Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 71 views

    SWIFT & SEPA: How International Money Transfers Actually Work

    Uploaded by

    Lalu Ahmad Gunawan
    1. SWIFT and SEPA transfers are the two most common ways to transfer money internationally. SWIFT transfers rely on a messaging system between banks but can be slow and incur fees, while SEPA transfers within Europe are generally faster and free. 2. For a SWIFT transfer, the sending bank will debit the sender's account and either transfer funds directly to the receiving bank if they have a relationship, or use intermediary banks which adds time and fees. 3. For a SEPA transfer within Europe, funds flow similarly either directly or through a central bank, and are usually faster and free.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    SWIFT & SEPA: How International Money Transfers Actually Work

    Uploaded by

    Lalu Ahmad Gunawan
    71 views5 pages
    1. SWIFT and SEPA transfers are the two most common ways to transfer money internationally. SWIFT transfers rely on a messaging system between banks but can be slow and incur fees, while SEPA transfers within Europe are generally faster and free. 2. For a SWIFT transfer, the sending bank will debit the sender's account and either transfer funds directly to the receiving bank if they have a relationship, or use intermediary banks which adds time and fees. 3. For a SEPA transfer within Europe, funds flow similarly either directly or through a central bank, and are usually faster and free.

    Original Title

    SWIFT.docx

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. SWIFT and SEPA transfers are the two most common ways to transfer money internationally. SWIFT transfers rely on a messaging system between banks but can be slow and incur fees, while SEPA transfers within Europe are generally faster and free. 2. For a SWIFT transfer, the sending bank will debit the sender's account and either transfer funds directly to the receiving bank if they have a relationship, or use intermediary banks which adds time and fees. 3. For a SEPA transfer within Europe, funds flow similarly either directly or through a central bank, and are usually faster and free.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    71 views5 pages

    SWIFT & SEPA: How International Money Transfers Actually Work

    Uploaded by

    Lalu Ahmad Gunawan
    1. SWIFT and SEPA transfers are the two most common ways to transfer money internationally. SWIFT transfers rely on a messaging system between banks but can be slow and incur fees, while SEPA transfers within Europe are generally faster and free. 2. For a SWIFT transfer, the sending bank will debit the sender's account and either transfer funds directly to the receiving bank if they have a relationship, or use intermediary banks which adds time and fees. 3. For a SEPA transfer within Europe, funds flow similarly either directly or through a central bank, and are usually faster and free.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    SWIFT & SEPA: How international money

    transfers actually work 💸


    Back in the ‘80s, the quickest way to send money from London to New York
    was to physically take cash with you on a plane, just like in the movies.
    Surprisingly, this still holds true today, but have you ever wondered why? 🛩️

    Last week we explained how money transfers work between two accounts held
    with the same bank (intra-bank transfers), as well as transfers between two
    different banks (inter-bank transfers). In case you missed that post, we
    recommend going back and reading it before you move on - it will help you
    understand the world of SWIFT and SEPA transfers.

    International Money Transfers 💸


    International money transfers are basically inter-bank transfers, only in this
    case, the two banks happen to be in different countries, which makes things
    slightly more complex. The principle of correspondent banking still applies,
    which means that the two banks need to have an established relationship in
    order to facilitate the transfer.

    The two most common ways to transfer money internationally are known as a
    SWIFT and a SEPA transfer.

    What is a SWIFT transfer? 💸


    The Society of Worldwide Interbank Financial Telecommunication or SWIFT
    is a financial messaging system that runs on a network of tens of thousands of
    financial institutions from around the world.

    The SWIFT system enables these institutions to securely send and receive
    information on financial transactions in a standardized way. This ultimately
    allows money to be sent from one bank to another, virtually anywhere in the
    world and in many different currencies.

    But this system is far from perfect. SWIFT does not actually send money, it
    simply sends messages between the banks. Because of this, other systems
    that require more human intervention must be used to transfer the actual
    funds and this, in turn, makes SWIFT transfers slow. What’s more, the
    complex nature of these transfers usually incur a fee which nearly always gets
    passed on to consumers.
    📖Remember to 📖📖

    How does a SWIFT transfer work? 💸


    Let’s assume John wants to send £20 from his bank account in the UK to
    Alice’s account held with a bank in Singapore. Depending on the bank’s
    relationship, there are two ways in which this transfer can take place:

    Banks have a direct relationship ❤️

    If both banks have a direct relationship with each other, or in other words, if
    Bank 1 has a commercial account with Bank 2 and viceversa, the transaction
    would look like this:

    John’s bank (Barclays UK) will send a SWIFT message to Alice’s bank
    (Lloyds Singapore), informing them of the transfer. Once the message is
    received (usually within minutes), the funds can be transferred directly between
    the two banks:

    1. John’s bank (Barclays) will debit John’s personal bank account by £20. ➖
    2. John’s bank will credit Lloyds’ commercial bank account held with
    Barclays by £20. ➕
    3. Alice’s bank (Lloyds) will credit her personal bank account by £20. ➕
    Since the banks have a direct relationship, they are able to easily
    moves the funds across, which keeps fees to a minimum and
    makes the transfer happen quickly.
    Banks have no direct relationship 💸

    If the banks don’t have a direct relationship, one or more intermediary banks
    must be found to facilitate the transfer.

    So, John’s bank (Bank 1) will once again send a SWIFT message to Alice’s
    bank (Bank 2), informing them of the incoming transfer. But since neither
    banks hold accounts with one another, SWIFT will find an intermediary where
    both banks have commercial accounts - let’s call it Bank X. Once the
    intermediary is found, the funds can be processed at the end of the day (or
    based on some other predetermined schedule):

    1. Bank 1 will debit John’s personal account by £20. ➖


    2. Bank 1 will ask Bank X (the intermediary bank) to debit their commercial
    account (Bank 1’s) by £20 ➖, and credit Bank 2’s commercial account. ➕
    3. Bank X deducts a small fee for acting as an intermediary (let’s say £0.40
    ➖) from the amount being transferred, and credits Bank 2’s commercial
    account by £19.60. ➕
    4. Bank 2 will then credit Alice’s personal account by £19.60. ➕
    Since there were more operations happening behind the scenes, this transfer is
    more expensive (notice the hypothetical £0.40 fee) and takes longer to
    complete (usually between 3 to 5 working days). In this case, there was only
    one intermediary bank (Bank X), but some transfers can require two or more
    intermediaries, which introduces even more fees and delays. 🛩️

    But what if the transfer was from one currency to another? 🛩️ One of the banks
    would have made the currency exchange, usually at a less than desirable rate,
    adding to the total cost of the transfer. Adding all the different fees and marked
    up exchange rates reveals that SWIFT transfers can cost around £30 to £50,
    simply for moving your money from A to B! 🛩️

    📖Like reading our blog? now! We promise not to spam you 📖📖

    SEPA Transfers 💸
    SEPA stands for the Single Euro Payments Area and represents a new format
    for international bank transfers within Europe. The SEPA zone comprises 34
    countries, including 28 EU member states alongside Iceland, Monaco,
    Switzerland, Liechtenstein, Norway and San Marino. It was created to simplify
    cross-border money transfers in Euros, the only currency SEPA supports. 🛩️

    In many ways, a SEPA transfer is similar to a domestic transfer. In essence,


    banks that support SEPA transfers either have direct relationships established
    or a network of intermediary banks, thus allowing transfers to run across
    country borders.

    Let’s revisit our previous example and assume that John is sending Alice €20,
    and that both banks are part of SEPA. If the two banks have commercial
    accounts held with one another, then the flow of money is the same as our first
    example in this post:

    1. John’s bank (Bank 1) will debit John’s personal account by €20. ➖


    2. John’s bank will credit Bank 2’s commercial account held with Bank 1 by
    €20. ➕
    3. Alice’s bank (Bank 2) will credit her personal account by €20. ➕

    If they do not have an established relationship, the transfer will pass through a
    central bank account in Europe, let's just call it the European Central Bank for
    the sake of our example. In a very simplified way, this is how the money would
    flow:

    1. John’s bank will debit his account by €20 ➖


    2. John’s bank will credit their commercial account held with the European
    Central Bank (intermediary bank) by €20 ➕
    3. The ECB will then credit Alice’s bank by €20 ➕
    4. Alice’s bank will credit her account by €20 ➕
    There is actually more that goes on behind the scenes, but for the
    purpose of this article, we won’t go into more details.
    More important than how it works, is what SEPA transfers have to offer:

     Allows you to make cross border payments in Euros ✔️


     Transfers usually take 1 day to reach the recipient's account ✔️
     Transfers are generally free for both the sender and receiver ✔️
    Some banks will still charge a fee for making or receiving a
    SEPA transfer. Please check with your bank before making a
    SEPA transfer to or from your Revolut account.

    Ok, but where does Revolut fit in?


    Revolut supports both SWIFT and SEPA transfers to or from your Revolut
    account. When you send money from Revolut to any bank account, the system
    automatically selects the best type of transfer for you. 🛩️

    This means that if you’re making a transfer in Euros to a bank located in


    Europe, the transfer will most likely be a SEPA transfer. But if you’re sending
    money to another bank in Singapore, for example, Revolut will make a SWIFT
    transfer since SEPA isn’t supported there. 🛩️

    📖If you've read this far, you might as well now! We'll keep you
    updated with anything Revolut 📖📖
    This automatic transfer selection ensures that your money reaches the
    recipient’s bank account as soon as possible. It also give you the peace of mind
    knowing that you never have to pay excessive fees or marked up exchange
    rates - #ProblemSolved 🛩️
    But where Revolut reigns supreme is in our ability to offer instant internal
    transfers in any of the supported currencies, virtually anywhere in the world.
    Using the app, you can instantly send money to any other Revolut user in the
    world. Yes, you heard that right - Revolut transfers are instant and
    completely free, from the moment you hit 'Send', because our technology takes
    away the need to go through clunky and oudated banking systems such as
    SWIFT or SEPA - #BeyondBanking 🛩️

    You might also like