Slower payment traffic without SWIFT
- Sandra Visser-Meijer
- 28 Feb 2022
- Edited 12 Oct 2023
- 1 min
- Managing and growing
Banks around the world use the international payment system SWIFT for payments. Sometimes banks or countries are removed from this system. This makes payments to and from these countries slower and more difficult.
The European Commission disconnected 7 Russian from the SWIFT network in March 2022. This was part of a larger sanctions package against Russia. Financial transactions with these banks such as payments and transfers are then more difficult. It is also not possible to pay with a Letter of (L/C) via banks that are disconnected from the SWIFT system.
What is SWIFT?
stands for the Society for Worldwide Interbank Financial Telecommunication. The organisation was created in 1973 by American and European banks. SWIFT is a communication system between banks to speed up and facilitate international payments.
Faster and easier payments
Before SWIFT, an international payment had to pass through a bank that mediated between two banks in different countries. This was known as an intermediary bank. The banks communicated with each other, often by telex communications, before transferring money to each other. SWIFT made it possible to connect various international banking systems. From then on, international payments were faster and easier.
A technological solution
The SWIFT system itself does not make payments. Instead, it provides users with the necessary information to make a foreign payment. With SWIFT, users have the guarantee that an announced transaction actually takes place. If, for example, you make payments to Russia, the SWIFT system provides tables with the details of the Russian recipient. If the Russian tables are removed from SWIFT, the system cannot make a connection. Without this control system, you cannot make or receive payments with an automatic guarantee.
International payments without SWIFT?
You can still transfer money internationally without SWIFT. To do so, your bank will use older communication methods to process your payment. The automatic guarantee of paying and receiving payments is absent. This has to be resolved manually, meaning banks must call or email each other. For example, a bank must check with the other bank if the account holder exists, agree upon the currency, and check that the account number is correct.
This makes international payments more difficult, slower and uncertain. And trust in your foreign relationship becomes even more important. Contact your bank and discuss the best way to arrange this, and consider alternative payment methods (in Dutch).