In the world of international banking and finance, communication is key. But with thousands of banks and financial institutions operating across the globe, how do they all “speak the same language”? Enter SWIFT standards messages—a universal system that ensures seamless communication for processing payments, securities, and more.
In this blog post, we’ll explain what SWIFT standards messages are, break down the different types of messages in an easy-to-understand table format, and provide real-life examples to show how they work in payment systems. Let’s dive in!
Make sure to check future articles where, will be explaining each Payment message in detail. In this post, will be giving overview of the messages. And if you are new to payments domain you can go through series of payments systems.
Table of Contents
What Are SWIFT Standards Messages?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network used by banks and financial institutions to securely send and receive information. SWIFT standards messages are formatted texts that follow strict rules to ensure consistency and clarity. These messages are used for a variety of purposes, such as:
- Processing cross-border payments
- Trading securities
- Managing treasury operations
- Sending account statements
SWIFT doesn’t actually move money—it simply provides the communication framework that enables banks to process transactions efficiently.
Why Are SWIFT Standards Messages Important?
- Global Standardization: SWIFT messages follow a universal format, so banks worldwide can understand and process them without confusion.
- Security: SWIFT uses advanced encryption and authentication to protect sensitive financial data.
- Efficiency: By standardizing communication, SWIFT reduces errors and speeds up transaction processing.
- Traceability: Each message includes unique reference numbers, making it easy to track transactions.
Types of SWIFT Messages: A Quick Reference Table
SWIFT messages are categorized by Message Types (MT), each identified by a 3-digit code. Now, new ISO format of SWIFT is introduced which many banks have already opted and others are in race to finish it before the deadline. Will be talking about them later in this blog series.
Below is a table summarizing the most common types of SWIFT messages and their uses:
| Message Type | Purpose | Real-Life Example |
|---|---|---|
| MT101 | Request for Transfer | A corporate customer requests their bank to transfer funds to another account. |
| MT103 | Single Customer Credit Transfer | Sending $10,000 from a U.S. bank to a supplier’s account in Germany. |
| MT192 | Request for Cancellation of a Payment Order | A bank requests the cancellation of a pending payment due to an error. |
| MT196 | Answer to a Request for Cancellation of a Payment Order | The recipient bank confirms whether the payment cancellation request was successful. |
| MT199 | Free Format Message | A bank sends a free-text message to another bank for clarification or updates. |
| MT202 | General Financial Institution Transfer | Bank A sends £1 million to Bank B to settle an interbank obligation. |
| MT205 | Financial Institution Transfer Execution | Executing a transfer between two accounts within the same bank. |
| MT940 | Customer Statement Message | A bank sends a monthly account statement to a customer. |
| MT900 | Confirmation of Debit | Confirming a debit transaction, such as a withdrawal or payment. |
| MT910 | Confirmation of Credit | Confirming a credit transaction, such as a deposit or incoming payment. |
| MT300 | Foreign Exchange Confirmation | Confirming the details of a foreign exchange trade. |
| MT320 | Fixed Loan Deposit | A bank confirms the terms of a fixed-term loan deposit with another bank. |
| MT535 | Statement of Holdings | A custodian bank sends a statement of securities holdings to a client. |
| MT995 | Queries About a Payment Message | A bank queries another bank about the status of a payment. |
| MT996 | Answer to a Query About a Payment Message | The recipient bank responds to the query with details about the payment status. |
How SWIFT Messages Work: Real-Life Examples
Example 1: Sending an International Payment (MT103)
Imagine you’re a business owner in Canada who needs to pay a supplier in Japan. Here’s how the process works:
- You instruct your bank (Ordering Bank) to send ¥1,000,000 to the Beneficiary Bank account.
- Your bank creates an MT103 message, which includes:
- Your account details
- The beneficiary account details
- The amount (¥1,000,000)
- A payment reference (e.g., invoice number)
- The MT103 message is sent via the SWIFT network to the supplier’s bank in Japan via correspondent banks. We will discuss in detail of this message in next post.
- The Japanese bank receives the message, verifies the details, and credits the supplier’s account.
- You receive confirmation that the payment has been completed.
Example 2: Bank-to-Bank Transfer (MT202)
Bank A in the UK needs to send €500,000 to Bank B in Spain to settle a debt. Here’s the process:
- Bank A creates an MT202 message, which includes:
- The amount (€500,000)
- The currency (EUR)
- The accounts involved
- The MT202 message is sent via the SWIFT network to Bank B.
- Bank B receives the message, verifies the details, and updates its records.
- The transfer is completed, and both banks update their ledgers.
Challenges and Limitations of SWIFT Messages
While SWIFT is a powerful system, it’s not without its challenges:
- Cost: SWIFT transactions can be expensive, especially for small businesses.
- Speed: While SWIFT is fast, cross-border payments can still take 1-3 business days.
- Complexity: The system can be difficult to navigate for those unfamiliar with financial messaging.
The Future of SWIFT: SWIFT GPI
To address some of these challenges, SWIFT has introduced SWIFT gpi (Global Payments Innovation), which aims to make cross-border payments faster, more transparent, and trackable in real-time. With gpi, you can track your payment’s status just like tracking a package!
Conclusion
SWIFT standards messages are the backbone of international banking, enabling secure and efficient communication between financial institutions. By understanding the different types of SWIFT messages and how they work, you can better navigate the complexities of global transactions.
Whether you’re sending money overseas, receiving payments from international clients, or simply curious about how the system works, SWIFT plays a vital role in keeping the global economy connected.
In next section we will discuss about – What Is MT103 SWIFT Message in detail.