SWIFT Payments and its Pros and Cons | Best MBA college in Bangalore

Posted by Sushmita S On 19/04/2022 10:19:41

Introduction: SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a network that allows financial institutions around the world to exchange and receive information about financial transactions in a secure, standardized, and dependable manner. Swift also sells financial institutions' software and services, much of which is designed for use on the SWIFTNet Network and ISO 9362. MBA course in Bangalore

SWIFT does not assist with money transfers; instead, it issues payment instructions that must be settled by the institutions' correspondent accounts. To exchange banking transactions, any financial institution must have a banking relationship, either by being a bank or by affiliating with one or more to benefit from those specific business features.

SWIFT is a cooperative society governed by Belgian law, and it is owned by its members. It has locations all around the world. SWIFT's headquarters are in La Hulpe, Belgium, near Brussels, and were designed by Ricardo Bofill Taller de Arquitectura. Best MBA college in Bangalore

SWIFT Payments: SWIFT Payments make it simple for individuals and organizations to move money and currencies from one bank to nearly any other bank on the planet.

For example, if a company in the United States wants to send a payment of $100,000 to an Australian supplier, they would call their local bank office in the United States. The US Company would tell its bank to send a payment, including the beneficiary's name and account (the person or firm to which they are sending cash, in this case, the Australian Company), the amount to be transferred, and the receiving bank's SWIFT Code.

When the bank of the US Company receives the order (and determines that it is valid), the bank debits the US $100,000 account. It sends a SWIFT message to the Australian bank of the Australian company, instructing them to credit the account with $100,000 USD. The Australian company can opt to have the US$100,000 exchanged into Australian Dollars as foreign currency exchange, or keep it in US Dollars to pay their own suppliers who wish to be paid in US Dollars.

SWIFT Code

A swift code is a one-of-a-kind identifying the bank to whom money is being paid.  Often, a bank person from the transferor will assist the consumer in determining the correct code. It is also known as Bank Identifier Codes (BICs), are made up of eight or eleven characters and contain the following data: 

  • The first four letters identify the bank and are frequently related to the full name or abbreviated name of the bank. 
  • The country code, which identifies the country the bank is located in, is the next two characters.
  • The next two characters (letters or numbers) indicate the location of the bank's headquarters in that country. 
  • Instead of the bank's national headquarters, the last three possible characters (letters or numerals) identify the bank's individual branch office. 

Pros and Cons of SWIFT Payments 

  • SWIFT Payments are a simple, safe, and quick way to make payments and transfer international currencies. 
  • When making a SWIFT payment, there are many security checks that must be completed:
  • The bank undertakes fraud checks and anti-money laundering (AML) checks to verify the sender is not committing fraud ("Know Your Client" requirements). 
  • Similar checks are carried out by the receiving bank to guarantee that money is disbursed to the correct account. 
  • As a result, the process of sending and receiving the SWIFT Payment can take longer, and currency transfers can take two to three days.
  • These security checks may not always ensure that the person or firm receiving the payments is not a fraudster or that they will provide the services or goods that they are obligated to provide.
  • Fees for SWIFT Payments can vary significantly from one bank to the next, and even within the same bank. The cost of sending a SWIFT Payment can range from zero (free) to more than US$50, and there may also be expenses associated with receiving the SWIFT Payment. These expenses can mount up quickly, especially if a person or company transmits many SWIFT Payments on a regular basis. If the sums being transferred and received are little, the costs can account for a large portion of the monies being sent and received.

Conclusion 

SWIFT Payments are a common way to send money from one country to another, and they're also a quick way to send money internationally. Companies can develop strategies around their use of SWIFT Payments for day-to-day operations by weighing variables such as ease of use, security, and payment fees.

 

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