SWIFT stands for “Society for Worldwide Interbank Financial Telecommunication”. Initially, it was introduced as “SWIFT” but was later standardized as BIC (Business Identifier Codes). It is also known as SWIFT-BIC, BIC code, SWIFT ID or SWIFT code.
What is SWIFT Code?
It is a unique identification code for both financial and non-financial institutions. The previous edition is ISO 9362:2009 (dated 2009-10-01). The update of ISO 9362 in 2009 has expanded the scope and it includes non-financial institutions as well. However, before then BIC was commonly known to be an acronym for Bank Identifier Code. With the update of ISO 9362, SWIFT got a standard format of Business Identifier Codes. And, the International Organization for Standardization (ISO) approves this standard format. The ISO has designated SWIFT as the BIC registration authority. For a non-financial institution, SWIFT Code acts as a Business Entity Identifier or BEI.
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Structure of SWIFT:
The SWIFT code consists of 8 or 11 characters. Following is the structural illustration:
- First 4 Letters: Institution Code or Bank Code.
- 5th & 6th Letters: Two-letter country codes as per ISO 3166-1 alpha-2 codes
- 7th & 8th Letters or Digits: Location Code. Now, these 7th & 8th Characters could be different with different meanings. If the second character is:
- “0”, it means its typically a test BIC as opposed to a BIC used on the live network.
- “1”, that means its a passive participant in the SWIFT network.
- or “2”, indicates a reverse billing BIC, where the recipient pays for the message as opposed to the more usual mode whereby the sender pays for the message.
- 9th to 11th Letters or Digits: Branch Code. Branch Code is optional. SWIFT Code could be of 8 digits only. If SWIFT is an 8-digit code, then it refers to the main office of the Bank.
Importance of SWIFT Code:
SWIFT codes are important for the international money transfer between banks. Mainly, for international wire transfers. Also, SWIFT Code plays an important role in the exchange of other messages between banks.
You cannot go for an international transfer without a SWIFT Code. It is mandate for international transactions. Usually, SWIFT Code is in combination with an IBAN (International Bank Account Number). Once the transfer is through, the receiver bank will issue a ‘SWIFT Message’. This message is a confirmation of successful transaction. Also, this message contains the full information about the transfer. Therefore, it is an important piece of information that you should include in an invoice if you have customers abroad. Moreover, it also ensures the security of the transaction.