An International payment is sent through the SWIFT network.
What is SWIFT?
SWIFT stands for the Society of Worldwide Interbank Financial Telecommunication, it is a system that allows all banks that are signed up to the system to speak with each other. This is how banks send and receive payments safe and securely.
Money doesn’t physically move from one bank to another. A SWIFT message tells the receiving bank to put the money you sent into their customer’s account.
This is done by both banks having an account with each other. Once two banks have an agreement, they can send and receive payments between each other.
Anna wants to send her niece Rebecca, in America, a birthday present of $50. Rebecca’s account is with Bank of America. AIB has an agreement with Bank of America so we can send the message directly to Bank of America. We take the money from Anna’s account then send the message to Bank of America who will take the money from our account with them and put the money into Rebecca’s account.
If we do not have an agreement with a particular bank, the message has to go to a bank that we do have an agreement with.. These banks are called “intermediary banks.
Tim is sending money to his son Brian in Australia to help buy a car. Brian’s account is with a small credit union in Sydney called Cape Breton. We do not have an agreement with this credit union so we must find a bank that does.
We have an agreement with Commonwealth Bank of Australia and it has a relationship with Brian’s credit union branch. So we send a swift message to Commonwealth Bank of Australia and place money in their account. Commonwealth Bank then send a swift message to Cape Breton Credit Union who can then pass the money into Brian’s account.
Due to how manual the process is, each of these banks may charge for passing along the payment.
The charge is known as “intermediary charges” and can differ from bank to bank and range from anywhere between €0- €70 or more depending on each bank.
There is no limit to the number of intermediary banks which can be involved in getting the money to Brian’s credit union. Each of these banks may also charge for passing on the money.