What is MT202 SWIFT Message? Key Features & Uses
TL;DR - Summary
- What is MT202? - MT202 is a SWIFT message type used for transferring funds between banks. Unlike customer payment messages, it does not carry payment instructions from a customer to a beneficiary.
- Who uses an MT202? - Banks use MT202 to settle payments between themselves (this usually occurs when banks process cross-border payments through correspondent banks). As an Indian freelancer or exporter, you will not be directly sending or receiving MT202 messages.
- MT202 vs MT103: what is the difference? - MT103 is the customer payment instruction stating that you are the beneficiary and that you get paid into an account. MT202, on the other hand, is the bank-to-bank liquidity instruction, as it follows the correspondent bank arrangement.
- What is MT202 COV? - The MT202 COV is an extension of the MT202 that introduces a mandatory Sequence B. This section carries the original sender's and beneficiary's information for AML compliance when retail payments are routed through correspondent banks.
- What should I ask my overseas client for? - Always request a copy of the MT103 (SWIFT Copy), your details (field 59), and remittance information (Field 70), which is required by your Indian AD bank to credit your account.
What Is an MT202 SWIFT Message?
MT202 is a SWIFT format message for interbank transfers only. It remains exclusively in the interbank network. Individual customers, businesses, or other non-bank entities cannot initiate, send, or receive an MT202 message. Instead, banks use it to instruct other banks to transfer funds between financial institutions rather than to a person or company.
It is generally the instruction that banks use to settle liquidity movements within themselves, i.e., between a bank's own nostro and vostro accounts. It is the infrastructure of settlement on the SWIFT network.
When an interbank transfer is linked to an underlying customer payment, banks use an MT202 COV. Unlike a standard MT202, an MT202 COV includes details of the related customer transaction while still facilitating settlement between banks.
Within the SWIFT network, MT stands for "Message Type", and 202 identifies the specific message format used for interbank fund transfers under SWIFT's legacy FIN (Financial Information) messaging system.
MT202 vs MT103: Key Differences
MT103 and MT202 are among the most commonly discussed SWIFT message types that differ in their purpose. MT103 is used for customer payments, while MT202 is used for interbank fund transfers between financial institutions. The sections below explain the key differences.
MT103: The Customer Transfer
The MT103 SWIFT message is the "Customer Credit Transfer" instruction, representing the whole payment instruction from the paying bank to the receiving bank. It involves who paid, whom to pay, references, and charges. It contains the beneficiary details, payment references, and charges. As it contains all the key transaction details, it serves as the primary document for tracing a customer payment and acts as proof that the payment instruction was sent.
MT202: The Bank Transfer
The MT202 is the "General Financial Institution Transfer" and supports the settlement of cross-border payments by transferring funds between correspondent banks. There is no beneficiary customer data but only banking data to identify the involved institutions and amount/value date.
Below is the breakdown of what each message is communicating:
- MT103 fields: Some typical fields used in wire instructions include Field 50K (ordering customer), Field 59 (beneficiary customer, i.e., you), Field 70 (remittance info/invoice reference); Field 71A (charge type: OUR, SHA, or BEN)
- MT202 fields: Field 20 (transaction reference), Field 32A (value date, currency, amount), Field 58A (beneficiary institution, that is a bank, not a person).
- ISO 20022 equivalents: ISO 20022 transition of SWIFT maps the MT103 to pacs.008 and MT202 to pacs.009.
Here is a tabular version of the key differences between MT103 and MT202:
| Aspect | MT103 | MT202 |
|---|---|---|
| Who sends it? | Sender's bank to beneficiary's bank | One correspondent bank to another |
| Who receives it? | Beneficiary's bank (your Indian AD bank) | Intermediary/correspondent bank |
| Contains beneficiary details? | Yes (Field 59) | No (except MT202 COV) |
| Contains remittance info? | Yes (Field 70) | No |
| Proof of payment? | Yes | No |
| Primary use case | Customer payment instruction | Interbank settlement |
| ISO 20022 equivalent | pacs.008 | pacs.009 |
✅ PRO TIP
If you are tracking a delayed international payment, ask your overseas client for the MT103 rather than the MT202. The MT103 contains the payment details needed to trace the transaction.
How Does MT202 SWIFT Message Work?
An MT202 SWIFT message works by facilitating the movement of funds between banks during an international wire transfer. The process begins with an MT103 customer payment instruction, routes the funds through one or more correspondent banks using MT202 messages, and ends when the beneficiary's bank credits the recipient's account. The steps below explain the process in detail:
- Step 1: Your client's bank sends an MT103: When your client initiates a wire transfer, your client's bank will initiate an MT103 directing your Authorized Dealer (AD) Bank in India to credit your account with your name, account number, IFSC code, invoice reference number, and precise transfer amount.
- Step 2: Correspondent banks enter the picture: In case the client’s bank and your Indian Authorized Dealer (AD) bank do not have a direct relationship, payment may be routed via another corresponding bank. This is where MT202 gets involved.
- Step 3: MT202 facilitates interbank settlement: Your client’s bank dispatches an MT202 to the correspondent bank to facilitate the transfer of funds to your Indian AD Bank. If multiple correspondent banks are involved, MT202 messages may be exchanged between them as part of the settlement process.
- Step 4: Your AD bank processes the MT103: Upon arrival of funds via the correspondent chain, your Indian AD bank will then use the companion MT103 and credit your account. The MT202 has already done its job in the background. You only see the final credit.
MT202 SWIFT Message Example
Suppose a client in the US sends a payment to an exporter in India. If the sender's bank and the recipient's bank do not have a direct banking relationship, the payment is routed through one or more correspondent banks. In such cases, MT202 (or MT202 COV for cover payments) is exchanged between the banks to facilitate interbank settlement before the funds reach the beneficiary's bank.
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MT202 SWIFT Message Format
The specific details of the SWIFT MT202 fields are set out within Block 4 (Text Block) of the SWIFT message envelope. There are other blocks comprising an envelope, way for routing and security information, but the core message carrying the payment information between banks is contained in Block 4.
Below are the SWIFT MT202 format specifications for Block 4:
| Status | Tag | Field Name |
|---|---|---|
| M | 20 | Transaction Reference Number |
| M | 21 | Related Reference |
| O | 13C | Time Indication |
| M | 32A | Value Date, Currency Code, Amount |
| O | 52a | Ordering Institution |
| O | 53a | Sender's Correspondent |
| O | 54a | Receiver's Correspondent |
| O | 56a | Intermediary |
| O | 57a | Account With Institution |
| M | 58a | Beneficiary Institution |
| O | 72 | Sender to Receiver Information |
M = Mandatory, O = Optional. Network validated rules may apply to optional fields depending on the scenario.
A few fields worth highlighting for Indian exporters:
- Field 20 (Transaction Reference Number): This is a unique reference assigned by the sending bank for internal tracking purposes. It helps the bank identify and monitor the transaction but is not required on your export documents.
- Field 32A (Value Date, Currency Code, Amount): The field specifies the date on which the funds are to be credited. It also includes the payment amount and currency.
- Field 58A (Beneficiary Institution): Specifies the receiving bank, not the beneficiary customer. This means the MT202 is clearing transactions between banks, and not involving the end user directly.
MT202 vs MT202 COV: Differences & Why We Need Them Both
One of the most important and frequently misunderstood distinctions in SWIFT messaging for cross-border payments is the difference between MT202 and MT202 COV.
MT202 (Standalone)
A standard MT202 is purely intended for interbank transactions, forex deals, bank private business, and treasury activities with absolutely no retail participation. Given that the consumer funds are not directly at risk, this message requires only the participating banking institutions as both the sender and the receiver identities.
MT202 COV (Cover Payment)
An MT202 COV ("cover") is included when a bank-to-bank payment represents payment in respect of underlying customer payments (MT103). If a client payment is processed using correspondent banking structures and a "cover" arrangement is used, the additional message would be an MT202 COV and not a standard MT202 message.
Unlike a standard MT202 message, an MT202 COV includes a mandatory Sequence B block that carries:
- The original sender's name, address, and account number
- The final beneficiary receiver's name, address, and account number
- These details are pulled directly from the companion MT103
Conceptually, an MT202 COV can be thought of as:
Standard MT202 + Customer Information from the Related MT103 = MT202 COV.
This distinction was introduced in 2009 following the FATF (Financial Action Task Force) recommendations aimed at strengthening anti-money laundering (AML) compliance in correspondent banking. Under these requirements, customer information must accompany the payment throughout the correspondent banking chain rather than remain only with the originating bank.
If your overseas customer makes a payment using the cover payment method, an MT202 COV helps transmit your details through the correspondent banking network. This allows the required customer information to accompany the payment in compliance with AML regulations, even though you never see the message.
💡 QUICK INSIGHT
Think of MT202 COV as an enhanced version of MT202. It includes an additional Sequence B that carries the sender's and beneficiary's details, helping meet anti-money laundering (AML) transparency requirements.
How Does Skydo Simplify Cross-Border Payments?
For the vast majority of Indian freelancers and exporters, the complications of MT202, MT103, and correspondent banking chains are just static in the background. However, their impact is evident in the form of delayed settlements, unexpected fee deductions, limited payment visibility, and compliance documentation requirements.
This is where Skydo makes a difference. It simplifies cross-border payments by addressing the common challenges associated with traditional banking in several ways:
- Flat-fee, transparent pricing: Unlike the hidden commissions that banks and other platforms take (between 5% to 10% of your funds), Skydo provides you with straightforward and transparent pricing of $19 under $2,000, $29 up to $10,000, and 0.3% beyond the $10,000 point.
- No SWIFT copy chasing: Skydo is digital from start to finish, with built in real time tracking of where your funds are without needing any Relationship Managers or SWIFT copy documents.
- Multi-currency virtual accounts: Skydo has free virtual accounts in USD, EUR, GBP, SGD, AUD, and CAD, and international SWIFT, so your overseas clients can easily pay you in the currency they prefer.
- Quick setup, no monthly fees: Setup is fast and easy, and it takes 10-15 minutes. Additionally, you're only charged when you make a transaction!
Can I accept an MT202 screenshot from my client as valid payment proof?
No, an MT202 is an interbank message. It is not a declaration that you have funds. Only an MT103 with you named as the payee in Field 59 is a valid proof of payment.
What is the difference between MT202 and MT202 COV in a cover payment?
Should I ask my overseas client for an MT103 or an MT202?
How many days does a SWIFT transfer with an MT202 COV take to reach my Indian bank?
Does my Indian AD bank use the MT202 or the MT103 to credit my account?
What happens if an intermediary bank deducts a fee from my SWIFT payment?
What is a nostro/vostro account and why does it matter for MT202?
Is MT202 being replaced by a newer SWIFT standard?
Do I need to reference the MT202 transaction number in my GST or export documentation?
