHHKHH
    • Bank of East Asia – BEASHKHH
    • Statrys - STYSHKHH

    We recommend that you always check the exact SWIFT code before making an international payment as it will save you time and money, as the fees to trace or recover funds sent using a wrong swift code can be costly. To check or search for the SWIFT code of any other bank, here are some trustworthy tools:

    How is money moved using the SWIFT network?

    So, now that we know about the SWIFT messaging system, what does this mean for the actual movement of money using the SWIFT system?

    Yes, it is true that no physical money exchanges hands with an initial SWIFT message. The actual movement of money happens later through mirroring ledgers or mirroring accounts known as Nostro/Vostro accounts.

    The use of Nostro/Vostro accounts in SWIFT payments

    Nostro/Vostro accounts are used when one bank has money deposited in an account opened with another bank for the purpose of executing international transactions. 

    What is a Nostro Account?

    The Nostro account is the term used by the bank holding money in the account. This is essentially the sending institution requesting a transfer to be made.

    What is Vostro Account?

     The Vostro account is the term used by the bank having the account opened in their books but in the denominated currency of the sending bank.

     A direct SWIFT transfer is only possible if the sending and receiving bank have a direct commercial relationship, aka the banks will have Nostro/Vostro accounts set up ready for receiving transfers.

    But what happens when there isn’t a direct commercial relationship between Bank A and B? This is where those intermediary banks enter the equation.

    Let’s look at this commercial/no commercial relationship through two different transfer scenario examples.  

    Scenario A – Direct commercial relationship between SWIFT member banks A & B

    A US client that banks with Bank of America wants to pay USD 15,000 to your bank account that is with DBS in Hong Kong. Both banks are members of the SWIFT community, which means payment will be processed using a SWIFT message.

    In this scenario, both banks have a direct commercial relationship via a Nostro / Vostro account. This means:

    • A SWIFT message issued by Bank of A will be directly addressed to Bank B, located in a different country, meaning the funds will be transferred directly between the two banks

    sepa nostro vostro

    Scenario B – No direct commercial relationship between SWIFT member banks A & B

    Suppose both banks don’t have a direct commercial relationship. This means no Nostro / Vostro account is set up to link the two banks.

    • In this case, SWIFT will determine how to pass the SWIFT message to successive banks which all have Nostro / Vostro accounts with one another. This will be through using 1 or a series of intermediary banks (also known as correspondent banks) that handle the transfer along its route to its destination. 

    Bank transfer with an Intermediary bank

    As you can appreciate, the more intermediary banks engaged in the transaction, the higher the fees will be deducted from the paid amount, the longer the payment will take to be credited to an account, and finally the higher the risk to have the SWIFT message lost. On that note, let’s look at the fees.

    How much are the fees for SWIFT transfers?

    Whether or not a SWIFT transfer is direct or goes through correspondent banks to its destination, SWIFT transfers always have associated fees. Fees are mainly attributed to bank handling for facilitating a SWIFT message, as in the details outlining sending a transfer and receiving a transfer. If more banks are involved, more handling fees are incurred. Sometimes it is possible to pay anywhere from upwards of $10 to $50 USD for SWIFT financial transactions.

    Secondly, fees also come from foreign currency exchange margins derived from the banks involved in a SWIFT transaction.

    As SWIFT transfers are cross-border, they need to be converted from the denominated currency of the sending country to the denominated currency in the receiving country.

    Who pays for the SWIFT fees?

    This is where the second set of codes comes in handy to know when making a SWIFT international transfer. These SWIFT codes dictate who is responsible for paying the fees associated with the transfer. The sender chooses this when setting up the transfer. These codes are: 

    • OUR = means you the sender are responsible for all SWIFT-related banking charges (up-front and incurred later)
    • BEN = the beneficiary or the recipient is responsible for all SWIFT banking charges. These fees will be deducted from the amount received.
    • SHA = the costs are shared as in the sender pays the outgoing fees, and the recipient pays the receiving fees and any correspondent fees.

    Finally, there can also be fees incurred if you need to trace, investigate, recover, or cancel a SWIFT transfer after it is initiated. These fees will vary between banks.

    How long do SWIFT payments take?

    SWIFT Transfers normally take anywhere from 1-5 business days. However, delays are common and can happen because of national holidays in either country of a transfer, incorrect SWIFT/BIC codes or other banking details, if intermediary banks are involved or system outages on rare occasions. This can push out transfer times to a few weeks in extreme cases.

    One of the benefits of SWIFT is that a transfer is traceable along its network, so if you are finding that a transfer is taking longer than expected, it is possible to organize a transfer status (although with a cost).


    For more than 40 years, SWIFT has been the leading provider of secure financial messaging services, so using the SWIFT system to make your international transfers might be the most convenient option for you.

    As you grow your business and expand into new markets, you'll want to make cross-border transactions as easy as possible.

    With a Statrys's multi-currency account, you can send and receive payments from around the world in 11 different currencies—making it easy for you to streamline your international transfers and save time and money.


    What does SWIFT means in banking?


    How long does SWIFT payments take?


    What is a SWIFT transfer?


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