SWIFT payments

Yummy!  SWIFT payments are the most hated and the most loved type of payment that exists today.  Why you ask?  Well without SWIFT we wouldn't have an interconnected global banking system, BUT with it, in 2021, we get an antiquated system for sending messages aka moving money around the world.  It's a classic love-hate relationship.

Quick Background:

SWIFT is an open consortium formed in Brussels in 1973.  Essentially if you are a bank or financial institution you can become a member of the SWIFT network and gain access to send payments/payment instructions.

SWIFT is nothing more than a messaging system that central banks and national/local banks use to tell one another that funds have been sent from one account to the next.  It does not physically move the money.

What is the user experience like when sending a SWIFT payment?

Happy Path:

When you or your customers send money through the SWIFT network, and everything works, it's a very beautiful thing.  Your customer creates a beneficiary, accepts an exchange rate and the transaction fee for the SWIFT network, clicks send, then two days later the beneficiary receives the funds.  Everything goes through smoothly, and we are all happy.

In our experience at Routefusion, the happy path accounts for about 90% of all payments we process through the SWIFT network.  It works as it should, and no one is upset.  For the other 10% of payments that do have some sort of lag or delay (remember this is out of our control), we see the following worst-case scenario.

Worst Case Scenario:

Your customer creates a beneficiary, accepts an exchange rate and the transaction fee for the SWIFT network, clicks send, and then two or three days later they are asking your support team "WHERE IS MY MONEY".  This is the worst-case scenario.  The GREAT thing, is their money is never lost, it is most likely just held up at one of the correspondent banks.  When people get upset with international payments costing too much or taking too long, it typically gets put on SWIFT.  This is both true and false.  It is true that SWIFT is more expensive to send money (you pay for the trust), but how long it takes the money to settle typically comes down to the bank that is sending the money and receiving the money.  When a SWIFT payment is sent, a message is immediately transmitted to the receiving bank that the funds are on the way, and a receipt called an MT103 is created and given to the sender.  This receipt can be given to the receiving bank and they would credit the funds immediately.  What usually happens though is the payment is sent, and then the funds get moved through a network of correspondent banks until they get to their destination (more info on correspondent banking).  As the funds are being moved through the correspondent banks, at any point these banks can hold funds for compliance reasons, or in some instances take a fee for the money moving through their bank.  While this isn't always the norm and only about 10% of payments get held up, it happens frequently enough that it provides for a very bad user experience.  Eventually, the funds will arrive at the ultimate beneficiary, and everything will be ok, but it doesn't discount that if you send a SWIFT payment, you can expect your customers to ask you where the payment is, and why it hasn't arrived, BUT you will have security with the MT103 receipt that the funds will eventually arrive.

What does Routefusion recommend?

It may be a cop-out, but we always recommend that our customers choose what works best for their product, team, and above all else customers.  SWIFT payments are GREAT if your customer base sends less frequent but larger transaction size  B2B payments.  They are not great if your customer base is sending more frequent, smaller transaction size payments.  At the same time though, if your customer base is sending smaller and more frequent transactions, but are constantly complaining that the beneficiaries are "not receiving the funds" (this is a very common fraud that occurs) then maybe using the SWIFT network for your payments so you can provide your customers with an MT103 is the best thing for you.

Ultimately the decision is all yours, and Routefusion is here to help you make the most informed and best decision you can.  We then will help you and your product/engineering team execute on it.  It's really beautiful thing.  

Please let us know if you have any questions, We LOVE to talk with customers of all sizes, so please don't hesitate to reach out. Ciao!

Email: info@routefusion.com

Schedule a consult: https://routefusion.com/contact

☮️ & 💕 - Routefusion