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Going abroad is not easy. Or managing your finances in two different countries. When I moved to France in September, I realized that not every country in the world had such an electronic and fast banking system as the United States. I had to submit document after document, wait for my applications to be processed, and then wait for my card, PIN and online banking information to arrive in the mail (all in different letters, of course). In total, it took me about five weeks to open a bank account in France.

I couldn’t skip the process either. I specifically needed a French bank account with a French IBAN (international bank account number) in order to pay my bills. For example, my Metro Pass account will only accept direct debit each month from a French bank account. Also, some online retailers will only allow transactions with payment forms issued within the EU, which means my credit cards are sometimes declined when shopping online. Depending on where you live abroad, there are services that can handle your finances in multiple currencies or for US residents living abroad. Make it easy for consumers to send money.

Main payment networks by bank transfer

QUICKLY DONE

SWIFT is the acronym for the Society for Worldwide Interbank Financial Telecommunication, a Brussels-based organization that has existed since the early 1970s. It was created to help banks communicate more quickly and securely with each other regarding the processing of payments by bank transfer.

How does SWIFT work?

Today, SWIFT is a communications network of over 10,000 financial institutions in over 200 countries, making it the largest international payment network in the world. We emphasize the word “communication” because SWIFT is nothing more than a messenger between banks.

Basically what SWIFT does is route the message containing the payment instructions from the issuing bank, i.e. the payer’s bank, to the issuing bank, the beneficiary’s bank. Now, this job may seem simple, but you should never judge a book by its cover. Read our article on how the SWIFT network works.

TO KNOW

SEPA is the acronym for Single Euro Payments Area. It was created in 2008 to simplify cross-border euro payments within Europe. In other words, a SEPA payment is similar to a national payment. The SEPA area includes 36 countries: the 27 EU Member States, the United Kingdom, Andorra, Iceland, Monaco, Switzerland, Liechtenstein, Norway, San Marino and the City State of Vatican (see the full list here).

How does SEPA work?

SEPA works the same way as SWIFT except that it is only for euro payments within the SEPA zone. Banks have direct or indirect relationships (i.e. they use a network of intermediary banks).

Payment codes by country

BIC (also known as SWIFT) for international payments

BIC stands for bank identifier code. This is a code assigned by SWIFT, the organization, when the bank joins the SWIFT network.

What is the difference between a BIC and SWIFT code?

Technically, that’s what happens. In fact, you will also hear SWIFT code, BIC/SWIFT code, SWIFT/BIC code or SWIFT identifier. They all refer to the same code and are mandatory when making an international payment.

What does a SWIFT/BIC code look like?

This is a series of 8 or 11 characters (letters and numbers) that identifies a specific bank you are sending money to. The code includes details of the country in which the bank is located, its location and the branch number. This is what a SWIFT/BIC code looks like:

IBAN code for SEPA payments

Unlike the BIC/SWIFT code, IBAN codes are not assigned by a central body. They are issued directly by banks in a format described in the IBAN Register.

What does an IBAN code look like?

This is a string of up to 34 characters (letters and numbers) that identifies the country, bank and account details you are sending money to.

The IBAN number is made up of:

• Two-letter country identification code
• two check digits
• Up to 30 characters for Basic Bank Account Number (BBAN)

At the time of writing, over 100 countries are registered with IBANs. 75 participating countries (including 36 countries in the SEPA zone) and 25 countries with partial/experimental use of the IBAN system. However, it is mainly European banks that use IBANs. The United States and Canada are two large countries that do not use the IBAN system (but recognize the system and process payments).

BSB for Australian payments

BSB stands for Bank State Branch. You must have this 6-digit code in addition to the SWIFT code when making a payment to Australia.

What does a BSB code look like?

Here is what this 6-digit code means:

• The first two digits refer to the bank or financial institution
• The third digit refers to the state where the branch is located
• The last three digits provide the unique branch address

ABA for US payments

ABA means a lot of things in the United States, but when it comes to payments, ABA stands for American Bankers Association. You probably guessed that the ABA number (also called bank routing number or routing transit number – RTN) identifies where a bank account was opened.

What does an ABA code look like?

This 9-digit code is made up of:

• 4 digits to represent the Federal Reserve Routing Code (which basically tells the Federal Reserve how to process the payment)
• 4 digits to represent the bank identifier
• 1 digit to represent a checksum. The checksum is a complicated mathematical expression that uses the first eight digits. If the final result is not equal to the checksum, the transaction is flagged and redirected for manual processing.

CNAPS for RMB payments to China

The banking world is a big fan of acronyms. Here’s another one: CNAPS stands for China National Advance Payment System. You will need this code in addition to the SWIFT code only if you are making a payment in RMB (or CNH for purists) to the PRC. If you are making a payment in other currencies (e.g. USD), you will only need the SWIFT code.

What does a CNAPS code look like?

The CNAPS is a 12-digit code that may start with the keyword CN to indicate that the account is in China.

This is what the 12-digit code refers to:

• The first 3 digits represent the bank code
• The next 4 digits represent the city code
• The next 4 digits represent the branch code
• The last digit is the verification code.

Bank code for payments in Hong Kong

Unfortunately (or fortunately?) there are no mysterious acronyms for the Hong Kong bank code. Unlike other jurisdictions, Hong Kong does not set a format. In addition to the SWIFT code, you will need a 3-digit bank code, a 3-digit branch code and a 6-9 digit account number.

What does a Hong Kong code look like?

If it’s an HSBC account, it should look like this. The bank code is always given separately, the HSBC bank code is 004. It is also common to see HSBC 812-852456-888.

Classification code for UK payments

Sort is not an acronym for anything. The name of this code dates back to the last century when the 5-digit national codes (for manual processing) were replaced by the 6-digit classification codes (for automated processing). So the sort code is literally a code that helps the bank sort payments to the correct UK account.

What does a classification code look like?

The classification code is a 6-digit code that is always written as three pairs of numbers. The first two digits identify the bank, the next four identify the branch.

Rate

When you make an international payment, these are all the fees that add up:

• shipping – This is the commission that the payer’s bank would charge to make an international payment
• Correspondent banking fees – These are the fees that any intermediary bank would charge when the banks do not have a direct relationship (remember the example at the beginning of this article?)
• Reception fees – This is the fee the recipient’s bank would charge to receive an international payment
• Foreign Exchange Fee/Surcharge – This is the exchange fee when an international payment is made in different currencies

How much does a SWIFT payment cost?

It is practically impossible to estimate how much an international transfer will cost, it varies according to the banks involved in the transaction, the currencies involved, the amount, if there are intermediary bank charges, etc. You could pay up to $50 to transfer money from country A to country B. Make sure you use the correct SWIFT code to avoid delaying your payment and incurring return fees.

When making a SWIFT payment, there are three ways to pay the international transfer fee:

• OUR = you (as the sender) pay all bank charges. Your recipient will receive the full payment amount. Normally, these costs are billed to you separately.
• Well (BENeficiary) = You pay nothing and your beneficiary pays everything. The fee will be deducted from the amount they receive.
• SHA (SHARED) = you pay your own bank’s outgoing transfer fees, and your beneficiary pays your bank’s receiving fees AND correspondent banking fees.

How much does a SEPA payment cost?

When you make a SEPA payment, it will cost you a domestic transfer fee (which usually means it’s free).

processing time

Electronic transfers are generally only processed the same business day if requested before the bank’s cut-off time. In some cases they are processed the next business day due to the time difference. In Hong Kong, these cut-off times vary by +/- 30 minutes from bank to bank. You can see international transfer times for major currencies below.

However, be careful, a bank that processes an international transfer on this working day does not mean that it will arrive in your recipient’s bank account on the same day. What happens after you give the payment instruction is beyond your control. Like you, we’d like to see real-time SWIFT transfers, but we’re not there yet.

International transfers typically take 1-5 business days to reach their final destination. But many factors can delay your transfer: incorrect bank details, public holidays, weekends, time zones, country of destination, regulatory controls, number of intermediary banks, etc.

Final Words: How to Make International Payments

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