Guaranteed payouts for Contractor invoices processed via Swift

SWIFT payments are used to send cross-border payments to contractors via the SWIFT network securely. Intermediary or correspondent banks are utilized to process these payments.

This article covers the following topics:

• What is Swift?
• When do you need a SWIFT transaction?
• How does SWIFT work?
• How are SWIFT fees calculated?

What is SWIFT?

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It's a secure network that banks use worldwide to send and receive information about transactions. This system helps make international payments quickly and safely, usually within 1-4 business days.

When do you need a SWIFT transaction?

For example, if a company in the US wants to pay a contractor in India in USD, the payment rails we use depends on the contractor's bank account details:

• If the contractor has a bank account with local US details, such as ACH ABA routing and a local US address, the transaction will be processed as local ACH payment with no fees. Payment providers like Wise or Payoneer offer this option, known as ‘Virtual Currency Accounts’ giving people access to local currency bank accounts when they’re located elsewhere in the world.
• If the contractor has an Indian bank account accepting foreign currencies like USD, their account will still operate with Indian details (account number and address) and utilize the SWIFT network for international transactions.

How does SWIFT work?

Once a contractor's invoice is approved and payment is initiated, understanding the payout currency and bank account location becomes crucial for calculating the fees each party may incur. Continuing with the previous example, if your contractor based in India would like to receive USD into their India-based bank account, here's what happens:

1. The payment is processed as an international or cross-border transfer.
2. Remote’s bank sends a secure message to the recipient bank’s correspondent or intermediary via the SWIFT network, detailing the transaction specifics.
3. The correspondent or intermediary bank executes the payment transfer to the recipient bank. Given their critical role in international payments, these banks charge fees for their services.
4. Ultimately, the contractor receives the payment in their account. It's important to remember that fees may be deducted by the intermediary bank and the contractor's bank may also assess a separate incoming wire fee.

How are SWIFT fees calculated?

If the payout currency is in USD, we get visibility of the full fees involved in the SWIFT payment. We will show this on our platform and give companies the ability to choose whether to pay these fees or pass them on to contractors. We do this by using what is known as a ‘CHG: OUR’ instruction, which allows us to pull the whole fee. Because we provide alternative free and cheaper payment options, Remote passes on SWIFT fees to companies or contractors.

For example, if you’re based in the US paying a contractor in USD to their India bank account via SWIFT - we would be able to pull the whole fee and let you decide who covers this.

Important to note that CHG:OUR is only available when sending USD Swift payments and that correspondent banks may, at their discretion, still charge a separate processing fee. CHG:SHA is used for sending non-USD Swift payments, which means we share the fee with the end user (the contractor). In this scenario, we are not given full visibility of the intermediary bank's charges, only our own payment processors' fees. In this scenario - we show the portion of the fee we have visibility of and allow companies to determine who covers this fee. We then call out on the platform that the correspondent bank fee is unknown and outside of our control.

For example, if you’re based in the UK paying a contractor in GBP to their India bank account via SWIFT - we would only see about 2 - 3 GBP in payment charges on our side and let you decide how to handle this. However, when the contractor receives their funds, the amount will likely be less than expected due to the intermediary bank’s fees.

In summary, SWIFT payments are a reliable way to handle international transactions, ensuring your contractors get paid no matter where they are. Understanding the steps involved — from approving an invoice to the final transfer — helps manage expectations regarding processing times and potential fees.

See also: Contractor invoicing currency and guaranteed payouts