As international commerce continues to grow, businesses of all sizes are looking for ways to better understand the world of international banking and how they can ensure that their payments get delivered effectively.
“When businesses first start to pay vendors overseas, they are often asked to understand new terms,” says Gwen Griffin, a vice president and senior product manager at U.S. Bank. “They hear things like SWIFT BIC or SWIFT code or IBAN and find themselves reaching for help online.” Below is a tool to help you crack the code of international payments.
International Wires can be sent to hundreds of different countries, involving many languages, and spanning all 24 time zones, so it’s no surprise that international wires have a language all their own.
Here are the answers to some key questions:
What is SWIFT? In general, when we talk about sending an international wire, we are talking about sending payment messages over the SWIFT FIN Network. SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services. It is a service that U.S. Bank and over 11,000 entities worldwide use for initiating cross-border payments to more than 200 countries.
What is a BIC? The Business Identifier Code (BIC) is eight or eleven characters long and uniquely identifies an entity that is on the SWIFT FIN Network. “If you think of an international wire as an electronic message,” Griffin explains, “the SWIFT BIC is like a bank’s email address.”
What do BIC numbers mean? The definition of the 8 character BIC has evolved; the first four characters are now the business party prefix, the next two identify the country where the entity is located, and the last two characters are the business party suffix. Historically, the first four characters defined the entity, but due to bank mergers and acquisitions, new BIC assignments do not follow this convention. So, for U.S. Bank, the BIC ID would be USBKUS44IMT (for International Money Transfer). USBK was assigned as the identifier for U.S. Bank, U.S. is the country, and 44 indicated the location of the bank headquarters.
“The first eight characters are known as the BIC8,” Griffin says. “If we add a three-character branch code to the end, it will further identify which area of the bank it's going to. The full 11-digit BIC Code is the one our customer would give to their customers overseas if they wanted to receive the wire at U.S. Bank”
What are IBANs? IBAN stands for International Bank Account Number. It is a specific account number that is used for cross-border payments, but the length can vary between 22 and 34 characters depending on the country.
For example, if you are sending a wire to the United Kingdom, the first two characters are GB (Great Britain), followed by a two digit check number, then four characters of the SWIFT BIC, then a national routing code of six digits, and then an eight digit local account number.
“That local account number is equivalent to your checking account number at a U.S. bank,” Griffin says. “All that other stuff in front of it is to make sure we're making it to the right country, the right bank and the right branch of that bank.”
The key for successful international wire payments is asking the receiver for all the information necessary for the payment. In addition to the SWIFT BIC and IBAN, you need to know information about who you are paying, for example their name and address, and country of their bank.
“The beneficiary or the payee may live in Austria, but if their bank is actually in Germany, that’s important. The country-specific rules and regulations for international wires are based on the country of the bank.”
Central banks for many countries have imposed rules that must be followed before their banks can accept incoming cross-border payment. For example, many countries now require listing a purpose of payment.
“They need to know that it’s for a legitimate business purpose rather than terrorist funding, money laundering, trafficking, that sort of thing,” Griffin explains. “At U.S. Bank, we offer dynamic payment templates to make it easier to ensure you are entering the correct information”
U.S. Bank continues to make it easier to make international Payments. U.S. Bank is already live with SWIFT Global Payment Initiative (GPI), which provides customers with end-to-end payment tracking to make the process easier and more transparent.
U.S. Bank has more exciting developments on the horizon. For example, Griffin is redesigning the user online experience and piloting some digital tools that take the guesswork out of providing wire information, including clickable dropdown menus to select the right country and rules, and prompts that guide the user to fill in the exact wire details needed.
“Our vision is for our systems to seamlessly ask for the required information for each destination country,” Griffin explains. “We're trying to guide them through providing all the information that is required by that country to ensure the wire is straight-through processed through every bank in the payment chain, and ensure the best possible experience”
Contact us to learn more about international payments and global cash management.