Intro: Why Understanding SWIFT Matters for Fintech
In today’s global financial ecosystem, SWIFT powers the vast majority of cross-border payments, enabling trillions of dollars to move securely between banks every day. While it’s not a payment system itself, SWIFT serves as the critical messaging backbone that connects banks, payment providers, and financial institutions worldwide.
For fintech teams building international payment products, understanding how SWIFT transfers work is essential - not just for compliance and risk management, but also to design seamless user experiences and automate backend reconciliation. Without a clear grasp of the SWIFT process, fintechs risk costly delays, regulatory pitfalls, and frustrating support issues.
This article breaks down the SWIFT transfer lifecycle into a simple, step-by-step overview. We’ll explore each stage in detail, explain the key message types like MT103, and highlight practical insights fintech teams need to integrate SWIFT payments efficiently and confidently.
What Is SWIFT? A Quick Refresher
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is not a payment system itself but rather a secure messaging network that enables financial institutions worldwide to exchange information about financial transactions safely and reliably.
Through SWIFT, banks and payment providers send standardized messages that initiate, confirm, and reconcile payments, securities, and other financial activities. This messaging infrastructure is critical for coordinating cross-border fund transfers, ensuring accuracy, transparency, and compliance throughout the payment lifecycle.
With a vast network spanning over 200 countries and connecting more than 11,000 financial institutions, SWIFT remains the backbone of global interbank communication and settlement—making it indispensable for any fintech handling international payments.
Who’s Involved in a SWIFT Transfer?
Understanding the key players in a SWIFT transfer is essential for fintech teams looking to build or optimize cross-border payment solutions. Here’s a breakdown of each participant and their role in the transaction:
- Sender Bank
- The financial institution that initiates the transfer on behalf of the sender. It composes and sends the SWIFT message containing payment instructions.
- Recipient Bank
- The bank that receives the funds and credits them to the beneficiary’s account once the transfer is complete.
- Correspondent/Intermediary Banks
- These banks act as intermediaries when the sender and recipient banks do not have a direct relationship. They facilitate the transfer by routing funds and messages through the SWIFT network.
- SWIFT Network
- The secure messaging platform that connects all parties, ensuring the standardized, encrypted exchange of payment instructions and confirmations.
- Fintech Provider (if applicable)
- Many fintech companies act as intermediaries or facilitators by integrating with the SWIFT network, offering APIs and dashboards to streamline payments, compliance checks, and reconciliation for their clients.
Step-by-Step: How a SWIFT Transfer Works
The SWIFT payment process is a meticulously designed sequence that enables secure and standardized international money transfers. For fintech teams, understanding each step is crucial to optimize compliance, user experience, and backend operations. Here’s a detailed walkthrough of how a SWIFT transfer works:
1. Initiation
The process begins when the sender provides all necessary payment details, typically through a fintech app or banking platform. This includes the recipient’s IBAN (International Bank Account Number), BIC/SWIFT code of the recipient’s bank, the amount to be sent, and the currency. Accuracy at this stage is critical to ensure the transfer routes correctly and avoids delays.
2. Validation & Compliance Checks
Before processing, the sender’s bank (or fintech provider) conducts mandatory validation. This includes Know Your Customer (KYC) verification to confirm the sender’s identity, anti-money laundering (AML) screening, and sanction list checks to ensure the transaction is not flagged for illegal activity. These steps reduce fraud risk and regulatory violations.
3. Message Creation
Once cleared, a structured SWIFT payment message, typically the MT103, is generated. This message contains standardized fields detailing the sender, recipient, amount, currency, purpose, and other essential transaction data. The MT103 acts as the formal payment instruction shared across the network.
4. Message Transmission via SWIFT Network
The MT103 message is then securely transmitted over the SWIFT network, an encrypted, highly reliable communication platform connecting thousands of banks worldwide. The network guarantees message integrity and confidentiality, ensuring payment instructions reach the intended recipient banks safely.
5. Intermediary Bank Handling
If the sender and recipient banks do not share a direct relationship (known as a correspondent banking relationship), one or more intermediary banks step in. These correspondents facilitate the transfer by routing funds and passing along the payment messages until the transaction reaches the recipient bank.
6. Settlement
At this stage, the actual movement of funds occurs. The sender bank debits the sender’s account, while the recipient bank credits the beneficiary’s account. For the transfer of funds between banks (liquidity movement), an MT202 message may be used internally to instruct the transfer of funds between correspondent banks.
7. Confirmation
Upon successful crediting, the recipient bank sends back an MT103 confirmation or updates the payment status via the SWIFT global payments innovation (gpi) system if enabled. This confirmation notifies the sender (or fintech platform) that the payment has been completed.
8. Reconciliation
Finally, fintech backend systems use MT messages and transaction reports to reconcile accounts, verify completed payments, and update the customer-facing dashboards. Automated reconciliation reduces errors and improves operational efficiency.
Understanding the SWIFT payment process at this granular level allows fintech teams to design robust, compliant payment flows that deliver fast, transparent, and reliable cross-border transactions.
How Long Does a SWIFT Transfer Take?
SWIFT transfers typically take 1 to 5 business days to complete, but the exact timeframe can vary depending on several factors.
One major influence is time zones and cut-off times. Payments initiated late in the day or close to weekends may face delays as banks process transactions only during business hours. Additionally, the number of intermediary banksinvolved affects speed - each correspondent adds processing time as funds and messages move through their systems.
The currency and destination country also play a role. Transfers to countries with less-developed banking infrastructure or involving exotic currencies may take longer. Meanwhile, compliance checks - such as enhanced due diligence or sanction screening - can cause additional hold-ups if red flags arise.
To address these challenges, the SWIFT global payments innovation (gpi) service offers real-time tracking and faster settlements, enabling fintech teams and end-users to monitor payments throughout their journey, improving transparency and predictability.
Common Reasons SWIFT Transfers Get Delayed - and How to Avoid Them
Delays in SWIFT transfers are often frustrating but usually preventable. Understanding the main causes can help fintech teams streamline payments and improve customer experience.
- KYC and Compliance Issues
Incomplete or outdated customer information often triggers additional identity checks. Similarly, hits on sanctions and watchlists can put transfers on hold for manual review.
Tip: Keep KYC data current and implement robust, automated screening tools to minimize manual interventions.
- Sanctions and Regulatory Filters
Banks apply strict filters to block transactions involving sanctioned entities or countries, which may delay or even reject payments.
Tip: Proactively monitor sanction lists and educate customers about restricted jurisdictions to avoid failed transfers.
- Formatting Errors in Payment Instructions
Mistakes in IBAN, BIC/SWIFT codes, or missing mandatory fields in the MT103 message can cause rejections or delays.
Tip: Validate payment details rigorously at onboarding and within payment flows. Use software checks to catch errors before submission.
- Cut-Off Times and Banking Hours
Submitting payments after cut-off times or during weekends means they’ll be processed on the next business day, adding unavoidable delay.
Tip: Communicate cut-off times clearly to users and automate payments to submit during optimal windows.
By proactively addressing these common pitfalls, fintech compliance and product teams can reduce transfer delays, improve trust, and deliver a smoother cross-border payment experience.
SWIFT Fees and Charges: Who Pays What?
When sending money via SWIFT, understanding the different fee structures is key for transparency and user trust. The fees are typically divided into three types, often abbreviated as OUR, SHA, and BEN - each defining who bears the cost of the transfer fees.
- OUR (Sender Pays All Fees): The sender covers all fees, including those charged by intermediary and recipient banks. This ensures the recipient receives the full amount without deductions.
- SHA (Shared Fees): The sender pays the sending bank’s fees, while the recipient covers any intermediary and receiving bank charges. This is the most common arrangement.
- BEN (Recipient Pays All Fees): All fees are deducted from the payment amount, meaning the recipient receives the funds minus all charges.
Intermediary banks often deduct their own fees during the transfer process, which can lead to unexpected reductions if the fee type is not clearly specified.
For fintech providers, it’s crucial to clearly communicate these fee structures and potential deductions to end-users upfront. Transparency in fees helps set accurate expectations, reduces support queries, and builds trust in your payment product. Leveraging APIs and real-time fee calculations can improve the user experience by showing estimated costs before payment submission.
Trust Kanzum for Fast and Secure B2B Payments
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Learn more about how Kanzum empowers enterprises with secure SWIFT payment tracking and secure cross-border transactions.
Conclusion: Build Better Cross-Border Flows With SWIFT Know-How
Mastering the SWIFT transfer process, from initiation and compliance checks to message transmission and settlement, is essential for fintech teams aiming to deliver seamless, reliable cross-border payments. Understanding each step helps reduce delays, improve reconciliation, and enhance user experience. Treating SWIFT integration not just as a feature but as a core infrastructure layer ensures your platform stays compliant, scalable, and competitive.
Ready to streamline your SWIFT payments and gain full control over cross-border flows? Get started with Kanzum