We have been using various methods to send money from one account to another. Cash and Cheque have been the age-old methods. With the rise of the internet, we are also used to NEFT (National Electronic Fund Transfer), RTGS (Real Time Gross Settlement System) and now UPI, which are primarily domestic money transfer systems. But what about sending money from one country to the other? That is where SWIFT comes into the picture.
What is SWIFT?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It provides a network that enables various financial institutions across the globe to send and receive information about financial transactions. This information exchange happens over a secure, standardized and highly reliable network. The important point to note that SWIFT doesn’t actually carry out the transaction. It neither transfers the fund from one account to other nor holds any accounts for their customers. It is simply a messaging system!!
But then, how does the transaction happen?
Each associated financial institutions get a unique SWIFT code. To send a message for the transaction, you need to know this code. The sender uses this code and other transaction details and sends the message over SWIFT network to the recipient. To make the actual transaction happen, these institutions need to maintain their accounts with each other or with the affiliates. The transaction happens within these accounts and the message is sent over SWIFT network.
More than 10000 organizations across 212 countries now use SWIFT to exchange millions of messages every day. SWIFT takes full responsibility for delivering the message across the network, once it is accepted by the network. It has an uptime of 99.999% and is extremely secure. Even SWIFT network can’t read the encrypted messages without proper authorization. This has made it a globally accepted network for financial transactions.
Alternative?
Ripple is the new entrant who is eyeing to use blockchain based technology to settle international payments. Using distributed ledger technique, Ripple hopes to bypass several hops required in the current system.
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Related Keywords
Financial Transactions, Ripple, Blockchain, Messaging Protocol