What Is SWIFT Code? (FAQs and Importance)
By Indeed Editorial Team
Published June 18, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
If you want to transfer money internationally in a responsible way, it may be useful to learn about the Society for Worldwide Interbank Financial Telecommunication (SWIFT). SWIFT issues identification numbers to financial entities and registers payments on an international database. If you're sending money across national borders, understanding SWIFT codes and how to find them may help streamline the process and increase your confidence. In this article, we explain what SWIFT code is, examine how to find a SWIFT code relating to a financial transfer, and answer some frequently asked questions about these and similar international and domestic standards.
What is SWIFT Code?
If you're interested in sending money abroad, you may ask yourself, "What is SWIFT code?" Carl Reuterskiöld founded SWIFT in Belgium in 1973 due to the need for fast, secure, long-distance, and electronic financial messaging. Banks issue SWIFT codes as a security layer for money transfers to and from other countries. These numbers help secure international transactions by acting as a digital tracking code. As their income depends on receiving international payments, exporters of products and services rely significantly on SWIFT codes.
Families that have members living in different countries may have a sustained need for SWIFT codes. For less frequent purchasing, SWIFT codes still reduce risks and ensure that each transfer is secure. While transfers to some regions may require further authentication, all non-domestic transfers from accredited financial institutions rely on SWIFT.
SWIFT code formatting
SWIFT codes are 8 to 11 characters long. These characters identify, in order, the bank or financial institution, country, location, and branch. While an 11-digit code provides greater specificity by referring to a particular bank branch, an eight-digit code refers only to the bank or financial institution's office. Even though SWIFT codes are unique to the intersecting values that their characters represent, they all have the same order and format of AAAA-BB-CC-123. Below are the components of SWIFT codes in more detail:
The Canadian Bankers Association manages bank codes in cooperation with the SWIFT cooperative society. These codes are four digits long and refer to the whole financial services organization rather than individual banks. They're typically abbreviated forms of a bank's name. For example, TDOM represents The Toronto Dominion Bank.
These are two-digit codes that look similar to bank codes. As an example, CA is Canada's country code. They follow bank codes in the order of SWIFT formatting. Over 200 countries have representative country codes in the SWIFT system.
Location codes are two characters long. They represent the location of a financial institution's head office. Location codes may combine letters and numbers. While SWIFT codes omit branch codes if the institution lacks branch information, they always include location codes.
The final three characters of the SWIFT code represent the financial or retail centre where the specific bank is. For example, VAN may represent a bank's Vancouver branch. If the branch is the central branch, the headquarters, or the only location, the branch code may not apply. For SWIFT codes without a branch code, the branch may read as XXX, showing non-applicability.
Frequently asked questions
It's beneficial to learn about SWIFT codes so that you can send a payment to another country with full confidence. Understanding them might involve learning about many other international and domestic financial messaging standards. Below are some answers to commonly asked questions to help you learn more about SWIFT codes and how they compare to alternatives:
Why are SWIFT codes important?
Ensuring that banks transfer funds and financial messages securely to the right locations is important. One advantage of SWIFT is redundancy. By centralizing transfers, Bank A can't send money to Bank B on behalf of Client C without verification from all three entities. This method reduces human errors resulting from manual verification.
Do I need a SWIFT code?
SWIFT was founded in 1973, in Belgium, as the need increased for secure, long-distance, automated, and electronic financial messaging increased. If you're making an international money transfer, you may need a SWIFT code. Certain economic regions, such as the Eurozone, may require additional authentication frameworks. For accurate money transfer pre-requisites, consult with a financial institution that associates itself with these international payment networks.
How can I find a SWIFT code?
If you transfer money internationally, your bank generates a SWIFT code that represents your transfer. To complete the transfer, you or the recipient may require to present the SWIFT code to receive the transfer. To find the right SWIFT code, you may use one of the following sources:
You can check your bank statements for SWIFT codes. Bank statements catalogue SWIFT codes as part of the bank's due diligence. Visiting your local branch and asking for a print-out may help you find information about the transfer.
If a paper copy of your bank statement is unavailable, try accessing your account through your bank's website. If your online statement doesn't list SWIFT codes, the bank's FAQ section may provide instructions for retrieving international payment information.
There are third-party options for locating your SWIFT code. Many websites host SWIFT code directories for you to use for free. With your location and banking information, an online SWIFT code directory might generate the exact code you need.
What's the difference between Bank Identifier Codes (BIC) and SWIFT?
Banks use BIC and SWIFT codes interchangeably. They're both strings of 8 to 11 characters that identify the bank, country, location, and branch. The International Organization for Standardization (ISO) regulates them both. While BIC refers specifically to the string of characters, SWIFT also refers to a larger organized network that uses redundancy and automation to assure secure transfers.
The BIC has a non-financial equivalent. The Business Entity Identifier (BEI) serves the same purpose as the BIC. The same regulatory group oversees it. When an entity isn't connected directly to a financial institution, it has a BEI instead of a BIC within SWIFT.
Is a SWIFT code similar to an International Bank Account Number (IBAN)?
A SWIFT code is distinct from an IBAN because it identifies institutions rather than specific accounts. While SWIFT solves the problem of institutional standardization, IBAN solves irregularities resulting from differing standards in bank account identification. An IBAN is typically a string of 34 characters that represent individual accounts for international and domestic payments.
Is a SWIFT similar to an EIN?
All sole proprietors, including banks, have an Employer Identification Number (EIN). While SWIFT codes primarily address international money transfers, EINs are for tax purposes and don't relate directly to SWIFT codes. EINs are nine-digit numbers representing businesses, estates, trusts, or any other taxable entity. They allow businesses to apply for business licences, open business bank accounts, take out business loans, and file tax returns.
Is there a difference between a SWIFT code and a sort code?
Sort codes are an additional regional standard that financial institutions may require for secure international transfers. Banks in the United Kingdom use sort codes domestically. They consist of three number pairs separated by hyphens. These numbers represent the bank and branch. Sort codes are part of the IBAN identification system. They don't relate to BICs SWIFT codes.
What's the difference between a SWIFT code and a routing number?
Canadian banks use eight-digit routing numbers. The first three digits indicate the institution and the last five digits represent a transit identification number. These numbers appear on the bottom of cheques, and the institutions that issue them are able to track them. They differ from SWIFT codes because they identify domestic transfers rather than international ones. Routing numbers tie transfers to individuals and mark routine payments such as direct deposits, bill payments, paycheques, and tax-related transactions.
Explore more articles
- Working Onsite vs. Working Offsite (With Pros and Cons)
- What Does a Business Coach Do? (With How to Become One)
- What Is Public Communication? (With Benefits and Types)
- What Is Statistical Data Analysis? (With Detailed Guide)
- Differences between Primary vs. Secondary Research
- Incremental Cash Flow (With Definitions and Examples)
- What Is a Video Sales Letter? (Benefits and How-to Steps)
- Common Causes of Manager Stress at Work and Ways to Cope
- What Is Cost in Project Management? (With Elements)
- Top Online Time Management Courses (With Essential Skills)
- What Is Hoshin Kanri? (Definition, How-to Guide, and Tips)
- How to Create Digital Transformation Strategies (With Steps)