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Society for Worldwide Interbank Financial Telecommunication (SWIFT)

SWIFT codes are similar to IBANs, in that they help payment rails route money to the right recipient. But, unlike IBANs, they identify the recipient's bank, not their account.

Think of it this way.

A SWIFT code is like a postcode. It tells payment rails which bank, in which country, in which city or town, and sometimes, to which branch they should send the money.

IBANs, on the other hand, are like a street address, directing payment rails to the specific bank account where the funds should go.

Unlike IBANs, SWIFT codes are required for international payments to almost every country across the world. IBANs, by contrast, are only required for payments to countries which use them: about 88 countries in Europe, Africa, Central and South America, and the Middle East.

SWIFT codes — SWIFT is short for Society for Worldwide Interbank Financial Telecommunication — consist of eight or eleven alphanumeric characters:

A bank code

This part of a SWIFT code represents the name of the bank. SWIFT — the organization that issues and manages SWIFT codes — assigns and manages bank codes. Each code consists of four letters. The code for Deutsche Bank, for instance, is DEUT, and the code for Commerzbank is COBA.

A country code

The country code is made up of the two letters that follow the bank code. As the name suggests, they tell payment rails which country to route the funds to. Country codes are assigned by the ISO 3166-1 alpha-2 standard. Germany's is DE, France's is FR, the UK's is GB, and so on.

A location code

These are numbers, letters, or a mix of the two, and they tell payment rails the city or region where the bank's main office is located. This section of the code is also issued by SWIFT. Unlike country codes, location codes aren't always obvious or fixed. The location code for Berlin, for instance, is BB. The location code for London could be 4L, 2L, or another variation, depending on the bank.

An optional branch code

These are three characters that can be letters, numbers, or a mix, and they point payment rails towards a specific bank branch. For example, towards the Sparkasse branch in the Charlottenburg district of Berlin. Sometimes, the branch code is XXX. This is a default code pointing the payment rails to the bank's main office.

Interesting facts

  • The term SWIFT code is used interchangeably with BIC, but the two aren't strictly the same. A SWIFT code is a type of BIC, but not all BICs are SWIFT codes. Some BICs aren't connected to the SWIFT network, and used only internally for reference purposes.

  • When SWIFT was set up, in 1973, it was a ground-breaking innovation. Before SWIFT, sending money abroad was a complicated and risky process involving an in-person visit to your local branch to instruct your bank, which would then send your instructions over to the recipient bank via TELEX.

    TELEX technology was developed in Germany in 1926, and it was a product of its times. That is, it was extremely slow — able to transfer around 66 words per minute — and unreliable. Something as simple as heavy rain or strong winds could cause the communication to fail. And, if the transfer was routed incorrectly, it was impossible to track it down.

    SWIFT is a computerized system and, so, significantly faster and cheaper. It also leaves a paper trail which banks can use to track down lost payments and flag suspicious transactions. In 2024, 90% of SWIFT payments reached the recipient's bank account within the hour.

  • These days, SWIFT isn't just used for secure bank-to-bank messaging and processing payments. About 50% of SWIFT traffic is related to securities and other investments: real-time instruction matching, processing, clearing, and settlement.

Further reading

  • To say SWIFT codes changed the face of international payments forever is to put it mildly. But they're also 50+ years old. And technology has moved on by leaps and bounds since then. So what's next for SWIFT? This article on SWIFT's blog discusses how international payments might evolve next, including the role of embedded finance technology.
  • Because SWIFT is the backbone of international payments, it has become a political tool. When rogue states are handed financial and economic sanctions, these often include being cut-off from SWIFT. This article, however, observes that this has had the unintended consequence of fueling the growth of once marginal alternative networks like SPFS, with the risks this entails.

Further Reading