When someone sends money abroad, the international transfer often occurs through a messaging system known as the Society for Worldwide Interbank Financial Telecommunications (SWIFT). This system consists of a messaging network of banks and other financial institutions that send and receive information necessary to perform a financial transfer.
This article provides a complete guide to SWIFT transfers in Canada. By the end of this post, you will know how SWIFT transfers work. You will also know how to transfer money using SWIFT, transfer costs, and how SWIFT compares to other transfer solutions.
What is SWIFT, and what does it do?
SWIFT is a messaging network of banks and other financial institutions. It facilitates communication via unique codes known as bank identifiers or BIC. More specifically, each financial institution that participates in SWIFT receives a unique code that follows a standard procedure:
1) The first four characters consist of the institution’s code, which is similar to the institution’s name
2) The following two characters represent the country’s code
3) The next two characters represent the city code
4) The last three characters are an option to assign codes to individual branches
Swift vs BIC: What's the difference?
One term that people often use interchangeably with SWIFT is BIC. There is, however, a distinction between the two concepts. SWIFT is a type of Bank Identifier Code (BIC) that SWIFT assigns to banks. When a business asks you to supply the BIC code, the request refers to the character code that SWIFT assigns. In other words, people typically use the terms interchangeably.
SWIFT is a co-op rather than a company
One should note that SWIFT is a messaging system and not an organization in itself. As such, SWIFT does not hold any financial assets. SWIFT is owned by its shareholders, around 3,500 financial institutions from all over the world. The messaging system generates income from its members. For example, there is a one-time fee for joining the system plus annual support charges. SWIFT also charges users for each message and has additional services that produce income. This includes business intelligence, compliance data, and reference data.
Because SWIFT is only a method of communication, it’s essential to remember that the money transfer company, such as the bank, handles the money you are transferring. For this reason, when conducting an international money transfer, don’t assume a transfer is secure just because a financial entity is using SWIFT. Entities involved in the transaction handle the money transfer. It is the financial institution’s responsibility to secure the transfers.
Currently, SWIFT is used by numerous entities offering financial services. Including banks, security dealers, trading houses, depositories, exchanges, clearinghouses, treasury market participants, and corporate business houses.
As the number of services provided by SWIFT has increased, so has the number of entities using it. For example, SWIFT is used for real-time instructions applied to forex and treasury transactions, securities market infrastructure for processing settlements, and clearing instructions for payments and transactions.
Other services provided by SWIFT include compliance services, such as reporting and utilities for anti-money laundering, sanctions, and Know Your Customer (KYC). More recently, SWIFT has implemented business intelligence capabilities that allow banks to monitor real-time messages, activities, reporting, and trade flow.
How to transfer money using a SWIFT code
When sending money in Canada via a SWIFT transfer, you must have your recipient’s bank SWIFT/BIC code and the bank’s transit number and institution number. You must also provide the recipient’s full name, physical address, and bank account number. On average, SWIFT bank transfers take between one and five business days.
If you expect money from the above and need to provide your sender with a SWIFT/BIC code, you can easily find it by entering the name of your bank + SWIFT code on Google. Most banks have the same SWIFT code across all branches. However, there are some exceptions to this rule, for which it is best to double-check the SWIFT code in your area before communicating the requested financial information.
SWIFT transfer costs
The cost of a SWIFT transfer will include the bank’s transfer fee (often a % of the transaction value), currency exchange (not always at the best rate), occasional double currency conversion, currency exchange charges, or other unexpected fees.
Transfer fees will vary from one bank to another, as shown in the table below.
|Bank||SWIFT Transfer Fee|
|RBC||$6 for transfers of $1000 or less or $10 fee for transfers over $1000|
|TD||TD Transfer Fee is up to $25 per transfer. The transfer fee amount is dynamic and will vary depending on the amount being sent, the recipient country and the currency of the account funding the transaction.|
|Scotiabank||There is a $1.99 transaction fee. Additional fees and/or taxes may be deducted by the Intermediary or the Recipient Bank. No interest will be paid on funds in transit|
|BMO||Fees start at a minimum of $15 to as high as $125. Outgoing fees for wire transfers are 0.2 percent of the value of the transfer. There is a communication charge of $10.00|
|CIBC||$30 for transfers of $10,000 or less; $50 for transfers between $10,000.01 and $50,000; $80 for transfers greater than $50,000|
Alternatives to SWIFT
Not all banks use the SWIFT system, and most credit unions do not use it either. Alternative message services for money transfers include Ripple, Clearing House Interbank Payments System (CHIPS), and Fedwire.
While SWIFT is still the best system to send money abroad with a traditional bank, it is not as cheap or fast as some online money transfer solutions such as Wise or Payoneer. Besides providing cheap and fast transfer capabilities, these online solutions also allow you to easily send money abroad from the comfort of your home, including by making payments with your credit card.
Finally, some people may find traditional money transfer solutions based on SWIFT more complicated because you always need to know the recipient’s financial information. Some alternative solutions for domestic transfers, such as Interac e-Transfers, allow Canadians with a chequing account (or, in some cases, with saving accounts) and email/mobile phone number to send or receive money without sharing financial information.
For fast and inexpensive global transfers, OFX is a great option. People and businesses can send or receive funds in foreign currencies at highly competitive rates, plus no transfer fees on transactions over $10,000 CAD. Same-day payments are available in some cases and you get access to innovative features like rate alerts, auto-send when your target rate is hit, and the ability to lock in the current rate for a future transfer.
Bottom line: SWIFT is the dominant system for international money transfer
SWIFT is by far the most used messaging network for international money transfers, and this will probably not change soon. The success of SWIFT is likely explained by the fact the system continues to improve its security while adding new message codes to transmit financial transactions. Therefore, as long as the system remains innovative and no better alternatives emerge, it is likely that banks will continue to use SWIFT for international money transfers in the near future.
FAQ About SWIFT
If you need to send money abroad, you should always supply a SWIFT code. This code helps ensure your money gets to the intended location.
SWIFT works by assigning each member institution a unique ID code (a BIC number) that identifies the bank name, the country, the city, and, sometimes, the branch.
Once a SWIFT transfer is initiated, the payment can take anywhere between 1 to 5 working days to complete.
To transfer money using a SWIFT code, you will need to provide the bank with the recipient’s banking SWIFT code and an international account number. Your bank will then send a SWIFT message to the recipient’s bank, requesting it to accept the transfer.
A SWIFT code, also referred to as a BIC number, is a standard format for Business Identifier Codes (BIC) used to identify banks and financial institutions on a global scale. One should note that SWIFT is a type of BIC code assigned by SWIFT, meaning that the two terms are, technically speaking, not the same.