What are SWIFT payments? How it works and how to send them

SWIFT payments let you send money internationally through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. This system helps banks communicate securely with each other to transfer money across borders, ensuring your transactions are verified, recorded accurately, and completed between countries.

You'll use SWIFT for paying international suppliers, managing cash across different currencies, or investing in overseas markets. Whether you're a small business selling abroad or a large company with global offices, SWIFT provides the infrastructure you need to move money worldwide.

This guide explains how SWIFT works, walks through the payment process, and covers the pros and cons of using this system for your international transactions.

What is SWIFT?

SWIFT is a messaging network that connects over 11,000 financial institutions across more than 200 countries. It doesn't actually move your money—instead, it provides a secure way for banks to exchange standardized information about financial transactions.

The system was created in 1973 and launched in 1977. Seven major banks formed SWIFT to replace the outdated Telex system, aiming to create standard formats for international banking messages.

Over the years, SWIFT has evolved significantly:

• Introduced SWIFT codes (BIC) in the 1980s
• Developed standardized message formats like MT and later XML-based MX formats
• Implemented enhanced security protocols
• Launched Global Payments Innovation (GPI) for faster, more transparent transactions

These changes have made international banking much more efficient. What once took weeks now takes days or hours. Security has improved, making fraud less likely. And standardized formats have reduced manual work and errors in cross-border payments.

What are SWIFT payments?

The SWIFT system uses standard formats for payment instructions so banks can communicate clearly and consistently.

Core components of SWIFT payment processing include:

• Standardized messaging format: SWIFT payments follow specific formats (like MT103 for customer transfers and MT202 for bank-to-bank transfers) to ensure all necessary information is organized consistently
• Global reach: With connections to over 11,000 financial institutions in more than 200 countries, you can send money to almost any bank account worldwide
• Multi-currency support: The system handles payments in all major currencies and many minor ones, using standard codes and formats
• Security infrastructure: SWIFT uses multiple layers of encryption, authentication, and monitoring to keep your financial messages secure
• Traceability: Each SWIFT message gets a unique reference number so you can track your payment throughout the process
• Compliance features: Fields for regulatory information (like payment purpose) help support anti-money laundering requirements

How do SWIFT payments work?

SWIFT only passes messages between banks—it doesn't actually move your money. When people talk about a "SWIFT transfer," they mean a payment that uses SWIFT messages for coordination, not funds moved by SWIFT itself.

International banking relies on Nostro and Vostro accounts. These are just two names for the same account, viewed from different perspectives:

• Nostro account: "Our account with you"—your bank's account at a foreign bank, usually in the foreign bank's local currency
• Vostro account: "Your account with us"—the same account from the foreign bank's perspective

For example, JP Morgan might have a Nostro account at Deutsche Bank in euros. To Deutsche Bank, that's a Vostro account. These relationships let banks make international payments without needing offices in every country.

Here's how a SWIFT payment typically works:

• Message creation: Your bank creates a SWIFT message (often MT103 for customer payments) with all your payment details like amount, currency, and recipient information
• Network transmission: This message travels securely through the SWIFT network to the recipient's bank—or through intermediary banks if there's no direct relationship
• Correspondent banking: If your bank and the recipient's bank don't connect directly, intermediary banks process the payment through their Nostro/Vostro accounts
• Account crediting: The recipient's bank receives and checks the message, then adds the funds to the recipient's account
• Confirmation: The recipient's bank receives the SWIFT message, credits the recipient’s account, and may notify the sender’s bank

Unlike domestic transfers (such as ACH in the US or SEPA in Europe), SWIFT transfers rely on correspondent banking. This typically makes SWIFT transfers slower—taking 1–5 business days—and more expensive, since several banks may be involved.

Common delays happen during compliance checks, when using intermediary banks, or due to time zone differences affecting processing hours. Currency conversions and missing recipient information can also slow things down.

When would businesses need to use SWIFT payments?

You'll need SWIFT payments for almost any financial transaction that crosses international borders. If you import or export goods, you'll use SWIFT to pay overseas suppliers or collect payments from international customers.

For example, if you're a US manufacturer buying components from Taiwan, you'd use SWIFT to pay in the appropriate currency. If you have global operations, you'll rely on SWIFT to manage international cash flows. You might use SWIFT payments to bring profits back from foreign subsidiaries, fund overseas ventures, or manage cash positions across different markets.

Other common business scenarios include:

• Paying international employees or expatriate staff
• Paying foreign contractors or service providers
• Investing in overseas opportunities or real estate
• Paying dividends to international shareholders
• Settling cross-border merger and acquisition transactions

What is the SWIFT payment process?

A SWIFT transaction has three main stages:

• Initiation: You provide payment details to your bank
• Processing: Your payment instruction travels through the SWIFT network, potentially passing through intermediary banks
• Confirmation: The recipient's bank receives the funds and notifies the recipient

To start a SWIFT transfer, you'll need to give your bank these details:

• Recipient's full name and account number (or IBAN, depending on country)
• Their bank's name and SWIFT/BIC code
• Transfer amount and currency
• Often, the purpose of payment and source of funds for compliance

Many countries also require information about where the money is coming from for regulatory reasons. Initiating SWIFT transfers also depends on your business size:

• Small businesses: Typically use online banking or visit a branch, with owner approval required for larger transfers. Compliance steps are simple, often handled with support from a relationship manager.
• Medium-sized enterprises: Use treasury systems linked to banks, with dual approvals for transfers. Payments are often grouped and scheduled, managed by finance staff.
• Large corporations: Rely on ERP systems with multi-level approvals and direct bank connections. Treasury teams manage relationships and run compliance checks before sending payments.

What are SWIFT codes?

SWIFT codes (also called BIC—Bank Identifier Codes) are unique IDs assigned to financial institutions on the SWIFT network. These 8–11 character codes work like addresses, making sure messages go to the right bank. Each part of the code tells you something specific about the bank and where it's located.

A SWIFT code has four main parts:

1. Bank Code (4 characters): Identifies the bank (e.g., CHAS for JPMorgan Chase)
2. Country Code (2 characters): Shows the country (e.g., US for United States)
3. Location Code (2 characters): Indicates the city or region
4. Branch Code (3 characters, optional): Specifies a branch. If missing or "XXX," it's the main office

If you import or export goods, you'll need SWIFT codes when paying international suppliers or receiving funds from overseas customers. For instance, if you're a German auto parts manufacturer getting paid by a US distributor, you'd provide your SWIFT code to ensure your payment arrives correctly. If you have employees in multiple countries, you'll also use SWIFT codes to route salary payments to them.

Here's an example SWIFT code breakdown:

• CHAS: Bank code for JPMorgan Chase
• US: Country code for United States
• 33: Location code for New York
• XXX: Main office (not a specific branch)

Fees and costs of SWIFT transactions

SWIFT transactions typically include several fees that add up to your total cost:

• Sending bank fees ($20–50)
• Receiving bank charges ($10–20)
• Intermediary bank fees ($10–30 per intermediary)
• Currency conversion costs—often hidden in a 1–4% markup over the mid-market rate

What you pay also depends a lot on your business size and banking relationships:

Beyond business size, the payment cost model you choose also affects your total fees:

• OUR: You pay all costs (common in tech for contractor payments)
• SHA: You share costs with the recipient (common in manufacturing for supplier payments)
• BEN: The recipient pays all costs (frequent in retail when receiving payments)

To keep your SWIFT transaction costs down:

• Combine multiple payments to the same recipient
• Keep accounts in currencies you use often to avoid conversion fees
• Negotiate volume-based pricing with your bank

Make sure to watch out for intermediary bank charges. These hidden fees can reduce payment amounts by 10–30%, especially for transfers to certain regions.

Benefits of SWIFT

The SWIFT network gives you major advantages when making international payments. Its global reach—connecting over 11,000 institutions in more than 200 countries—means you can pay almost any business partner securely.

Three key benefits you'll get from SWIFT are:

1. Transaction traceability: Each of your payments gets a unique reference number for tracking. For example, if you're importing pharmaceuticals, you can monitor exactly where your payment is—crucial when you need time-sensitive medical supplies.
2. Operational efficiency: Standardized formats let you automate much of the process, reducing manual work. If you run an international retail business, you can automate payments to hundreds of suppliers, cutting down on data entry and reconciliation time.
3. Regulatory compliance: Structured messaging includes fields for sanctions screening and anti-money laundering details. This helps you document transactions for audits and reduce compliance risks.

The standardized messaging formats also help eliminate confusion and reduce errors in your cross-border transfers. For example, different industries benefit in specific ways:

• Financial services: You can rely on SWIFT's security infrastructure to protect your high-value transfers from fraud and cyber threats
• Manufacturing: You can use SWIFT's standardized documentation to streamline your supply chain payments and reconciliation
• Healthcare: You can count on SWIFT's precision for timely payments to your global medical suppliers

No matter your industry, SWIFT provides the reliability, security, and global access needed to manage complex international payments with confidence

Drawbacks of SWIFT

Despite its widespread use, SWIFT has several limitations you should know about. Speed is a major issue as payments often take 1–5 business days. The fees can also add up quickly, as multiple banks each take a cut. Compared to domestic transfers or newer fintech options, SWIFT payments typically cost more.

Three major drawbacks you might encounter with SWIFT include:

1. Settlement delays in certain regions: Your payments to areas with less-developed banking infrastructure or complex regulations can take 5–7 days
2. Limited transparency: SWIFT GPI offers near real-time tracking for many payments, but full visibility still depends on the participating banks and the payment route
3. Currency conversion costs: When exchanging currencies, banks often add hidden markups to the rate

These issues affect different businesses in different ways. If you run a retail business with tight cash flow, SWIFT's unpredictable timing can make inventory management challenging. For instance, you might face stockouts while waiting for your seasonal merchandise payment to clear.

If you're a small business making occasional international payments, you'll find the high fixed fees particularly expensive—a $30 fee on a $500 payment means you're paying 6% just to send money.

The future of SWIFT

SWIFT is evolving quickly to keep up with fintech competition and changing customer needs. SWIFT GPI (Global Payments Innovation) is its biggest upgrade, giving you near real-time tracking, same-day settlement for many currency pairs, and clearer fee information.

The network is also adding API connections, cloud infrastructure, and AI to modernize its systems. For example:

• Fintech companies are connecting to SWIFT's APIs to give you a modern, reliable experience
• Trade finance operators are testing SWIFT's blockchain projects to digitize paperwork-heavy processes

If your organization relies heavily on older systems, you may face integration challenges. But if you can adapt, you'll gain major advantages in speed, cost, and customer experience.

Simplify SWIFT payment management with Ramp

SWIFT payments enable secure international transfers by facilitating messaging between banks. For businesses managing cross-border vendor payments, understanding how SWIFT works is key to ensuring funds arrive accurately and on time.

Ramp is a modern expense and spend management platform built to help businesses streamline every aspect of their payments, including international wire transfers. Through Ramp Bill Pay, you can initiate international wire transfers in U.S. dollars through the SWIFT network, giving you the control and transparency you need—without the hassle of managing payments across multiple platforms.

By automating approvals, syncing payments to your accounting system, and offering clear visibility into global spend, Ramp helps you simplify complex payments—without needing to juggle multiple systems or bank portals.

Whether you're paying vendors in the U.S. or abroad, Ramp helps you move money securely, efficiently, and all in one place.

Get started with Ramp Bill Pay.