By Michael Salerno, Vice President, Global Banking Group, First National Bank of Omaha
Most international transactions are processed using the SWIFT network without most companies knowing. This is how banks communicate with each other in a secure manner. Commercial letters of credit and most international payments are processed using the SWIFT network which makes SWIFT crucial to support the global economy through trade.
What does the anacronym SWIFT stand for?
SWIFT is the “Society for Worldwide Interbank Financial Telecommunications”; a member-owned cooperative that provides safe and secure transactions for its members.
Prior to SWIFT, telex, hampered by low speed, security concerns and a free message format, was the only means of message confirmation for international funds transfer.
Swift was founded in 1973 with 239 banks in 15 countries. In 2022, there are more than 11,000 institutional members hailing from more than 200 countries and territories.
How AVTECH of Rhode Island utilizes SWIFT
By Richard Grundy
AVTECH has used the SWIFT system to support international wire transfers for customers in over 185 countries for over three decades. For the majority of our international customers, it is not possible or simply not practical to pay for orders by check. That leaves wire transfers and credit cards as the two primary and most common forms of payment internationally.
Credit cards are ubiquitous and widely available. However, they often have restrictive limits that prevent their use for larger orders, and the fees charged by credit card companies can be substantial. For example, a 3.5% fee on a $10,000 payment results in a $350 fee due to the credit card company that comes out of the payment to the vendor. These fees are absorbed entirely by the vendor.
Wire transfers via the SWIFT network are often preferred for larger orders. While they typically incur fees both for the buyer to send money, and the vendor to receive the money, these fees are typically fixed amounts that do not incur a percentage of the total amount sent. Most payments are fully reconciled within 2-3 business days. For that same $10,000 payment, a wire transfer via SWIFT would typically cost the buyer $35 to send the transfer, and the vendor $35 to receive it. The total fees are $70 and split by both parties, rather than $350 carried entirely by the vendor for a credit card payment.
AVTECH continues to evaluate the best options available to support payments from its customers around the world. Wire transfers via the SWIFT network continue to be a stable, reliable and cost-effective option for most organizations.