SWIFT, SPFS and CIPS: how international payments work today

SWIFT is often described as if it were a pipe that money flows through. In fact, it is a messaging system. Once you understand the difference, it becomes clear why disconnecting a bank from SWIFT does not stop all payments, and why being connected does not mean that a payment will arrive.

What SWIFT is

SWIFT was created by the banks themselves to send each other payment instructions in a single format. The society was founded in 1973 as a cooperative, and its headquarters are in Belgium. The organization’s full name is the Society for Worldwide Interbank Financial Telecommunication.

SWIFT does not transfer money. The sender’s bank sends a message with an instruction through the system: to whom, how much, in which currency. The money itself moves through correspondent accounts that banks open with each other. Each participant has an 8- or 11-character BIC code.

For a long time, a customer transfer was sent as an MT103 message. SWIFT payment messages are now moving to the ISO 20022 standard, which carries more structured data about the payer and the beneficiary. For correspondent banks, this is an additional source of information during checks.

A SWIFT payment has an end-to-end identifier, the UETR. Banks use it to track where the payment is now: debited, at a correspondent or already credited. If a payment is delayed, this number helps find faster at which link it stopped.

This leads to an important point: for a transfer to arrive, the sender’s bank must have a chain of correspondent accounts to the beneficiary’s bank in the required currency. A message without such a chain will not transfer anything.

What has changed since 2022

Since 2022, a number of Russian banks have been disconnected from SWIFT by decisions of the European Union. The organization is registered in Belgium and must comply with EU law. The list of disconnected banks has been extended several times.

For companies, this means:

• a disconnected bank cannot send a SWIFT message directly;
• many Russian banks have lost their correspondent accounts abroad, above all in dollars and euros;
• banks that remain in SWIFT also work with restrictions: foreign correspondents decide for themselves whether to let a payment through.

The main conclusion: your bank being connected to SWIFT does not ensure that a payment will arrive. What decides is not the messaging system but the willingness of every bank in the chain to process the money. We deliberately name no banks here: the list changes, and a bank’s SWIFT status says little about the fate of a specific payment.

SPFS

The Bank of Russia created the System for Transfer of Financial Messages (SPFS) in 2014 as a domestic alternative to SWIFT. Russian banks use it to exchange messages with each other, including for domestic payments. Foreign banks can also connect to SPFS, and some of them have done so. Most of these participants are in EAEU countries and among partners with which Russia settles in national currencies.

The limitation is the same as with SWIFT: SPFS transmits messages but does not create correspondent relationships. A payment abroad via SPFS is possible if the Russian bank has a correspondent abroad that works in this system and is willing to accept the money.

CIPS

CIPS is China’s cross-border yuan settlement system, in operation since 2015. Unlike SWIFT, it not only transmits messages but also settles yuan payments between participants. Some Russian banks are connected to CIPS.

For yuan payments to China, this is a working channel. But only in yuan: if the invoice is in dollars, CIPS will not help. You need either a dollar route or the supplier’s agreement to switch to yuan. And here too, the decision to credit the funds remains with the beneficiary’s bank, and Chinese banks check payments from Russia carefully.

Other channels

Besides messaging systems, international payments now also go by other paths:

• direct correspondent relationships between Russian banks and banks in other countries, often in national currencies;
• settlements in roubles through rouble accounts of foreign banks in Russia;
• agency arrangements: the company pays roubles to an agent in Russia, and the agent pays the supplier from its foreign company by a local or international transfer;
• set-off of mutual claims, which currency legislation allows only in limited cases.

From the supplier’s point of view, an agency payment is no different from an ordinary transfer. From the importer’s point of view, the confirmation changes: instead of a copy of your own SWIFT message, you receive the payment confirmation and the agent’s report and completion certificate.

What a company should do

Whether and when the disconnected banks return to SWIFT depends on political decisions, and we will not forecast it. It is more sensible to work from what works today:

• ask not “is the bank connected to SWIFT” but “which route to my supplier’s bank works right now”;
• have a backup route in case the main one closes;
• agree in advance with the supplier on a currency that reaches its bank more easily;
• if an agent will pay, check that the contract allows payment by a third party;
• keep payment confirmations for currency control in one place.

How to choose between banks and routes is covered in the article How to choose a bank and route for a payment abroad.

Where we fit in

VEDmost works with what is available now. The agents in our pool have different routes and currencies. For each payment we select an agent whose route to the destination works right now, and compare the terms. The agent, rate and fee are fixed before the roubles are debited. If you need a guarantee, the roubles wait for execution in a special escrow account at a Russian bank, for an additional fee. If the payment went via SWIFT, we will send a SWIFT confirmation on request. More on the Route selection and Invoice payments pages.