SWIFT…… What is it?

[Former Member]

Hi Experts,

Today I learnt about SWIFT Integration Package.This is the package provided by SAP which can be readily imported as ESR content and
you just have install and configure this to be able to use it.

Let’s start from basics as to what is swift is? and what role does it have? Although many of you may be aware of this but fewmay not be aware of this as I was not aware of this  before the need to work on the development of the same in our project has come across. So just thought of sharing few of my
thoughts..

In this blog, I will try to express my thoughts of  basics of swift and in the next blog I will cover the technicalities about swift  package like installation and configuration part.

As  you are all aware of  how quickly the transaction involving bank to bank take place no matter in which part of the world you are living.Unlike before, nowadays it all happens online and is quite easy. Within the comforts of your  home, you just need to login to your internet banking account, do some clicks and
money will reach your bank account in some other country in a couple of days.
Your bank makes it possible through SWIFT!

SWIFT or the Society for Worldwide Interbank Financial Telecommunication is a worldwide network for financial messages through which its members (i.e. financial institutions such as banks) can exchange messages related to money transfer for their customers. The messages are sent securely and reliably to the target member financial institution of SWIFT.


By the way, SWIFT is just a messaging service and it doesn’t facilitate actual cash transfer between banks. For doing that, the banks that
exchange authorization message for money transfer shall have an external banking relation between them and normally they settle the actual cash transfer
in parallel.

But the point is, once the authorization for the release of funds are sent through SWIFT, the target bank can release the money to the end
user’s account and the bank is assured of the money from the sending bank. Sometimes, the target bank will have a branch in the sending bank’s country or
vice versa and they may settle it within the purview of a single country.

Thus, the end user will receive the money without needing to know the hassles of exchange rate conversion and various other formalities,
which happen in parallel between the banks. Also, the user will receive money, irrespective of the time taken for all these.

SWIFT does not facilitate funds transfer; rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with
each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with
one (or more) so as to enjoy those particular business features.

SWIFT means several things in the financial world. It may be a secure network for transmitting messages between financial institutions or a set of syntax standards for financial messages (for transmission over SWIFTNet or any other network) or a set of connection software and services, allowing
financial institutions to transmit messages over SWIFT network.

Over 8,700 banking organizations, securities institutions and corporate customers in more than 209 countries use SWIFT for transferring financial messages, making it the most widely used network for international financial messaging. Each financial institution registered with SWIFT is identified by a bank identifier code
popularly known as the ‘SWIFT Code’.

Through SWIFT, transfer of funds to various countries can be completely automated; where the core banking solution of the bank can directly communicate with
SWIFT to do the transfer. This makes the process of money transfer more efficient, secure and with lower cost. Thus, SWIFT makes the process of
transferring funds across the globe a lot easier.

The SWIFT secure messaging network is run from two redundant data centers, one in the United States and one in the Netherlands. These centers share information in near real-time. In case of a failure in one of the data centers, the other is able to handle the traffic of the complete network.

SWIFT opened a third data center in Switzerland, which started operating in 2009. Since then data from European SWIFT members
will no longer be mirrored to the US data center. The distributed architecture will partition messaging into two messaging zones: European and Trans-Atlantic  European zone messages are stored in the Netherlands and in a part of the Switzerland operating center; Trans-Atlantic
zone messages are stored in the US and in a part of the Switzerland operating center that is segregated from the European zone messages. Countries outside of
Europe were by default allocated to the Trans-Atlantic zone but could choose to have their messages stored in the European zone.

SWIFT provides a centralized store-and-forward mechanism, with some transaction management. For bank A to send a message to bank B with a copy or authorization with institution C, it formats the message according to standard and securely sends it to SWIFT. SWIFT guarantees its secure and reliable delivery to B after the appropriate action by C. SWIFT guarantees are based primarily on high redundancy of hardware,
software,
and people.

Hope you got some idea about SWIFT.

Regards,

Amarnath