There are different ways in which money can be transferred internationally: using retail money transfers, prepaid cards, electronic funds transfer (also knows as ACH transfers), and the most popular of all, SWIFT.
B2B Pay provides a way to transfer payments in USD, GBP or EUR via SWIFT between many countries around the globe.
But first, what is the difference between SWIFT and SEPA payments?
The basic difference between these two systems is their geographical scope: SEPA is a standard for fast, free, or cheap bank transfers in Euro between 35 SEPA member countries, while SWIFT is a global standard that allows for quick and safe communication between banks around the globe.
More about SEPA zone countries can be found here. You can read about the SWIFT and SEPA financial transfers in separate articles.
Comparing difference in sending payments between SEPA vs SWIFT or International wire.
A simple comparison between SEPA and SWIFT.
|
Detail requirement |
SEPA |
SWIFT or Wire Transfers |
|---|---|---|
|
Name of Beneficiary or receiver |
Yes (can be optional) |
YES |
|
IBAN |
Yes |
YES |
|
BIC |
Optional |
YES |
|
Payment reference |
Optional |
YES |
|
SWIFT |
NO |
YES |
|
Beneficiary address |
NO |
YES |
|
Beneficiary Bank details |
NO |
YES |
|
Account number / branch code |
NO |
YES |
|
Specific Currency |
NO (always EURO) |
YES |
The history of SWIFT payments
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication and was inaugurated in 1973 in Brussels, with the support of 239 banks from 15 countries. Over the years, the system was developed to create common standards for financial transactions that can be implemented all over the world, fueled by a processing system and communications network that allowed for sharing data between institutions. Important elements, such as operational procedures or liability, soon followed. SWIFT became the global language of money transfers, and systems all over the world were soon able to recognize and use it.
By replacing the outdated, slow and insecure system Telex, creators of the SWIFT system focused on the principles of transparency, traceability and consistency. The results greatly improved the security of international financial transfers and established a standard that is in use until today, by more than 10.000 institutions with banking licenses in over 200 countries.
The standardized code used in SWIFT transactions consists of a code that each member institution is assigned by the system, 8 or 11 characters long - you probably know it either as BIC or SWIFT code. The first four letters indicate the institution, then follows the two-letter country code and the two-letter city code, while the last three characters are optional and identify the local branch.
By using the account number of the person you want to transfer the money to, and knowing the SWIFT number of his/her bank, you can simply administer a transaction that looks like a message between two banks, allowing the recipient branch to clear the amount from your account. And indeed, SWIFT is simply a messaging system.
What contributed to SWIFT’s unparalleled success are its transparency (the message contains all important information one needs to follow the money), traceability and consistency (the system is universal, making it easy for its users to understand the transactions).
When using your online banking system, you are making a SWIFT transfer every time you choose an international transaction - you will have to provide the name of the recipient, sometimes the country of destination (in the case of European banks, these transfer will slightly differ depending on whether you send money inside the EU or outside of it). Once you fill in the bank account information, the system will be able to recognize the bank, and often the BIC/SWIFT code won’t even be necessary.
Nevertheless, in some cases, you will be asked to add more information, depending on the domestic regulations of the banking system. Providing correct and full information will speed up the process.
Fees & charges of SWIFT payments
While sending or receiving SWIFT payments, both sides can agree on who would be covering the costs of the transaction - the sending party can decide to take over all of the transaction costs, or they can be charged on both accounts.
The fees depend both on the message you send, especially the type and length of the transaction, but also on the type of the bank you’re using and the volume of SWIFT transactions your bank sends. These transfers can be free and reach up to 50 euros (or its equivalent in your currency). Keep in mind that in many cases of international transfers, this is not the only charge you will have to pay - there are other costs, for example associated with the exchange rate and currency conversion, or the routing charge that any intermediary bank cuts for participating in the transfer of the funds. Oftentimes, the amount you send is lower than the amount that lands on the recipient's account, and the charges for convenience and security can be quite high.
The advantage of using B2B Pay for your SWIFT payments, for example, is that it charges 1% for your transfer to India, while PayPal may charge for it up to 10%.
Swift Limits
As long as there are sufficient funds to cover the transaction and fees, there are no limits on SWIFT transactions, neither minimum nor maximum.
Processing times
Sending money via SWIFT requests within the EU, inside the US and between EU and US countries takes between 24 and 48 hours, in special cases, up to 5 days. But for some countries, such as India, it may take up to 3 months for the transaction to be completed. See a list of SEPA countries here.
Conditions, typical rules & information
- Your personal data will appear on all related messages.
- Fees are likely to be non-refundable.
- SWIFT transfers are usually the full responsibility of the sending party. Claims or losses are unlikely to be recovered (although these are rare occurrences). Delays are possible and there is nothing one can do about them.
- it is not possible to recover charges made by receiving banks.
- There could be extra charges that come without authorization from smaller markets. These are outside of a bank's control.
- There could be multiple currency conversions in the process, impacting the charges and the final amount that arrived on the recipient’s account.
- Rates may effectively be different than those provided at the time of signing a contract. It means that it may be higher or lower depending on circumstance and external factors.
- Typical total time for a transfer is 3-5 working days but it is possible that it takes longer in special cases.
- The transfer of money only starts once SWIFT receives and processes the request.
SWIFT alternatives
- Bitcoin and other cryptocurrencies. One of the main competitors in this area is a system called Ripple, which uses blockchain solutions to transfer money. It remains to be seen if the scalability and cost obstacles can be overcome by this and similar systems. It is a safe alternative in the right hands, which is why we recommend everyone first to understand the concept behind blockchain and its inherent risks.
- Virtual bank accounts such as B2B Pay's - the way our system is set up allows our clients to save up to 80% on some of the transfer fees and guarantee the speed of the transfers - we make sure they don’t take longer than 3 working days.
- There are also similar systems sponsored by the EU (INSTEX), China (CIPS) and Russia (SPFS).
- Online systems such as Paypal and several others are just like banks but operate online.
- Retail money transfers, such as Western Union, do not require a bank account.
- Prepaid debit cards, issued by employers for example - the money on the card can be withdrawn from ATMs anywhere in the world.
Questions & Answers
- What if I don't include an IBAN in my transfer? In this case, the payment processor won't be able to make your transfer. Banks in Europe cannot accept incomplete requests. In most cases, banks will ask you to correct the data before accepting your request.
- What is the purpose of an IBAN/BIC? An IBAN (International Bank Account Number) is the person or business bank account number in a standard international format. When used with a BIC (a number that identifies the recipient’s bank), it makes international payments more secure and faster. It also reduces errors in the process.
- Where can I find the IBAN/BIC/SWIFT details of the intermediary bank? If you’re receiving the money on your account, the IBAN, BIC and SWIFT numbers will appear at the top of your paper/online bank statement, typically directly above the list of detailed transactions. For issuing payments, the IBAN details are provided by the person receiving the money. The BIC details are provided by the beneficiary bank or the beneficiary itself.
Country-specific information
- SWIFT Payments to/from Jordan: Beginning in 2/2/14, banks in Jordan are required to accept and process payments only with a valid IBAN. From 2/15, all payments need to have a payment purpose code included. All payments outside of these parameters are declined.
- SWIFT Payments to Russia (RUB): the Central Bank of the Russian Federation has the following requirements: Complete name and address of the beneficiary, the beneficiary's account number (20 digits), beneficiary's INN (tax code), complete address of the bank, BIK (Russian sort-code), an account of the beneficiary's bank in the Russian Central Bank, VO-code (payment reason), the letters VO + 5 digit payment code (written in format VO12345), explanation of the payment in English, the number and date of the transaction contract (inside the payment details field), NDS (VAT) amount. If no VAT is imposed on the goods or services, then you must add "BEZNDS".
- SWIFT Payments to India (INR). India has imposed new regulations and these are mandatory and specific to the country: remitter and beneficiary and their relationship, nature of the payment to the beneficiary, type of beneficiary account (savings/nre/nro/etc), whether the payment is towards expenses of branch/liaison/project. Additional info may be required such as a unique identification number provided by the local authority (Reserve Bank of India) to the beneficiary. If payment is invoiced or it is service-based, details have to be included. We recommend that you include as much information as possible regarding the purpose of the payment.
- SWIFT Payments to Thailand. All SWIFT payments to Thailand require a stated purpose of the payment along with the payment instructions. If the purpose of the payment is not included (and details pertained to it, such as an invoice or salary details) the payment will be rejected.
- SWIFT Payments to the United Arab Emirates. All payments to the UAE must include an IBAN. This is a regulatory requirement. The UAE bank regulators also require the inclusion of a code that references the purpose of payment.
- SWIFT Payments to Saudi Arabia. Effective 1/ 2013, the Saudi Monetary Fund requires that payments into the country include an IBAN.
- SWIFT Payments to Brazil. As of 7/13, all payments sent to Brazil must include the IBAN. Payments above BRL 250,000 need to be accompanied with payer ID (CPF) and beneficiary tax ID
- Payments to Qatar. As of 31/12/13, payments sent to Qatar must include the IBAN.
- SWIFT Payments to Latvia. Effective 1/1/14, Latvia converted to using the Euro. Latvian Lats (LVL) is no longer an available currency option.
How does SWIFT or wire transfers work in international business
Due to rapid innovation in the areas of banking and finances, aided by new technologies, faster and cheaper solutions, some of the business operations are increasingly easier without the SWIFT system.
Even though SWIFT or wire transfers work similarly for individuals and businesses, as a business you are often required to provide more information to execute a transfer, especially for the first time. Requested details can include copies of your company incorporation documentation, proof of address and invoices in order to establish the legitimacy of the transaction.
Get a SEPA account with B2BPay
Your very own B2B Pay virtual bank account with IBAN in Europe
B2B Pay is offering our clients all around the globe a simple solution: after a basic compliance check, you will get your own European IBAN number. This way, you benefit from free bank transfers between all 36 SEPA countries with a non-resident bank account. B2B Pay instantly transfers the money to your domestic bank for a much better fee: up to 80% cheaper than your domestic bank.
After opening your account you will receive your IBAN number. You can use it right away on your invoices and contracts with customers in the SEPA zone, which includes major European countries. You will get a notification when money has been transferred into your account.