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SWIFT - Customer Payments

🟦 CATEGORY 1 — Customer Payments & Cheques (MT1xx)

🔹 Purpose

Used when a bank sends or receives payments on behalf of customers (individuals, companies, trusts).

These are client-originated payments, not bank-to-bank treasury movements.

📌 Key Message Types (Conceptual)

Although individual MT numbers are not listed in detail here, Category 1 messages cover:

  • Customer wire transfers

  • Cheques and cheque clearing

  • Customer payment instructions

🔁 MX (ISO 20022) Equivalents

Used in payment clearing & settlement systems:

  • pacs.003 – FI-to-FI customer credit transfer (batch clearing)

  • pacs.004 – Payment return / reversal

  • pacs.008 – Customer credit transfer (core customer wire message)

🏦 Who Uses This

  • Retail banks

  • Corporate banking

  • Private banking

  • Trust and fiduciary accounts

✅ Real-World Use Cases

  • Client wires funds to another bank

  • Trust distributes funds to beneficiaries

  • Corporate payroll and vendor payments

🟩 CATEGORY 2 — Financial Institution Transfers (MT2xx)

🔹 Purpose

Used exclusively for bank-to-bank transfers, not customers.

These messages move institutional funds, often related to:

  • Treasury operations

  • Liquidity management

  • Correspondent banking

🔁 MX Equivalent

  • pacs.009 – Financial Institution Credit Transfer

🏦 Who Uses This

  • Correspondent banks

  • Central banks

  • Clearing banks

  • Treasury desks

✅ Real-World Use Cases

  • Bank moves funds between nostro/vostro accounts

  • Settlement of interbank obligations

  • Treasury liquidity balancing

⚠️ Important:
MT202 / pacs.009 does not represent customer money, even if a customer is indirectly involved.

🟨 CATEGORY 3 — Foreign Exchange, Money Markets & Derivatives (MT3xx)

🔹 Purpose

Used to confirm and settle financial market transactions, not payments for goods/services.

📌 Covers

  • Foreign exchange (FX) deals

  • Interest rate swaps

  • Options

  • Money market instruments

🏦 Who Uses This

  • FX trading desks

  • Investment banks

  • Treasury & capital markets teams

✅ Real-World Use Cases

  • FX spot/forward confirmations

  • Swap settlements

  • Hedging transactions

💡 These messages confirm deals, they do not replace payment messages.

🟧 CATEGORY 4 — Collections & Cash Letters (MT4xx)

🔹 Purpose

Used for paper-based and collection-driven payment instruments, often tied to documents.

📌 Message Types Explained

MT400 — Advice of Payment

  • Notifies that payment has been made under a collection

MT405 — Clean Collection

  • Collection without commercial documents

  • Typically financial instruments only

MT450 — Cash Letter Credit Advice

  • Notifies receipt of cash letter credits (bulk cheque processing)

MT455 — Cash Letter Credit Adjustment Advice

  • Used to adjust previously advised cash letter credits

🏦 Who Uses This

  • Trade finance departments

  • Collection banks

  • Clearing institutions

✅ Real-World Use Cases

  • Documentary collections

  • International cheque clearing

  • Legacy trade settlement workflows

🟪 CATEGORY 5 — Securities (MT5xx)

🔹 Purpose

Used for settlement, delivery, reconciliation, and claims related to securities.

📌 Message Types Explained

MT541 — Receive Against Payment (RAP)

  • Receiving securities only when payment is made

MT543 — Deliver Against Payment (DAP)

  • Delivering securities in exchange for payment

MT559 — Paying Agent’s Claim

  • Used to claim payment from an issuer or paying agent

🔁 MX (ISO 20022) Equivalents

  • sese.020 – Securities settlement transaction instruction

  • sese.023 – Securities settlement status advice

  • sese.033 – Securities settlement transaction confirmation

  • sese.036 – Securities settlement condition modification

🏦 Who Uses This

  • Custodian banks

  • Investment banks

  • Clearing systems (Euroclear / Clearstream)

✅ Real-World Use Cases

  • Bond settlement

  • Equity delivery

  • MTN and note settlement

  • Paying agent claims

🟥 CATEGORY 7 — Documentary Credits & Guarantees (MT7xx)

🔹 Purpose

Used for trade finance instruments, not direct cash transfers.

These messages support obligations, not immediate payments.

📌 Message Types Explained

MT752 — Authorisation to Pay / Accept / Negotiate

  • Authorizes a bank to honor a documentary credit

MT754 — Advice of Payment / Acceptance / Negotiation

  • Confirms that action has been taken under an LC

MT756 — Advice of Reimbursement or Payment

  • Requests or confirms reimbursement under trade finance structures

🏦 Who Uses This

  • Trade finance banks

  • Issuing banks

  • Confirming banks

✅ Real-World Use Cases

  • Letters of Credit (LC)

  • Bank Guarantees (BG)

  • Standby Letters of Credit (SBLC)

⚠️ These messages do not move money by themselves — they authorize or confirm obligations.

🧠 Key Strategic Takeaways

  • MT ≠ Money by default
    Some messages authorize, some confirm, some settle, some advise.

  • Categories define intent

    • Cat 1 → Client money

    • Cat 2 → Bank money

    • Cat 3 → Market deals

    • Cat 4 → Collections

    • Cat 5 → Securities

    • Cat 7 → Trade instruments

  • MX (ISO 20022) is the future, but MT is still operational worldwide

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