What are SWIFT payments?

Key takeaways

• What are SWIFT payments: They enable secure international money transfers between banks in over 200 countries. The SWIFT payment system processes millions of messages daily, but doesn't handle compliance or taxes.

• SWIFT GPI and security: SWIFT GPI tracking reduces payment delays, while ISO 27001 certification ensures data protection for sensitive payroll information.

• Challenges of global payroll: Managing global payroll through SWIFT wire transfer means handling multiple currencies, regulations, and compliance rules separately.

• The easiest way to run global payroll: A reliable employer of record (EOR) like G-P can manage multicurrency payroll, contractor payments, and local compliance for you.

Managing international payments can be challenging even for experienced HR teams. When you're paying employees and contractors across multiple countries, you need a reliable system that supports different currencies, banking regulations, and compliance rules. 

The SWIFT banking system provides this foundation, but understanding how to use it effectively can be the difference between smooth operations and costly delays.

What is a SWIFT payment?

A SWIFT payment is an electronic instruction that moves money between banks and across international borders through a standardized messaging system. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) doesn't transfer funds directly. Instead, it sends secure messages between financial institutions, telling them how to credit and debit accounts.

When you initiate a SWIFT wire transfer, your bank sends an encrypted message through the SWIFT network to the recipient's bank. The recipient's bank follows the instructions in the encrypted message to credit the funds to the recipient's account.

The SWIFT global payment system connects over 11,500 financial institutions across 220+ countries, making it the backbone of international business payments. For companies managing global teams, this network streamlines everything from monthly payroll runs to one-time contractor payments.

The swift payment network offers standardized processes across countries, traceable transactions, and bank-grade security. SWIFT is committed to data protection, ensuring that the payment platforms it works with maintain ISO 27001 certification, which is critical for handling sensitive payroll data. 

Challenges in global payroll and payments

Flawed payment processes disrupt your operations and impact employee satisfaction. Top global payroll challenges include:

• Local taxes and regulations: Each country has specific payroll tax obligations, reporting rules, withholding rates, and payment deadlines. Missing these deadlines can result in penalties.

• Payment method preferences by region: While SWIFT wire transfers work globally, local preferences vary. Employees might ask for local payment methods to reduce fees and maximize their take-home pay. 

Bonuses, commissions, and equity compensation: Variable compensation adds another layer of complexity. You must calculate taxes differently for bonuses, handle vesting schedules for equity, and ensure commissions reach sales teams promptly. The global SWIFT pay network handles these various payment types, but you need clear processes to track and report each component.

How SWIFT payment works

Understanding how SWIFT payment works helps you optimize your processes and avoid common mistakes.

The SWIFT payment process

The SWIFT online transfer process follows a clear sequence that ensures secure and traceable transactions:

1. Payment initiation: You submit payment instructions through your bank's online platform or payment software. The instructions include beneficiary details, amount, and payment purpose.

2. Message creation: Your bank creates a SWIFT message — typically MT103 for customer transfers — containing standardized payment information.

3. Network transmission: The encrypted message travels through the SWIFT payment network to the beneficiary's bank, sometimes routing through intermediary banks.

4. Payment execution: The receiving bank processes the message and credits the beneficiary's account according to the instructions.

5. Confirmation: Both banks exchange confirmation messages, and you receive notification of successful payment completion.

Every SWIFT wire transfer features:

• The ordering customer, typically your company

• The ordering bank

• The beneficiary bank

• The beneficiary, typically the employee or contractor

• Intermediary banks, if needed

Each party has specific responsibilities for compliance checks, fee collection, and information verification.

Examples of SWIFT payments

You may use SWIFT money transfers in the following ways:

• Payroll: When you pay an employee in Germany from your U.S. headquarters, the SWIFT global payments system ensures their salary arrives in euros to their local bank account. The payment includes reference information for tax reporting and can be scheduled for specific dates to meet local payroll cycles.

• Contractor payments: Independent contractors work across different countries. A SWIFT bank transfer lets you pay a developer in Thailand, a designer in Brazil, and a consultant in Kenya using one standardized system. Each payment can include invoice numbers and project codes for accurate record-keeping.

• B2B transactions: Beyond payroll, you can use the SWIFT payment system for vendor payments, partnership distributions, and intercompany transfers. These transactions sometimes involve larger amounts and need compliance documentation.

Essential details for a SWIFT payment

Accurate information prevents payment delays and returns. You'll need:

• Beneficiary name: Must match exactly as it appears on the bank account

• SWIFT code: An 8-11-character code identifying the specific bank and branch

• Account number: The recipient's account identifier or international bank account number (IBAN)

• Bank address: Physical address of the beneficiary's bank

• Payment purpose: Clear description for compliance and tax purposes

• Regulatory information: Tax IDs, registration numbers, or other local requirements

What are SWIFT codes?

SWIFT codes, also known as Bank Identifier Codes (BICs), uniquely identify financial institutions within the SWIFT banking system. The code structure tells you exactly where money is going:

• First four characters: Bank code, like “CHAS” for Chase Bank

• Next two characters: Country code, such as “US” for the United States

• Next two characters: Location code for the city or region

• Last three characters (optional): Specific branch code

For example, CHASUS33XXX identifies JPMorgan Chase's New York headquarters, and DEUTDEDB101 is for Deutsche Bank in Berlin. You can find SWIFT codes through your bank's website, account statements, or through SWIFT's online directory. Always verify codes with your beneficiary. The wrong code can route payments to the incorrect bank.

SWIFT payment logistics

Getting the operational details right determines whether your international payments run smoothly or create ongoing problems for your team.

How long do SWIFT payments take?

Standard SWIFT money transfer time frames have improved. According to SWIFT's most recent data, nearly 100% of SWIFT GPI payments reach beneficiaries within 24 hours, with 60% arriving under 30 minutes. However, some factors can cause delays.

• Time zones create natural delays. A payment started Friday afternoon in New York won't be processed in Tokyo until Monday morning.

• Intermediary banks typically add 1–2 days to the process, especially for currencies needing multiple conversions.

• Compliance checks for amounts over USD 100,000 can add another 24-48 hours.

To minimize delays, submit payments early in your banking day, use SWIFT GPI for real-time tracking, and add the right beneficiary information. Establishing regular payment schedules helps banks anticipate and process your transactions faster.

What are the fees involved with SWIFT?

The SWIFT global payment system has several fee components. Your bank charges USD 25-65 per outgoing wire, while intermediary banks may deduct an extra USD 15-30 from each transfer. Receiving banks also charge USD 10-25 to credit accounts. For a single international payment, total fees can range from USD 50-120.

Currency conversion adds another 1-4% to your costs through exchange rate markups. Banks typically offer rates 2-3% less favorable than mid-market rates. For a USD 10,000 payment, this means USD 200-300 in hidden conversion costs.

Volume discounts can reduce per-transaction costs. Many banks offer tiered pricing for companies sending multiple international payments monthly. Negotiating fixed monthly fees instead of per-transaction charges saves money for routine payroll runs.

Are SWIFT payments safe?

The SWIFT payment processing system has multiple security layers. All messages use end-to-end encryption with regular key rotation. SWIFT's Customer Security Programme mandates specific controls for all users, including multifactor authentication and segregated network access.

The network monitors unusual patterns and flags suspicious transactions for review. Your bank adds extra fraud detection, holding unusual payments for verification.

For payroll security, implement approval workflows that need multiple authorizations for payments above certain thresholds. Regular audits of payment beneficiaries and monthly reconciliation catch errors before they become problems.

Is a SWIFT code the same as an IBAN?

SWIFT codes and IBANs have different purposes in the SWIFT wire transfer process. A SWIFT code identifies the bank, while an IBAN identifies the specific account at that bank. You need both for successful international transfers.

IBANs contain up to 34 characters, including country code, check digits, bank identifier, and account number. The structured format reduces errors. They're mandatory in Europe and becoming common globally. 

Some countries don't use IBANs. The U.S., Canada, Australia, and several other countries still rely on routing numbers and account numbers. When sending payments to these countries through the SWIFT payment system, you'll provide the SWIFT code plus local account details instead of an IBAN.

Best practices

While the SWIFT banking system is the go-to for international payments, smart practices and alternatives can optimize your global payment operations.

Practical considerations for international employee payments

Managing SWIFT transactions effectively means planning carefully and following best practices, including:

• Clear payment schedules: Establish payment schedules that account for local banking holidays and payroll customs. Workers in some countries expect payment on specific dates, while others follow weekly or biweekly cycles.

• Proper documentation: Document your payment processes to ensure accuracy and compliance. Create templates for common payment types, maintain updated beneficiary databases, and establish approval hierarchies. This structure reduces errors and speeds payment processing when you're managing multiple currencies and destinations.

• Strategic payment timing: The SWIFT global payment system operates continuously, but exchange rates fluctuate throughout the day. Setting rate alerts and using forward contracts helps manage the risk.

Alternative payment solutions

Digital payment platforms offer alternatives to traditional SWIFT online transfer services. These solutions may provide lower fees and faster processing times. However, they often have country restrictions or transaction limits that don't suit all business needs.

If you don't have a local entity and want to avoid managing individual SWIFT global payments yourself, consider working with an employer of record like G-P. G-P streamlines the entire employment life cycle, including payroll and benefits. This approach removes payment complexity and ensures local compliance. Instead of worrying about SWIFT codes, currency conversions, and local compliance requirements, our global employment platform manages everything for you.

Streamline global payroll with G-P

Global payroll doesn't have to be difficult. When you choose us as your EOR partner, you get an end-to-end global employment solution, including payroll, hiring, onboarding, benefits administration, and ongoing support across 180+ countries. We manage the entire payment process, from currency conversion to local compliance. Our platform integrates with leading HCM and payroll providers to maintain workflow continuity while adding global capabilities. 

G-P Gia™, the first-of-its-kind agentic AI for HR, enhances accuracy by providing real-time information on employer burden rates, standard benefits packages, and local payment requirements. 

Book a demo to see how G-P simplifies global payments.