What are SWIFT and BIC Codes? How Do They Work?

Introduction

When doing foreign transactions, bank branches are precisely identified using BIC and SWIFT codes. 'Society for Worldwide Interbank Financial Telecommunication' is the acronym for the global messaging system, SWIFT. 'Business Identifier Code', or BIC, is the code that this system uses. BIC and SWIFT are interchangeable words that refer to the data needed to conduct international transactions.

Despite their seeming confusion, BIC and SWIFT codes are necessary for anyone wishing to send money internationally. Therefore, they're something you might need to be aware of for companies that operate internationally. Everything you need to know about SWIFT and BIC codes will be covered.

What is a BIC code?

Bank Identifier Code, or BIC, stands for Bank Identification Code. When you conduct an overseas transaction, this eight- to eleven-character number is used to identify a particular bank. It guarantees that your money is sent to the correct location, much like a postcode for your bank.

What exactly is a SWIFT code?

The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is an international network that handles international payments.

Is a BIC code equivalent to a SWIFT code?

In a nutshell, sure. Different banks and financial institutions just give the concepts different names, but they are interchangeable and refer to the same thing. It's also important to note that these codes may be called SWIFT/BIC codes, BIC/SWIFT codes, SWIFT IDs, or SWIFT identifiers; but, in reality, none of the terminology differ.

How do BIC/SWIFT codes appear?

Every BIC and SWIFT code has the same structure. They are grouped as follows and range in length from 8 to 11 characters:

AAAABBCCDD

The four-character bank code AAAA resembles a condensed form of the bank's name.
BB is a two-character country code that indicates the nation in which the bank is located.
CC is a two-character location code that provides the address of the bank's headquarters.
DDD is an optional three-character branch code that indicates the location of the particular branch.

Some banks will have a shorter (8-character) BIC code since they do not employ the 3-character branch code. For some banks, the branch code could be omitted completely or substituted with a triple X (MIDLGB22XXX, for example).

How can my BIC code be found?

You must be aware of your BIC number if you are receiving a payment from outside the country. Usually, you can find it on your bank statements, but if you don't have any on hand, you may also check your online banking account or just give your local branch a call.

If you need to know the recipient's BIC number while making an international payment, you may easily utilise a BIC/SWIFT finder, like this online tool from Bank.Codes, which lets you look up specific branch codes or verify SWIFT numbers for more security.

Before approving a payment, it's crucial to confirm with the person you plan to pay that the BIC number you were provided is accurate. Your money may be returned, delayed, or even routed to the wrong account if you enter the erroneous code.

Does using BIC/SWIFT numbers come with a cost?

When using a BIC number to make a payment, you might have to pay up to £40 to £50 because most banks charge a fee to handle foreign payments. Additionally, the corresponding institutions may charge you a handling fee while your money transfer is in transit.

These fees can mount up because SWIFT bank transactions frequently pass through one to three corresponding banks. Furthermore, handling fee details are frequently buried in the fine print, making it challenging to predict the exact amount you'll pay at the time of transfer.

GoCardless provides a smooth cross-border bank payment solution that covers more than 30 regions with pricing that is both reasonable and transparent because international transaction fees can be costly and opaque.

Also read: How Freelancers & Agencies Can Reduce Payment Processing Costs

How do BIC/SWIFT codes actually work?

Banks rely on a network of correspondent banks for sending money abroad. Before your money reaches the intended recipient, these correspondent banks collaborate to transfer it from one area to another. To make sure the correct bank receives your payment, BIC codes are utilised.

It's an easy process for the customer. You only need to go to your local branch and request to make an overseas payment after you have your recipient's SWIFT number and have verified that it is accurate. As an alternative, you can pay using your online bank account.

Facilitating foreign payments

With only a few clicks, you can set up international payments with GoCardless' merchant dashboard.

GoCardless allows automatic conversion and deposit into your UK bank account, saving merchants the effort of setting up international bank accounts. However, you can deposit money into your foreign currency account if you already have one. In the US, UK, EU, Australia, New Zealand, and the Nordics, local cash can be collected.

Also read: How Payment Schedules Improve Cash Flow and Client Trust

FAQs

What makes BIC/SWIFT different from IBAN?

An IBAN number allows you to identify the specific bank account, whilst BIC/SWIFT codes aid in identifying a certain bank when you're making an overseas payment.

Banks around Europe use IBAN, a unique bank account identification number, to make sure payments are sent securely.

Does collecting international payments require a foreign currency bank account?

No. GoCardless will automatically collect foreign currencies on your behalf, convert them to GBP, and deposit them into your UK bank account if you are a GoCardless merchant without an international bank account.

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