Our series on International Payments For Dummies is here to help you understand the process of overseas payments, so you know how your money gets from A to B and where you can avoid those pesky hidden fees.

In Part 1 we talked you through the questions you should be asking when moving your money overseas. This week, we'll be figuring out just what this SWIFT business is all about.

SWIFT: The Godfather Of Payments

If you’ve ever sent money abroad, it will almost certainly have gone through the SWIFT payment network somewhere along the way.

You’ve likely heard the term SWIFT payments bandied about when talking about international payments, but do you know how it actually works?

Is it actually a very swift process at all?

We at Airwallex like to refer to SWIFT as 'The Godfather of Payment Rails'. It’s old and a little slow, but very well connected.

What is SWIFT?

SWIFT = Society for Worldwide Interbank Financial Telecommunication.

Which, in layman's terms, means a network which enables international monetary transactions. It’s basically the Facebook of payments, but instead of having friends (poor SWIFT), it links up a whole load of banks, trading institutions, money brokers and investment corporations – 10,000 in fact, in over 200 different countries.

SWIFT in the annals of history

When SWIFT first hit the scene four decades ago, it was a bit of a revolution. Prior to SWIFT an old fogey system called TELEX had been running. TELEX was pretty dire: involving laborious, time-consuming processes and lacking in security. You even had to plug in full sentences to describe how and where your money was going – room for human error was almost unavoidable.

In 1974, seven large international banks got together and decided to create a new global network which would simplify the transaction process and change the face of international exchange.

Since its birth until about five years ago, SWIFT has been pretty much the only route you can send your money abroad through.

How SWIFT Works

Even though it is an international money transfer system, no actual money is moved anywhere. The SWIFT payment network is essentially a money messaging service. It carries the message of a transaction order from one bank to another through its vast financial network.

Say you want to send money from Mexico to Melbourne. A SWIFT code with all the details of the Mexican Bank, the Aussie bank, the amount of money will be sent over in a little message to the Melbourne bank, which will in turn carry out the transaction.

But how does the bank in Melbourne understand the message from your bank in Mexico?

Because it’s been around for so long, SWIFT codes have become standardised worldwide, in the form of IBAN (International Bank Account Numbers) or BIC (Bank Identifier Codes). Both do nearly the same thing, but BIC codes are used more commonly. In fact, you can use the term SWIFT code and BIC code interchangeably.

Over 15 million of these little messages are sent via SWIFT codes in one day, which means the money can be transferred in big batches to lower the cost of each individual transaction.

The Problem With SWIFT

It all sounds great, right? Almost. One problem is that not all banks or financial institutions in the network are connected with each other. Each bank will have around one to two hundred SWIFT networks with other financial institutions, out of the 10,000 existing ones.

This means if they want to send to a bank they don’t have a SWIFT relationship with, they will have to go through one, two, or three stops to get there.

Your Mexican Pesos, for example, will have to stop at New York along the way and be transferred into US Dollars before they can arrive in Melbourne in Aussie bucks.

Each step along the way incurs a cost, and going via an indirect route can slow down the process.


There has been a spate of new fintech disruptors, such as Ripple, Blockchain and Homesend who have created methods which avoid using the SWIFT network and make payments more direct.

However since SWIFT has had such a monopoly for so many years, it will take a while before they can be viewed as a serious threat in the market.

Airwallex’s relationship with SWIFT

Airwallex are going to make you an offer you can’t refuse. Instead of trying to build a new payment rail, Airwallex have built a nifty piece of machine learning which will connect all the competitors in the market (including SWIFT), and find the cheapest, fastest route for your money to travel.

What does this mean for you?

It means your money will transfer overseas via the quickest route from A to B, without having to go through C and D to get there along the way.

We also batch SWIFT transactions, meaning any additional costs will be a fraction of the price of when you use SWIFT directly.

SWIFT payments can take anywhere from 1 day to a week to arrive, depending on the jurisdiction. Our machine learning system, per transaction, will send the payment down the cheapest and fastest rail, ensuring that your payment gets there in the quickest possible time and at minimal expense.

Finance is a gun. Airwallex is knowing when to pull the trigger.

Want to know more about international payments? Check out Part 1 of the series here.