The knowledge of SWIFT codes comes in handy when you have to do a financial transaction from one account to another account, anywhere in the world. This becomes important not only when you are sending money to another account, but also when you are receiving funds from another account. Do bear in mind that the procedure followed is the same, whether you are sending and receiving funds within a country or across nations.
Let us assume for now that you are trying to send money across to another bank account. This bank account is part of a bank in a different country. To initiate such a transaction, you will have to ready with information that pertains to both the parties – the correspondent, which is you and the beneficiary, which is the other person.
You, the correspondent should be ready with the amount you wish to transfer, the currency in which the money is being transferred. Then, you will need to have your name, account number, bank name, the SWIFT code and the branch name. The same goes to your beneficiary and you must have that person’s name, account number, name of the bank with the SWIFT code and of course the branch name.
When the money transfer transaction is initiated by your bank, on behalf of you, secure messages are sent and received across the SWIFT network. The SWIFT network is managed by the SWIFT organization which is responsible for ensuring that these messages are sent in a secure manner and they don’t get lost. The system ensures that the messages reach the intended recipient, which is made possible thanks to a number of protocols that are part of the SWIFT network.
A major part of the SWIFT technology is the concept of the SWIFT code that is unique to each bank, anywhere in the world. So, in the above example, even if the name of the bank or the branch name should go wrong, as long as the SWIFT code is perfect, you can still expect the transaction to be executed as planned because the SWIFT network ensures that.
It is important to understand here that the SWIFT network itself does not perform any financial transactions. What it does is act as the message carrier between two entities. One way of understanding the role of the SWIFT is to think of it like a secure messaging system which promises delivery of messages.