Wire transfers are known for security, safety and reliability. We see wire transfers commonly used in high dollar transactions like buying a property as it is the safest way to move money around. Imagine having to buy a house using a check. You will have to issue the check and the other party clearing it as we mentioned in our previous post (Common methods we use for transacting). Comparing the two wire transfers are faster and more convenient.
When money is sent through a wire transfer there is no lock period on the fund. Once it is received by the destination account that would be it. Unlike Credit Cards or other means where there is a hold period and a clearing period. Wire transfer are instant.
The contingency with Wire Transfer is that both parties must have a bank account and the account owner has to pass the KYC AML procedures to be able to open a bank account. This means that each bank account is KYCd and authenticated and legit; you would not have to worry about spammers in the sense that you would not get random people hitting your account and sending you funds.
There are various forms of wire transfer the common is through using the network call SWIFT.
SWIFT is short for Society for worldwide interbank financial telecommunications. It is a network that allows banks to securely communicate with each other utilizing a set of standard codes. This also means that they have a private independent network that runs multiple levels of redundancy and failover measures (i.e. it does not use the public Internet but leased lines instead). SWIFT codes usually range between 8–11 characters. You might come across different names to SWIFT you might see it called Bank Identifier Code (BIC) or even ISO 9362 Code.
SWIFT came to life in 1973 with 239 banks in 15 countries as a replacement for Telex. Telex was quite slow and did not have a unified set of codes , when using Telex sender had to use text to describe transactions and you can imagine how troublesome that would be.
Emirates NBD for example has EBILAEAD as the SWIFT code. It may look bizarre but it has meaning embedded. The first four characters represent the bank’s code (EBIL) the next two characters represent the country code (AE) the last two characters represent the city code in this case is AD (Abu Dhabi). This allows for banks to quickly communicate. Assume you decided to send money from A to B. A will send the transfer message through SWIFT’s network to B and B would then Credit the account. SWIFT does not hold any money it is the message bit of the transaction, the operations of moving money and crediting destination is done by the banking system underneath which we will cover on future posts and not SWIFT.
SWIFT took over competition like Fedwire due to its constant updates and maintenance and it is quite scalable. It supports various types of transactions like treasury transactions and it is not limited to the traditional payment transactions. SWIFT is utilized beyond banks; exchanges and money brokers use it too and many other financial entities. It is worth mentioning that there are fees to being a member of the SWIFT network and to the messaging that happen. The entity using the SWIFT network is usually charged per message and its type and length.
Banks are quite established and almost every single human being owns a bank account. Verify Payments tapping into banks opens up numerous applications. This means that Verify Payments would indirectly be utilizing the SWIFT network without having to go through the process of being a member.
We’re always on the lookout for great developers! If you’d like to join a team on the bleeding edge of financial technology, send us a note → [email protected]
You can always shoot us your questions here, or in telegram, reddit, twitter, facebook or linkedin.
