SWIFT code vs IFSC code

Behind every seamless money transfer—whether it’s paying an international supplier or settling a bill next door—is a code banks use to move your funds accurately and securely. It’s identified as per the nature of transactions. There are two codes: SWIFT for cross-border payments and IFSC for domestic transfers. These codes ensure every transfer reaches the right place without a hitch.

In India and across the globe, the two key codes that play a vital role in how banks route and process payments are the SWIFT code and the IFSC code. SWIFT codes ensure your money travels safely across countries; IFSC codes, on the other hand, make domestic transfers in India instant and efficient, powering services like NEFT, RTGS, and IMPS.

In this article, we'll explore what the SWIFT Code and IFSC Code are, as well as their purpose, usage, and examples. We'll also take a closer look at the SWIFT vs. IFSC codes to understand the key differences between them.

Before we dive into what a SWIFT code is, let's understand what SWIFT is. SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a network that facilitates financial transactions at the global level and allows secure communication between financial institutions. So, it's like a messaging app, but for financial institutions. 

Founded in 1973 by 239 banks from over 15 countries, SWIFT now connects over 11,000 financial institutions globally. While it started primarily with payment instructions, today, SWIFT handles a variety of financial communications, including security transactions, treasury operations, and trade communications. It's the SWIFT that assigns a unique code to every financial institution that's part of the network. And this code is known as the SWIFT code. 

A SWIFT code is an alphanumeric code that identifies a bank or financial institution in international transactions. Think of it as a unique address that ensures that your money reaches the right destination when sending or receiving funds across borders.

SWIFT doesn't actually transfer money, instead, it securely communicates transaction instructions between financial institutions using SWIFT codes.

Swift Code Example

SWIFT codes have 8 or 11 alphanumeric characters, and here is what they represent:

• The first four characters represent the financial institution itself.
• Fifth and sixth characters denote the country of the institution.
• Seventh and eighth characters are the city code and represent the institution's location.
• Ninth, tenth, and eleventh characters are optional and are usually used to identify the specific branch of the financial institution.

For instance, the SWIFT code of SBI's Delhi Main Branch is SBIN IN BB 104. Here, SBIN denotes the bank, IN is for India, BB is the location code of the head office of the bank, and 104 is the branch code. 

Another example is BOFA US 3D DOC. BOFA stands for Bank of America, US is the country code, 3D is the location code, and DOC is the branch code. 

A SWIFT code is meant for international transfer of funds. Its main purpose is to ensure that global transactions are fast and secure. It guarantees accurate routing of funds between global banks and institutions.

SWIFT codes are essential when you are making cross-border payments. This is what banks use to identify the recipient's bank. Once the code is verified with the designated bank, SWIFT streamlines the communication between the sender's and the receiver's bank, ultimately leading to the smooth transfer of funds. 

This example will help clarify the process.

1. Let's say you're an exporter in India selling goods to a company in the United States. 

2. To get paid from USD to INR, you'll need to share your account details, including the SWIFT code, with the U.S. buyer. 

3. The buyer's bank will use this SWIFT code to send a secure message through the SWIFT network to your bank in India, ensuring the funds are directed to your account accurately. 

4. This secure system reduces risks and delays, with payments typically processed in 1-5 business days, depending on intermediary banks and countries involved.

If you are wondering how to find your bank's SWIFT code, try these simple methods:

• Check your bank statement, it's often listed there.
• Log in to your bank's mobile app. Some banks show the SWIFT code there.
• Visit your bank's website, especially the international payments section.
• Call customer support, they can also provide the code quickly.
• Drop by your local branch and ask a representative directly.

Just like the SWIFT code, an IFSC (Indian Financial System Code) is a unique alphanumeric identifier, and it is used to recognize a specific bank branch in India. The code is issued and managed by the Reserve Bank of India (RBI). 

In domestic payments, IFSC plays an essential role in ensuring accurate and efficient fund transfers, especially for electronic transactions like NEFT (National Electronic Funds Transfer), IMPS (Immediate Payment Service), and RTGS (Real-Time Gross Settlement). 

The IFSC code is also required when you make electronic payments, including sending money through apps like Google Pay, PhonePe, and others or initiating bank transfers via online banking portals.

IFSC Code Example

Your IFSC code has 11 alphanumeric characters. Here's a detailed breakdown of these characters.

• The initial four characters are your bank's unique identifier
• The fifth character is always zero, which works as a separator and is meant to be used in the future 
• The final six characters represent the particular branch of your bank. 

Examples include:

BARB0BANGBS: The BARB is the Bank of Baroda's unique identifier, the fifth character is zero, and BANGBS denotes the Indiranagar, Bengaluru branch. 

CBIN0280233: Here, CBIN is the identifier for the Central Bank of India, and the last six characters, 280233, represent the bank's Agra, Uttar Pradesh branch. 

The purpose of an IFSC code is to enable seamless financial transactions across different financial institutions in India. In contrast with the SWIFT code, the scope of the IFSC code is limited within Indian borders only and doesn't include any international transactions.

Whenever you make transactions through NEFT, RTGS, or IMPS, the IFSC code is an essential requirement. It ensures that the payment is transferred to the correct bank branch.

For instance, if you want to receive domestic transfers, you'll need to provide your account number and IFSC code. The IFSC helps the sender's bank identify your branch, making sure the funds are credited correctly into your account.

Locating your IFSC code is also a simple process. You can find it:

• On your cheque book: The IFSC code is generally located near the top left, beneath the branch address.
• Through your bank's website: Most banks offer an online tool or list where you can easily look up your branch's IFSC code.
• On RBI's portal: Use the RBI's official site to search for IFSC codes by entering the bank and branch details.
• By visiting the local branch: You can also personally visit the bank branch and request the IFSC code if the above methods don't work. 

Essentially, both SWIFT and BIC mean the same thing. BIC refers to the Bank Identifier Code, which is also a unique code of 8 or 11 characters that identifies a specific bank during international transactions. The SWIFT code itself is sometimes referred to as the BIC.

Now that we have covered what SWIFT Code and IFSC Code mean separately, let's look at this SWIFT Code vs IFSC Code table to better understand their differences.

Whether you are receiving payments with SWIFT codes or involved in domestic fund transfers, the common denominator should be efficiency, security, and reliability. Xflow provides you all that and more for your international payments. 

Xflow makes every cross-border transaction seamless, compliant, and cost-efficient. With our user-friendly interface, you can manage international payments with ease, while benefiting from a low 1% transaction fee, real-time tracking, and simplified KYC. 

What's more, your payment settlements are processed within one business day, ensuring faster cash flow. Your FX rates are linked to mid-market prices, which helps you save more on every transaction. All of this allows you to focus on your core business goals without worrying about payment complexities.

Ready to begin a journey of hassle-free international payments? Choose Xflow now!

Both SWIFT and IFSC codes serve essential roles in financial transactions, but they cater to different needs. Understanding the differences between these two codes will help you make better-informed decisions about your transactions, saving time and money.

More articles:

1. How to master efficient transfer pricing with Xflow
2. Managing international business payments business with Xflow
3. Beginner’s guide to cross-border payments for service exporters