MT103 – Single Customer

Credit Transfer
by Pallavi Deshpande . September 8, 2014

MT103 is also used in the form on MT103+ and

MT103REMIT which facilitates straight through
processing.
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We have already discussed in our earlier article SWIFT MT1xx &
MT2xx that these specific message types starting with ‘1’ and ‘2’ are
standardized and assigned for Customer and Financial institution
related payments. SWIFT MT103 is an improvised version of the
original MT100 customer credit transfer message.

MT103 is used to make a single payment. It has a large number of

options that are to describe exactly how the payment should be made.

Let us study a few examples of MT103 facilitating foreign currency

trade payments between the exporter and importer located in 2
countries. Through our example we will examine the architecture of
trade payments between with 2 banks having a single account
relationship, 2 banks having multiple account relationship and 2 banks
having no relationship thereby using an intermediary bank to facilitate
the actual payment.Please remember that MT103 like other SWIFT
messages is a mere communication of financial transaction. SWIFT
offers a secured, encrypted and standardized medium of financial
transaction communication.

MT103 provides the instructions of the underlying financial payment to

the receiver of the transfer, the actual entries/transactions are carried
out separately and are outside the purview of SWIFT.
Payment Reference: Your bank payment reference must be indicated
in all MT103 and it should be correct. This reference number enables
the payee/beneficiary to apply the payment.

BEN/OUR/SHA: This field indicates as to who is being the transfer

charges. The ‘OUR’ instructions mean that the sender will bear the
charges. ‘SHA’ means means sender only pay sender bank’s outgoing
transfer charge. Receiver receives the payment minus the
correspondent bank charges. ‘BEN’ (beneficiary) means sender does
not pay any charge. Beneficiary receives the payment minus all
transfer charges.

MT103 – Single Customer Credit Transfer with Direct Account

Relationship
Circles G.m.b.H. orders UBS, Zürich, to pay Euro 1,558.47 to ABN Amro
Bank, Amsterdam, for the account of W.E. Jose.
In the above example no reimbursement party will be indicated as the
home currency as well as the transaction currency is Euro (no
conversion involved) and both the bank have an account relationship.
The direct account relationship, in the currency of the transfer,
between the Sender and the Receiver will be used.

UBS Zurich will debit the account of Circle G.m.b.H and credit the
account of ABN Amro Bank held with them for Euro 1558.47 whereas
ABN Amro bank will debit the account of UBS by Euro 1558.47 and
credit W.E.Jose. These 2 banks have only one account in Euro currency
held with each other hence no serviced/settlement account needs to
be specified. Final beneficiary is W.E.Jose whose account is held with
ABN Amro Bank.

MT103 – Single Customer Credit Transfer specifying account for

reimbursement
Transaction: Circles G.m.b.H. orders UBS, Zürich, to pay Euro 1,558.47
to ABN Amro Bank, Amsterdam, for the account of W.E. Jose.

However by this time, these 2 banks have more than one Euro account
relationship, hence UBS, Zürich will have to specify the particular
account number that needs to be used for reimbursement and
settlement. The flow of the transaction will be the same as the above
example, the only addition is the mention of reimbursement account in
the SWIFT message.

In field 53b of MT103 the account number (say 456 75 1598) of the

Sender’s account (UBS Zurich), serviced by the Receiver(ABN Amro
Bank), which is to be used for reimbursement in the transfer will be
specified.
This way ABN Amro bank will know as to which particular Euro
account of UBS held with them needs to be debited to settle the
transaction.

MT103 – Single Customer Credit Transfer with ordering and

account-with institution.
Circles G.m.b.H. orders UBS, Zürich, to pay USD 2000.00 to OCBC
Bank, Singapore for the account of W.E. Jose.

Please note 2 changes in this example; currency is USD and UBS,

Zurich does not a hold a USD account directly with any bank
(assumption held for the sake of this example).
Since UBS, Zurich does not have a direct account relationship with
OCBC Bank and does not hold a USD account it requests Goldman
Sachs bank AG, Zurich to handle the transaction. UBS, Zurich routes
all its USD transaction through its correspondent bank Goldman Sachs
AG, Zurich as it has a Dollar account with Citibank New York.

Now both the banks ie Goldman Sach Bank AG  and OCBC Bank SG
have a USD currency account with Citibank, New York. Hence the
transaction can be successfully routed through Citibank New York for
settlement in USD.

Note that in order to settle this particular transaction there will be 2

MT103 messages sent

First MT103:  will be sent by Goldman Sachs AG, Zurich to Citibank,

New York for $2000.00 instructing Citibank to debit their USD account
for $2000.00 and credit OCBC Bank Singapore for $2000.00.

Second MT103: will be sent by Citibank New York to OCBC Bank,

Singapore instructing them to debit their USD account for $2000.00
and credit the  beneficiary W.E.Jose.
MT202 is the next most popular message type, it facilitates transfers
between Financial Institutions. We will conduct a similar discussion
around MT202 in our forthcoming article.