SWIFT (Society for Worldwide Interbank Financial Telecommunica | UPSC Economy

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

It is a cooperative society headquartered in Belgium and the members are banks and financial institutions.
It is a method of communication among banks/financial institutions for sending financial messages around the world.

SWIFT provides a way to encrypt financial messages between the banks/financial institutions in such a way that only the sender bank and the receiver bank will know the details. No one else in between can break the encryption. Messages sent through SWIFT are almost real time.

What is a SWIFT Code:
It is a unique ID for the Bank which is a part of the SWIFT system. It is also known as Bank Identifier Code (BIC)

Structure of SWIFT Code:For example "SBININBB103" is the SWIFT code

SBIN = First four letters denote the Bank i.e. State Bank of India
IN = 5th & 6th letters denote the Country i.e. India
BB = 7th & 8th letter denotes the Location i.e. Bombay
103 = 9th,10th & 11th character denotes the Branch and its optional.

So, SWIFT codes are unique identifier for the different financial institutions/banks around the world which are part of the SWIFT society and they use this SWIFT code as "SENDER" and "RECEIVER" identifier and the messages (related to payment, amount, or any information) which are sent among them are in the encrypted form which only the sender and the receiver can decode.