SWIFT Code stands for ‘Society for Worldwide Interbank Financial Telecommunication’ code. A SWIFT code is also called BIC Code – ‘Bank Identification Code’ which is used to identify banks uniquely throughout the world. A SWIFT code is recognized and approved by the International Standards Organization, or ISO, and represents a particular bank or bank branch. It is especially useful in facilitating international wire transfers.
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The SWIFT code is an 8 or 11 alphanumeric characters code that uniquely identifies financial institution. If a SWIFT code is eleven characters, this means that the bank has added a three-digit code to denote a specific branch of a bank.
First 4 characters – Bank Code – Identifies financial institution uniquely (only letters)
Next 2 characters – Country Code (only letters)
Next 2 characters – Location Code (Letters and Digits)
Optional Last 3 characters – Branch Code of a bank (‘XXX’ for main office) (Letters and Digits)
The above mentioned format of Bank Identifier Codes (BIC) or Swift Code is approved by the International Standard Organization (ISO) and represents a particular bank or bank branch.
What is the use of Swift Codes?
When transferring money to another country or another bank, options include on-site express funds transfer services like Western Union, online funds transfer services like PayPal, or direct wire transfers from one bank to another. If a direct wire transfers is selected, the bank will probably ask for a SWIFT code for the bank receiving the funds. The SWIFT code is universally recognized and usually necessary for a funds transfer. These codes are used for transferring the money between banks especially the international wire transfers and are also used for exchanging other messages between banks. If you want to do a international direct wire transfer between banks, your bank will probably ask for the SWIFT code of the bank receiving the funds.
Most of the international banks use the SWIFT network for interbank messages. As of September 2010, SWIFT linked more than 9,000 financial institutions in 209 countries and territories, who were exchanging an average of over 15 million messages per day (compared to an average of 2.4 million daily messages in 1995).
SWIFT does not facilitate funds transfer; rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.