SWIFT is an Industry-Owned Interbank Communication Network to exchange Financial Messages in Standard Formats, between its member Banks. Since 2007, SWIFT has also opened memberships for Corporates, thru MACUG and SCORE Arrangements. And with that Corporates too can communicate with their Banks using this network.
But many in Corporate World mistake SWIFT as a complete Payment System, including Value Transfer for funds. This is not true.
Technically, a complete Payment System consists of three stages in its process:
· Payment Instructions
· Clearing
· Settlement
A SWIFT payment message (e.g. MT101) only caters to the first part of this process, i.e. providing Payment Instructions. Clearing and Settlements are not catered for by SWIFT Network itself. Though in the Payment Instructions, there could be a mention of which Clearing and Settlement method is to be used for processing that payment.
Usually SWIFT Payments are settled thru Correspondent Banks. But if there is another desired method to be used (e.g. CHIPS for a payment in the US or CHAPS in UK), it could be mentioned in Payment Instructions message, along with other additional information for such settlements.
So, it is important to know that SWIFT only provides communication of Payment Instructions and it is NOT a Funds Transfer Network. For Funds Transfer, it gives you the flexibility to choose whatever Clearing and Settlement method desired for your payment.
But many in Corporate World mistake SWIFT as a complete Payment System, including Value Transfer for funds. This is not true.
Technically, a complete Payment System consists of three stages in its process:
· Payment Instructions
· Clearing
· Settlement
A SWIFT payment message (e.g. MT101) only caters to the first part of this process, i.e. providing Payment Instructions. Clearing and Settlements are not catered for by SWIFT Network itself. Though in the Payment Instructions, there could be a mention of which Clearing and Settlement method is to be used for processing that payment.
Usually SWIFT Payments are settled thru Correspondent Banks. But if there is another desired method to be used (e.g. CHIPS for a payment in the US or CHAPS in UK), it could be mentioned in Payment Instructions message, along with other additional information for such settlements.
So, it is important to know that SWIFT only provides communication of Payment Instructions and it is NOT a Funds Transfer Network. For Funds Transfer, it gives you the flexibility to choose whatever Clearing and Settlement method desired for your payment.
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