The SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global cooperative that functions as a vast international messaging system, not a financial institution that holds or transfers money. Established in 1973, it was created by 239 banks from 15 countries to solve the problem of the previous system, TELEX, which was slow, error-prone, and unencrypted for international payment instructions.
The mechanism works by providing a secure and standardized way for financial institutions to exchange information. SWIFT assigns a unique BIC code (also known as a SWIFT code or ISO 9362 code) to each member institution. This code is typically 8 or 11 characters long and identifies the bank, country, and city. When a cross-border payment is initiated, the sender's bank uses the recipient's bank's SWIFT code to route the payment message, which contains the instruction to transfer funds. The network itself only transmits the message; it does not provide settlement functions.
An informed reader should know that SWIFT works in conjunction with the IBAN (International Bank Account Number), where SWIFT identifies the bank and IBAN identifies the specific account. The system is overseen by the central banks of the G10 countries, the European Central Bank, and the National Bank of Belgium. A significant recent change was the introduction of SWIFT GPI (Global Payments Innovation) in 2017, which allows for real-time tracking of cross-border payments, with most now credited within 24 hours. The core function as a secure messaging network remains, but exclusion from the network is now a major economic sanction, as seen when many banks in Russia and Belarus were removed in 2022.