Full Form of SWIFT

The full form of SWIFT is Society for Worldwide Interbank Financial Telecommunication. It is a platform that provides national financial institutions with a secure, standardized, and encrypted network in a reliable environment for the transfer of various important information, which can be from one financial institution to another branch or from one financial institution to another. It also provides software for maintaining various information.

SWIFT may not be a banking institution or financial entity that moves money, but it is a system that enables the entities transfer money from one end to another with utmost security. More than 11,000 SWIFT members transfer around 42 million messages per day over the network.

The full form of SWIFT is Society for Worldwide Interbank Financial Telecommunication, which is a well-developed system having its operating center in various countries with a membership of almost all the financial institutions. The smooth functionality of sending SWIFT codes between the banks ensures that only the payment clears and is credited when the transactions are authorized to form the end customers. Thus, SWIFT is a very successful platform for the quick and smooth functioning of financial institutions, including established banks worldwide.

Whenever there is a banking transaction, SWIFT assigns a unified and standardized code to the financial institution entering into the transaction, either 8-digit or 11-digit codes. The code has three interchangeable terms: the swift code, the bank code, and the SWIFT ID or ISO code.

Let's suppose a person has a bank account in one bank, and he needs to transfer the money to another person having a bank account in another bank in another country. In that case, the first person must walk into his bank with another person's account number and its unique SWIFT code. Then, the other bank will send a SWIFT message for a payment transfer via a secured network. Once the other bank receives the SWIFT message of incoming payment, it will clear the credit into another person's bank account.

The image below shows how it works:

• Before the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the only message confirmation for international funds' reliable means was 'Telax.' However, at that time, there were various issues associated with Telax, which included slow speed, lack of standardization, security problems, etc. Due to this, it required something new with standardization.
• So, they founded the society for worldwide interbank financial telecommunication in 1973 in Brussels. The CEO Carl Reuterskiöld inaugurated it and initially worked for SWIFT under his leadership only. At its initial stage, only approximately two hundred and forty banks from so many countries supported it.
• Gradually, it started establishing common standards for financial transactions and a shared and secured financial information network with a worldwide communication data processing system. However, it established its fundamental operating procedures and rules data after 2 years in 1975, and after 2 years, it sent a message in 1977. Finally, in 1979, Governor John N Dalton of Virginia established SWIFT's first the United States operating center.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) functions worldwide with its reliable, smooth, secured data transmission network among the globe's financial institutions. The functions of the Society for Worldwide Interbank Financial Telecommunication are as follows:

1. SWIFT does not help transfer the funds; rather, it provides passcodes and payment orders to the financial institutions that need to be settled by the corresponding accounts that institutions have.
2. It provides a network where one can transfer the data from one bank's branch to another bank's branch. Hence, it is a financial messaging network.
3. It makes an exchange of information reliably and securely through the worldwide established transmission and telecommunication network.
4. Most interbank international transactions use SWIFT, which provides a turnkey solution for its member financial institutions and banks. In addition, it facilitates connectivity to SWIFT networks regarding the transfer of relevant information in all international transactions.
5. Also, a SWIFT code is an alphabetical number containing information identifying the banks and the branches based on a standardized format.

The importance of Society for World Wide Inter-Bank Financial Telecommunication is as follows:

• SWIFT ensures the faster transfer of information from one bank to another, regardless of whether the banks are in the same country.
• Unlike other data transmission networks, SWIFT provides a secure network. It uses encryption and decryption technology to transfer information from one financial institution to another.
• SWIFT uses SWIFT codes, which help identify the financial institution because SWIFT provides a unified and independent code to each member institution. Encryption adds when sent the message, which secures the message's transfer. Then, decrypted when the message reaches the receiver.
• It provides the user the highest integrity and confidentiality, as proved by its world renouncement.

The following are the differences between SWIFT and IBAN:

• SWIFT is the short form for worldwide interbank financial telecommunication society, while IBAN is the short form of the international bank account number.
• SWIFT codes provide the identity of specific banks entering into specific transactions while, on the other hand, IBAN identifies the specific bank account in international transactions. Hence undoubtedly, both are inevitable for the smooth running of international transactions.
• IBAN easily identifies the country where the bank locates between which the transaction is conducted. At the same time, the SWIFT system attempts to provide and standardize international banking transactions through IBAN.
• Typically, the United States economic network doesn't require IBAN for its financial institutions' functioning. Rather, it uses a SWIFT code, like bank identification codes (BIC), for secured data transmission.

This article is a guide to the Full Form of SWIFT. Here, we discuss functions, how it works, and their importance. You may refer to the following articles to learn more about finance: -

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