SWIFT is a global messaging network used by financial institutions to securely transmit information and instructions relating to financial transactions. It does not transfer funds itself, but instead sends payment orders between institutions, using standardised message formats that ensure accuracy and efficiency.
Each participating institution is assigned a unique SWIFT/BIC (Bank Identifier Code), which functions like an international bank address. For example, DEUTDEFFXXX represents Deutsche Bank in Frankfurt, Germany.
In international trade, SWIFT messages are crucial for enabling:
Execution and confirmation of cross-border payments
Issuance and management of trade finance instruments (e.g. Letters of Credit, SBLCs)
Secure transmission of documentary instructions
Real-time tracking and proof of payment for risk mitigation
The reliability and standardisation of SWIFT communications underpin trust between buyers, sellers, and their respective financial institutions.
Below is a summary table of some of the most commonly used SWIFT messages in trade finance and their respective functions:
| SWIFT Message Type | Purpose |
|---|---|
| MT103 | Single Customer Credit Transfer – Used for TT payments; provides proof of payment |
| MT199 | Free-format message – Often used for general communication or pre-advice |
| MT202 | Financial Institution Transfer – Used between banks for fund settlement |
| MT202 COV | Cover Payment Instruction – Supports the MT103 for intermediary bank routing |
| MT700 | Issue of a Documentary Letter of Credit |
| MT701 | Amendment to a Documentary Letter of Credit |
| MT760 | Issue of a Standby Letter of Credit or Bank Guarantee |
| MT799 | Free-format message used for pre-advice or proof of funds |
| MT999 | Free-format general-purpose message |
These messages are categorised under different series, with the MT1xx series relating to customer payments, MT2xx to bank-to-bank transfers, and MT7xx to trade finance instruments such as Letters of Credit and SBLCs.
To illustrate how SWIFT works in practice, consider the following example:
A buyer in Australia purchases industrial equipment from a manufacturer in Germany. The payment term agreed under the contract is advance payment via Telegraphic Transfer (TT).
Buyer Initiates Payment:
The buyer instructs their bank in Australia to make the international wire transfer using TT.
MT103 Generated:
The buyer’s bank generates and transmits a SWIFT MT103 message to the seller’s bank in Germany. This message serves as the formal instruction to transfer funds, with all necessary payment details.
Confirmation Received:
The German supplier’s bank receives the MT103 message and confirms payment receipt or pending settlement. The supplier uses this as verification to proceed with fulfilling the order.
Documentation and Audit:
The MT103 acts as verifiable proof of payment for both accounting and compliance purposes. It is frequently required by customs brokers and freight forwarders for cargo release or shipping documentation processing.
The SWIFT network is the gold standard for financial messaging in global trade. Whether facilitating payments, issuing trade finance instruments, or confirming transactions, SWIFT provides the backbone that allows banks and trading parties to communicate securely, efficiently, and with legal certainty.
For importers, exporters, and financial intermediaries, understanding and leveraging the appropriate SWIFT messages, particularly the MT103, MT760, and MT799, is vital to ensuring transactions proceed without disruption.