SWIFT: How international money transfers actually work 🌐

If you're wondering how international money transfers work, you’re in the right place. Back in the ‘80s, the quickest way to send money from London to New York was to physically take cash with you on a plane, just like in the movies. Surprisingly, this still holds true today, but have you ever wondered why?

We explained how money transfers work between 2 accounts held with the same payment service provider (intra-account transfers), as well as transfers between 2 different payment service providers (inter-account transfers) in another post. If you'd like to understand the world of SWIFT payments better, we'd recommend reading that blog first.

International money transfers

International money transfers are basically inter-account transfers. Only in this case, the 2 payment service providers happen to be in different countries, which makes things slightly more complex. The 2 payment service providers need to have an established relationship in order to facilitate the transfer.

The most common way to transfer money internationally is known as a SWIFT transfer.

What is a SWIFT transfer?

The SWIFT payment system enables these institutions to securely send and receive information on financial transactions in a standardised way. This ultimately allows money to be sent from 1 payment service provider to another, virtually anywhere in the world and in many different currencies.

But this system is far from perfect. SWIFT doesn't actually send money, it simply sends messages between the payment service providers. Because of this, other systems that require more human intervention must be used to transfer the actual funds and this, in turn, makes SWIFT transfers slow. What’s more, the complex nature of these transfers usually incur a fee, which almost always is paid by the customer.

How does a SWIFT transfer work?

Let’s assume John wants to send $20 from his account in the UK to Alice’s account held with a payment service provider in Australia. Depending on the provider’s relationship, there are 2 ways in which this transfer can take place:

If payment service providers have a direct relationship:

If both payment service providers have a direct relationship with each other (if provider 1 has a commercial account with provider 2 and vice versa) the transaction would look like this:

John’s payment service provider (for example, Barclays UK) will send a SWIFT message to Alice’s payment service provider (Lloyds Australia), informing them of the transfer. Once the message is received (usually within minutes), the funds can be transferred directly between the 2 payment service providers:

1. John’s payment service provider (Barclays) will debit John’s personal account by $20
2. John’s payment service provider will credit Lloyds’ commercial account held with Barclays by $20
3. Alice’s payment service provider (Lloyds) will credit her personal account by $20

If payment service providers have no direct relationship:

If the payment service providers don’t have a direct relationship, 1 or more intermediary providers must be found to facilitate the transfer.

So, John’s payment service provider (provider 1) will once again send a SWIFT message to Alice’s payment service provider (provider 2), informing them of the incoming transfer.

But since neither provider holds accounts with one another, SWIFT will find an intermediary where both payment service providers have commercial accounts — let’s call it payment service provider X. Once the intermediary is found, the funds can be processed at the end of the day (or based on other predetermined schedule):

1. Payment service provider 1 will debit John’s personal account by $20
2. Payment service provider 1 will ask payment service provider X (the intermediary) to debit their commercial account (provider 1’s) by $20, and credit provider 2’s commercial account
3. Provider X deducts a small fee for acting as an intermediary (let’s say $0.40) from the amount being transferred, and credits provider 2’s commercial account by $19.60
4. Provider 2 will then credit Alice’s personal account by $19.60

Since there were more operations happening behind the scenes, this transfer is more expensive (in this case, the hypothetical $0.40 fee) and takes longer to complete (usually between 3 to 5 working days). In the example, there was only one intermediary provider (provider X), but some transfers can require 2 or more intermediaries, which introduces even more fees and delays.

But what if the transfer was from one currency to another? One of the payment service providers would have made the currency exchange, usually at a less than desirable rate, adding to the total cost of the transfer. Adding all the different fees and marked-up exchange rates reveals that SWIFT transfers can cost around $30 to $50, simply for moving your money from A to B.

Ok, but where does Revolut fit in?

Revolut supports SWIFT transfers to or from your Revolut account, but where we reign supreme is in our ability to offer near-instant transfers in any of the supported currencies to other Revolut customers all over the world, usually within seconds. Yes, you heard that right — transfers between Revolut friends are super quick, from the moment you hit send, because our technology takes away the need to go through clunky and outdated payment systems such as SWIFT.

This automatic transfer method ensures that your money reaches the recipient’s account as soon as possible. It also gives you the peace of mind knowing that you never have to pay excessive fees or unfair exchange rates — #ProblemSolved.

Read more:

1. Sending money overseas? Here’s how with Revolut
2. How a money transfer works
3. All you need to know about exchange rates