How the SWIFT system works: Complete guide on payments

If your business regularly sends or receives money across borders, understanding how SWIFT payments work is essential. The SWIFT system underpins much of the global financial infrastructure, enabling secure, standardized messaging between banks in different countries. While it doesn’t move money itself, it facilitates the communication that makes international transactions possible.

For finance managers and executives working with global vendors, employees, or partners, SWIFT offers a reliable way to process international payments, supporting over 11,000 institutions in more than 200 countries. In this guide, we’ll break down what SWIFT is in banking, how it works, and how to use it effectively for your business.

What is SWIFT in banking?

The SWIFT system—short for the Society for Worldwide Interbank Financial Telecommunication—is a global messaging network used by financial institutions to exchange payment instructions and other financial data in a standardized and secure format. Established in 1973, SWIFT was created to replace the fragmented and error-prone telex system with a more reliable way to communicate across borders.

Although SWIFT doesn’t move funds itself, it serves as the backbone of international payments by transmitting messages between banks and financial institutions. These messages tell participating institutions how to execute financial transactions such as wire transfers, securities trades, and currency exchanges.

Today, SWIFT connects over 11,000 financial institutions in more than 200 countries, providing the infrastructure that supports trillions of dollars in daily global commerce.

SWIFT services

The SWIFT network offers a range of services to support secure and efficient international transactions, including:

• Applications: Tools that help institutions manage payments, securities, compliance, and reporting in a streamlined, digital environment.
• Business intelligence: Data and analytics services that provide insights into transaction trends, operational performance, and market behavior.
• Payment orders: Standardized messaging formats that allow financial institutions to send and receive cross-border payment instructions clearly and accurately.
• Messaging services: Secure communication channels for everything from trade finance to treasury and foreign exchange.
• Connectivity solutions: Interfaces and cloud-based tools that integrate an institution’s internal systems with the SWIFT network to automate transaction workflows.

History of SWIFT payments

The SWIFT system was born out of a need for a more secure and efficient way to facilitate international financial transactions. Before its creation in the early 1970s, banks relied heavily on telex: a slow, unstructured communication method that lacked standardization and was vulnerable to misinterpretation and fraud.

In 1973, a group of 239 banks from 15 countries came together to form the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Their goal was to create a centralized messaging network that could replace telex and improve how banks communicated across borders.

SWIFT officially went live in 1977, and since then, it has grown into one of the most critical components of the global financial system. Over the decades, SWIFT has expanded its capabilities beyond simple payment messages to include services for securities, treasury transactions, trade finance, and compliance. It has also introduced several innovations to enhance cybersecurity and data integrity, such as the SWIFT Customer Security Programme (CSP).

Today, SWIFT connects more than 11,000 institutions in over 200 countries and territories, processing millions of secure messages each day. Its evolution reflects the increasing complexity of global finance, and its infrastructure continues to play a key role in enabling smooth, standardized transactions around the world.

What is a SWIFT code?

A SWIFT code, also known as a Bank Identifier Code (BIC), is a unique sequence of characters used to identify a specific bank in international financial transactions. When sending money across borders, banks use SWIFT codes to ensure the payment instructions reach the correct institution.

Each SWIFT code typically contains 8 to 11 characters, broken down as follows:

• Bank code (4 letters): Identifies the bank.
• Country code (2 letters): Indicates the country where the bank is located.
• Location code (2 letters or numbers): Specifies the city or region.
• Branch code (optional, 3 characters): Designates a particular branch of the bank.

For example, the code HSBCGB2LXXX refers to HSBC in the United Kingdom, located in London, with “XXX” indicating the main office.

SWIFT codes are essential for correctly routing international payments. Without them, transactions may be delayed, misdirected, or rejected altogether. For finance teams, having the right SWIFT code ensures faster and more reliable cross-border payments.

5 benefits of SWIFT payments for global businesses

For companies operating across borders, SWIFT offers a dependable way to manage international transactions. Its global reach, consistent formatting, and security protocols make it a go-to system for finance teams that need to move money securely and efficiently.

Here are some of the key advantages of using SWIFT payments:

1. Security and compliance

SWIFT is built with strong encryption and multi-layered authentication protocols, helping to protect sensitive financial data. Additionally, the system supports compliance with global regulatory standards, such as anti-money laundering (AML) and sanctions screening, reducing legal and operational risks.

2. Efficiency

By standardizing how transaction messages are structured, SWIFT reduces the chance of miscommunication and manual errors. This leads to faster processing times and fewer delays, even when multiple institutions are involved in the transaction chain.

3. Global reach

With over 11,000 financial institutions connected across more than 200 countries, SWIFT is one of the most widely adopted systems in global finance. This makes it easier for businesses to send and receive payments almost anywhere in the world.

4. Transparency and traceability

Every SWIFT message includes reference numbers and timestamps that allow both senders and recipients to track the progress of a transaction. This transparency helps finance teams reconcile payments more easily and respond to issues faster.

5. Versatility

SWIFT supports a wide range of transaction types, including payments, securities trading, and foreign exchange. This flexibility makes it a valuable tool for multinational companies with complex financial operations.

How SWIFT payment works in 4 key steps

Although SWIFT payments may seem complex, the actual process follows a clear and structured path. The SWIFT network acts as a secure messaging system, guiding banks through each stage of an international transfer. Here's how a typical SWIFT payment works, step by step:

Step 1. Gather the needed information for the transaction

Before initiating the transfer, collect all essential details. This includes the recipient’s full name, their bank’s name and address, the correct SWIFT/BIC code, the recipient’s account number or IBAN, the payment amount, and the desired currency.

Step 2. Fill out the transfer forms

Log in to your business banking portal or visit your financial institution to complete the international wire transfer form. Double-check all input fields. Errors at this stage can delay processing or result in a failed transaction.

Step 3. Provide payment

Once the form is complete, submit the funds through your bank or payment provider. The payment will be debited from your business account, and the bank will send a SWIFT message with detailed transfer instructions to the recipient's institution.

Step 4. Wait for confirmation

The SWIFT message is transmitted through one or more intermediary banks (if needed), and once received, the recipient's bank credits the funds to the beneficiary's account. Depending on the banks involved and their processing times, this can take anywhere from 1 to 5 business days.

Who can use the SWIFT payment system?

The SWIFT network isn’t just for large banks. A wide range of financial and non-financial institutions rely on it to facilitate secure and standardized communication for international transactions. Here are some of the key players that use SWIFT on a daily basis:

1. Global businesses

Companies that operate across multiple countries often use SWIFT to pay international contractors, vendors, and employees. The system’s reliability and broad reach make it ideal for managing cross-border payments with transparency and ensuring payroll compliance.

2. Banks

Commercial banks are the primary users of the SWIFT network. They use it to exchange payment instructions, settle foreign exchange deals, and handle interbank transfers securely and efficiently.

3. Money brokers and security broker-dealers

These institutions depend on SWIFT to send and receive messages related to securities trading, foreign currency transactions, and investment settlements. The standardized format ensures clear communication between parties.

4. Non-bank financial institutions

Insurance companies, asset managers, and fintech providers also use SWIFT to handle a wide range of transactions and financial communications. The platform’s security features and global coverage make it a reliable choice for institutions outside traditional banking.

5. Central banks and government agencies

Some public sector organizations use SWIFT for intergovernmental payments, foreign reserves management, and cross-border regulatory communications.

SWIFT payments and compliance

When it comes to moving money across borders, compliance is essential. The SWIFT network is built with regulatory standards in mind, helping institutions stay inside the bounds of global financial laws and prevent misuse of the system. Businesses using SWIFT must follow a range of compliance protocols to protect themselves and their customers.

Here are some of the key compliance frameworks that govern SWIFT payments:

1. Anti-Money Laundering (AML)

To combat financial crime, organizations using SWIFT must implement AML checks. These include transaction monitoring, customer due diligence, and reporting suspicious activity to the appropriate regulatory authorities.

2. International sanctions

Participating financial institutions are responsible for screening SWIFT messages against international sanctions lists, such as those maintained by the U.S. Treasury’s OFAC or the EU. This helps prevent transfers to sanctioned individuals, entities, or regions.

3. SWIFT Customer Security Programme (CSP)

CSP is a global initiative that sets baseline cybersecurity standards for all SWIFT users. Participants are required to meet certain technical and procedural controls to help safeguard their infrastructure and reduce the risk of cyberattacks.

4. Know Your Customer (KYC)

Institutions involved in SWIFT payments must verify the identity of their clients and counterparties. KYC protocols reduce the risk of fraud and help ensure that the parties involved in a transaction are legitimate.

5. Data privacy and protection laws

Financial institutions must also comply with data regulations, such as GDPR or local privacy laws, when handling personal and financial information through SWIFT messages.

How much does SWIFT cost?

The cost of using SWIFT can vary depending on the banks involved, the destination country, and the size of the transaction. Unlike domestic transfers, SWIFT payments often include multiple fees charged by different parties along the transfer path.

Here are the main types of fees you may encounter:

• Sending bank fee: This is the charge your bank applies for initiating the SWIFT transaction.
• Receiving bank fee: The recipient’s bank may charge a fee for processing and crediting the funds.
• Intermediary or correspondent bank fee: If the payment passes through one or more intermediary banks before reaching the final destination, each may deduct a fee from the transfer amount.

Some banks offer fee-sharing options to determine how these costs are distributed between sender and recipient. Additionally, high-volume users like multinational corporations may be able to negotiate reduced fees or access better rates through their financial institutions.

For finance teams managing global payments, it’s important to factor in these potential costs when budgeting for international transactions.

5 Tips to use SWIFT payments for your global workforce

Managing international payroll and contractor payments can be complex, but with the right approach, SWIFT payments can help streamline your operations. To get the most out of the SWIFT network, here are some best practices for finance teams supporting a global workforce:

1. Rely on automated compliance software

Manual compliance checks can slow down payments and increase the risk of errors. Use tools that automate screening for sanctions, AML regulations, and KYC requirements to ensure fast, compliant transfers.

2. Consider fees and limitations for international transactions

Because SWIFT payments can involve multiple banks, fees can add up quickly. Understand how your bank handles charges, especially intermediary fees, and explore consolidated payment options to reduce costs.

3. Regularly update security measures to align with SWIFT CSP

SWIFT’s Customer Security Programme (CSP) outlines cybersecurity standards to protect users across the network. Review your systems regularly to ensure they meet these evolving requirements and reduce your exposure to fraud.

4. Choose banking partners with strong global networks

Working with banks or payment providers that have established SWIFT relationships and access to intermediary banks can reduce delays and improve payment reliability across different regions.

5. Plan for processing times

While SWIFT payments are reliable, they can take 1–5 business days depending on the countries and banks involved. Set clear expectations with international employees or vendors and schedule payments ahead of deadlines.

Ensure safe global payments with Rippling

Managing international payroll and cross-border payments doesn’t have to be complex. With Rippling’s global payroll software, you can streamline the process through a unified platform that supports multiple funding types, including international SWIFT transfers.

Rippling enables businesses to receive incoming bank transfers into supported currency hubs, helping finance teams fund payroll and other financial products efficiently. For Rippling customers, this means the ability to send international SWIFT wires to a designated receiving account with wire-mapping capabilities, to enable efficient downstream payments.

While SWIFT transfers remain a flexible funding option, Rippling also supports more automated solutions like direct debit, allowing for faster and more predictable processing, especially when managing high-volume or recurring pay runs. Regardless of the funding method, all payment flows are underpinned by Rippling’s secure infrastructure and are designed to meet the applicable regulatory, data protection, and compliance requirements in each operating market. This ensures that payments are compliant, secure, and optimized for global scale.

Whether you’re funding payroll from overseas or managing billing across borders, Rippling gives you the tools to handle international transactions confidently and compliantly.

FAQs on SWIFT payment

How does SWIFT work?

SWIFT works by securely transmitting standardized financial messages between banks and financial institutions around the world. When a business initiates an international payment, its bank sends a SWIFT message to the recipient's bank with all the payment details, like the amount, currency, and destination account. While SWIFT itself doesn't move money, it provides the communication framework that allows the funds to move through a network of correspondent or intermediary banks.

How long does a SWIFT transfer take?

Most SWIFT payments are processed within 1 to 5 business days. The exact timing depends on the banks involved, time zones, and whether intermediary banks are used. Delays can occur due to compliance checks or holidays in the sender’s or recipient’s country.

What are the disadvantages of SWIFT payment?

While SWIFT is secure and globally accepted, it can involve multiple fees charged by the sending, receiving, and intermediary banks. Processing times may also be slower compared to domestic transfers or newer real-time international payment systems.

Are SWIFT payments free?

No, SWIFT payments typically incur several fees. These may include a transfer fee from the sending bank, charges from intermediary banks, and a receiving fee from the destination bank. Costs vary depending on your financial provider and the route the payment takes.

Is SWIFT better than a wire transfer?

SWIFT is actually a type of wire transfer system, specifically for international payments. It’s ideal for large, secure cross-border transactions. For domestic transfers, however, local wire systems are usually faster and less expensive. The best option depends on your specific use case and destination.

This blog is based on information available to Rippling as of May 13, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.