Revolutionizing International Trade: The Impact of SWIFT Payment Accounts

The ability to send money abroad is needed not only by ordinary people, but first and foremost by businesses. Let’s find out how the SWIFT system works and how it helps international trade.

SWIFT – what is it?

SWIFT (Society for Worldwide Interbank Financial Telecommunications) is an international financial messaging system that unifies money transfers and makes them secure.

In essence, it is a messenger that provides delivery of messages from one bank or SWIFT-connected company to another. Messages in this messenger are standardized, and the format and rules for checking fields are regulated, which guarantees the correct interpretation of messages by the sender and the recipient.

Thus, SWIFT is not a payment system, does not manage the accounts of its members, and does not hold any assets. It only encrypts, transmits, and stores data on transfers.

The creation of SWIFT was largely due to the need to streamline the interaction between banks on their international settlements and payments. The more actively international trade developed, the more urgent the need for a system that would create a safe environment for settlements in different currencies with floating rates.

The system was created in 1973 in Belgium in the form of an independent association, 239 banks from 15 countries participated in its creation. Now more than 11 thousand financial organizations in almost all countries of the world are connected to this system. In 2021, the SWIFT system processed over 42 million financial transactions on average daily, the busiest day was November 30, when the system processed more than 50 million messages. On average in September 2022, this figure was almost 44.8 million.

Today it is easy to open a SWIFT payment account for business users and get all the benefits of SWIFT money transfers in one account. Send and receive money without restrictions, track transactions and control the movement of funds without any problems. Such a system will be very useful for organizing payments, working with partners, etc.

Advantages of SWIFT

Nowadays SWIFT is the most rational solution for payment of foreign services or transfer of a large sum of money to another country (especially for those who have a constant need to send considerable money transfers abroad).

The incredible scale of spreading SWIFT in the world allows you to make a transfer to the client account of any known bank, and the amount is limited only by permissible values that do not violate the economic laws of a particular state.

SWIFT transfers send funds not to the name of the recipient, but to certain accounts, and you always have the opportunity to choose the currency of the transfer. Also, the system is as confidential and secure as possible. When transferring money through SWIFT, the commission is always a certain (fixed!) amount, which will increase in minimal proportion to the amount of transfers, which will be beneficial when transferring large amounts of money abroad.

So, the main advantages of SWIFT are:

• high speed of delivery of transfers. The average delivery time to any part of the world is approximately 15 minutes for a regular message and 2 minutes for an urgent message;
• No restrictions on the amount of payment;
• wide choice of currencies SWIFT operates;
• low tariffs (they are much lower than in other systems);
• wide distribution and popularity in the world, which allows payments to be made to almost all countries;
• guarantees of timely delivery of the transfer. SWIFT will cover the losses incurred by clients in case the delivery terms are violated due to the fault of the system.

The importance of SWIFT for business

Why is the speed of payments important? If we omit additional commissions when using intermediaries, there is still the issue of the speed of transaction processing. This is especially important for businesses.

For example, if a company buys foreign goods, it usually has an agreement with the supplier on partial payment. And while the goods are in transit, the company can use the free funds for other needs or investments.

In conditions where there are no guarantees of a quick transfer, problematic situations arise. For example, suppliers may request 100% prepayment for goods. For a business, this means:

• If there are logistical disruptions and delivery is delayed, the company will be in a vulnerable position: the money has been paid, but the goods have not yet arrived;
• the condition of full prepayment may affect the company’s financial position, making it more difficult for the company to fulfill other obligations, such as paying off creditors.

In addition, if payment for the goods is late, including because an intermediary was involved, then:

• the supplier may demand a penalty for each day of late payment;
• if the shipment is tied to the receipt of money in the supplier’s current account, the goods will not be shipped on time.

All this creates additional costs for the business.

And vice versa: the ability to work in one system with your counterparties in a predictable and fast scheme stimulates financial and business activity.

The importance of SWIFT is because this system is used by a huge number of banks around the world and in a multitude of world currencies. This allows you to quickly and without restrictions to do business with any country. No other system has such numerous participants.