How Corporations use the SWIFT MT101 Request for transfer

The SWIFT MT101 Request for Transfer is a payment initiation message used by corporations to send domestic and/or internatinal payments instructions to their banks. The equivalent of the SWIFT MT101 message in the ISO 20022 standard is called the Pain.001 (Customer Credit Transfer Initiation). The MT101 message can be used in many ways and in various situations. 

The structure of SWIFT MT101 message (Text Block)

We will try to illustrate the common situations and provide some explanations for each of them. Before we go through all that, it is important to remember how the MT101 message is structured. You find the SWIFT MT101 format specifications here. The text block (Block 4) of that message consists of two main parts: Sequence A General Information and Sequence B Transaction Details.

The Sequence A is mandatory and contains debit party information like Sender’s Reference, Instructing Party and Requested Execution Date. The Sequence B is repetitive and must be present at least once in the message. There you find credit party information like Transaction Reference, Beneficiary and Remittance Information. It should be noted that the fields 50a (Instructing Party),  50a (Ordering Customer) and 52a (Account Servicing Institution) are all present in both sequences and optional. Up to the sender to determine in which sequence to put them depending on what he wants to do. We will get back to all that in detail when we will look at the messages content in future articles.

For now let’s consider how the SWIFT MT101 message is commonly used by corporations.

Different usages of the SWIFT MT101

Typical usages of the SWIFT MT101 Request for Transfer by Corporates

In the picture above, a corporation (Corp. AB) sends a SWIFT MT101 to a concentrating bank. That bank is called concentrating Bank because it receives all instructions provided in the SWIFT MT101 regardless of whether those instructions are to debit an account held by that bank or an account held by another bank.

The concentrating bank can play the role of either a debtor bank or forwarding bank. It takes the role of:

  • a debtor bank for the instructions that are to debit an account that it holds,
  • and a forwarding bank for the instructions that are to debit an account that other banks hold

Typical usages of the SWIFT MT101 message by corporations

In our example, the concentrating bank issues four messages after processing the SWIFT MT101 from the corporation. Let’s take a closer look at each case:

Case 1: In this case, the concentrating bank (in the forwarding agent role) forwards another SWIFT MT101. This message contains all the instructions that are to be forwarded to the receiver, the Debtor Bank. We assume there is only one instruction in the SWIFT MT101 that it receives. The Debtor Bank is the one that holds the account to be debited and therefore the one that can execute the instruction. A subsidiary of Corp. AB, sender of the initial SWIFT MT101, has an account with the debtor Bank. Corp. AB, the parent company, is a party authorised by the account owner, its subsidiary, to send instructions. Corp. AB is the initiating party and therefore provides the account of the subsidiary as Ordering customer account in the SWIFT MT101. Note that the Debtor Bank processes the SWIFT MT101 and forwards a MT103 to the creditor Bank. If it receives many instructions in the SWIFT MT101, it may send additional MT103, but not an MT101.

Case 2: Here the concentrating bank (as forwarding agent) also forwards another SWIFT MT101 Message. Like above, this message contains all the instructions that are to be forwarded to this receiver, the Debtor Bank. We assume there is only one instruction in the received SWIFT MT101. This time, the debtor Bank is simply another Bank where Corp. AB has an account. As a result, the debtor Bank processes the instructions and debits Corp. AB’s account. It sends a MT103 message to the creditor bank.

Interesting Remark: there are cases, where the creditor Bank can be the concentrating Bank itself. The Debtor Bank is then requested to repatriate funds held in an account it holds to an account held by the concentrating Bank. This is done usually for cash management purposes with a specific code in the SWIFT MT101. Again, we will come back to this in future articles.

Case 3: Here the concentrating bank sends an SWIFT MT103 to an intermerdiary Bank. It plays the role of debtor Bank and therefore debits Corp. AB’s account that it holds and sends the funds to the intermediary bank which will then sends it further to the Creditor Bank. This can be for instance an international payment where settlement happens through a correspondent bank.

Case 4: This is simple. The concentrating bank (in the role of Debtor Bank again) sends an SWIFT MT103 directly to the Creditor Bank. It debits Corp. AB’s account and credit the creditor bank. The creditor bank can be another bank inside a bank Group, or a bank reachable through a domestic interbank clearing system. To keep the figure clean, the creditor is not represented.

Let me highlight an important point (thanks to the valuable comment of a reader): Not only the Cross Border payments are initiated by Corporates using MT101. SWIFT MT101 can be used as well to initiate the local or in country payment types such as RTGS, EFT, ACH, Cheques etc. This allows the corporations to use a single standard format for the initiation of all the payables.

In conclusion, we saw that Corporations use the MT101 messages to send instructions to a concentrating bank that can either execute them (if it is the Debtor bank) or forward them (If it is forwarding bank) to other banks holding the account to be debited. SWIFT MT101 can be sent to debit own accounts or accounts of a party authorised by the account owner, a subsidiary generally. Finally, the MT101 messages are used in Cash management to repatriate funds. In the next articles, we dig into the SWIFT MT101 messages in the different cases and analyze the content of messages. We will learn a lot. So stay tuned!


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5 Responses to How Corporations use the SWIFT MT101 Request for transfer

  1. Sanjay Ajwani October 8, 2018 at 9:22 am #

    Nice Article. I should also point out that its not only the Cross Border payments which are initiated by Corporates using MT 101. Even the local or in country payment types such as RTGS, EFT, ACH, Cheques etc..can be initiated using MT 101. There is a commercial reason for doing this that the corporate ERP has to generate a single standard Format to initiate all the payables. I work for implementing a Payment application in Canadian Bank and have seen Corporates using MT 101 for initiating all types of Payments.

    Looking forward to hear your thoughts/comments on this.

    • Jean Paul October 8, 2018 at 10:53 am #

      Thank you for your comment. I totally agree with you that corporates use MT101 for all types of payments.
      If you look at case 3 and 4, I have mentionned that payments can be international payments or domestic payments.
      I will update the introductory part of the article and the picture to highlight that and make it crystal clear for everyone.
      Thanks again for your valuable comment.
      Jean Paul

      • Sanjay Ajwani October 8, 2018 at 1:07 pm #

        Thanks Jean,
        Appreciate your prompt action.

  2. Stuti January 31, 2019 at 7:14 am #

    Hi Jean,

    I must say it is possibly the best article on MT 101. It gave me a very good understanding of the working of MT 101, but there is one thing which i failed to understand – In case 1 and case 2 why would the concentration bank initiate another MT 101. Wouldn’t it rather pass on the same MT 101, which it received from AB Corp.?

    Apologies, if my question sounds weird, as i’m relatively new to SWIFT.

    • Jean Paul February 1, 2019 at 8:16 pm #

      Hi Stuti,
      Thanks for your appreciation. In cases 1 and 2, the concentrating bank forwards the same MT 101. You got it right.
      So the concentrating bank must extract the MT101 to be forwarded to each destination bank and process the MT101 for which it is the debtor bank.
      I hope it clarifies.

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