International financial transactions have traditionally used the SWIFT system for fast transfers. Every bank has been assigned a SWIFT code. Over the past ten years or so, the banking system has been moving to a newer version and began to call it the BIC code. It's not a new topic, but lately more customers, that is the intended users, appear to have issues.
Apparently some of the western banking personnel doesn't know what a SWIFT code is any more. Some refuse to process it. I understand that customers experience difficulties while banking trainees are trying to get a handle on their trade.
Apparently newcomers to the banking system are being thought that a BIC code must have 11 digits to be valid, ergo any code with with 8 digits, like original SWIFT code, can't be processed. Wrong number, transfer not possible, a needed transaction can't be done. Tedious troubleshooting ensues.
History
The SWIFT code was established for fast telex transfers between banks in the 1970s. The system itself is owned and operated by the banking system as a co-operative legal entity. The name stands for Society for Worldwide Interbank Financial Telecommunication (SWIFT). Swift transfers were fast, high end and expensive for the end-consumer. The system was highly successful and has gotten better with modern communication methods.
The organisation is now tasked with implementing the more advanced forms of fast transfers between banks and bank accounts, using BIC. Compared with the old telex times, general international communication has become very inexpensive, while the international transfer is at the same or higher cost level.
Sending money from one Asian country to another puts the sender back about 40 usd a shot, that's roughly 20-40 lunches at an Asian market food stall with good food. That's a lot of lunches for a simple money transfer.
Of course, in this global society, transferring money is not a public service like water, electricity and heat, but a privileged elite specialisation that must come at an appropriate cost. I mean, you must have a lot of money if you are going to send it around, right? And someone has pay for the sophisticated system, while the bank cooperative must show the right kind of profit.
SWIFT and BIC numbers
The original SWIFT code was and in many cases still is an 8 digit code, consisting of letters that a layman could encypher and easily remember. Like, the SWIFT number for Deutsche Bank was and still is DEUTDEFF - standing for Deutsche Bank, Germany, Frankfurt Main (river) referring to headquarters. Of course, like all other banks, DB still uses SWIFT and that particular code is still valid and other SWIFT codes with 11 characters have been added.
The new "BIC" stands for Bank Identification Code.
The new BIC number is always an 11 digit number, in Germany it is based on the "Bank Guide Number", a national system of bank and branch codes.
The new BIC number contains code details on the bank name and the specific bank branch. So the BIC number encompasses the entire global banking system, including bank branches.
The older SWIFT code only identified the bank by name and location, apparently not its branches. In the earlier times, all transfers were first routed to a bank's headquarters.
Development divide
Most, if not all western banks now use the 11 digit BIC numbers. Their hard-copy and electronic forms now have an 11 digit input. Most Asian banks still use the 8 digit SWIFT number for their retail clients' bank transfers.
Asia - always through HQ
Asian banks do not need and do not want branch details specified in the transfer code of retail transactions. In practice, Asian banks using the 8 digit SWIFT are principally routing clients transfers always through the bank's national headquarters. My guess is that this practice could have several reasons such as security, control, traceability, legal issues or other reasons.
Fact is, that in countries with shakier systems and some corruption, it might make sense to route international transfers first to one single location, such as headquarters.
Solving SWIFT-BIC
There are two ways to solve the issue when a form has 11 spaces for BIC and you still need to use the 8 digit SWIFT code.
1. You can insist with banking staff that the 8 digit SWIFT code will work, if that is what the recipient of the transfer has given you.
2. You or the banking staff append three letters XXX after the 8 digit SWIFT code, making a total number of 11 digits. This converts the SWIFT into a BIC number that that can be processed and it routes to the correct bank's headquarters. I have not seen it in person, and cannot generalise for all systems, but it appears that at least some electronic banking forms add the XXX automatically when a valid 8 digit code is entered.
One indication is SWIFT's official BIC lookup: http://www.swift.com/bsl. Enter the 8 digit code. Then try again by entering the 8 digit code and appending XXX.
Update: My own bank experience:: My European bank's new international transfer form has a search function for any bank's BIC or SWIFT number. When I search for my Asian bank by its name and country, quite a few SWIFT numbers appear, they are all 11 digits now. The correct "original" 8 digit SWIFT number appears with the triple X, to make it 11 digits. Same as I showed above.
Some informal sources also describe this practice: - http://www.swiftbic.com/swift-code.html?bank=KASIKORNBANK-PUBLIC-COMPANY-LIMITED - http://www.theswiftcodes.com/thailand/ Note the main 8 digit swift code, some country variations in that code, some of the local and international branch suffixes, and XXX for the main national branch, accompanying the 8 digit code for retail customers.
Officially, the 8 digit SWIFT code should still work, even if some European and American banking personnel may have already become unfamiliar with it. How fast people forget age-old practices!
IBAN
Similarly to the BIC, many if not most banks in Asia do not use the IBAN code for their clients' accounts. Another conundrum for western bank trainees, and client questions when confronted with a form that only knows IBAN.
I'll need to get to the details of it later.
Related
- http://en.wikipedia.org/wiki/Wire_transfer
- http://en.wikipedia.org/wiki/Society_for_Worldwide_Interbank_Financial_Telecommunication
- http://www.swift.com
- http://www.deutschebank.co.in/swift-transfer.html
- others in text