| Field | Meaning | Required |
|---|---|---|
:20: | A unique reference assigned by the sending bank for this advice. It identifies the advice in both banks systems and lets operations teams trace it. It must not | M |
:21: | The reference of the original collection or cheque instruction that this advice relates to. It links the payment advice to the collection the beneficiary bank i | M |
:25: | The account that was credited with the payment, identified by account number. It tells the receiver exactly which account received the funds. A wrong account nu | O |
:32A: | The value date, ISO currency code and amount of the payment, for example 261106EUR48250,00. The receiver compares it with its expected collection amount to conf | M |
:52a: | The institution that ordered the payment, when it differs from the sender of the MT400. It identifies the true originator of the payment instruction. The field | O |
:53a: | The bank that presented the cheque or collection for payment. It identifies the presenting bank in the collection chain. The receiver uses it to confirm the pay | O |
:50a: | The drawer of the cheque or the party that issued the collection instruction. It gives the name and account of the party whose funds were used. The receiver use | O |
:59a: | The beneficiary of the payment, identified by account number and name. The receiving bank credits this party on the value date. The field confirms the funds rea | M |
:72: | Additional information from sender to receiver, such as a narrative explaining the payment or a code for the payment type. It can carry the cheque number or the | O |
:71B: | Details of any charges deducted from the payment, with the charge type and amount in free text. It explains why the advised amount differs from the original col | O |
:30: | The date on which the cheque or collection was paid, when it differs from the value date in field 32A. It tells the receiver when the payment was actually made. | O |
Harbour Bank sends an MT400 to Meridian Bank advising payment of EUR 48,250.00 on 6 November 2026 for collection reference COLL99214, drawn on a Madrid corporate. The related reference matches the outstanding collection, the value date matches the payment date, and Meridian credits the beneficiary and closes the collection.
Valid example from the message catalogue. Scheme rules: MT400 follows the SWIFT collection and cheque advice rules and remains in use for documentary collections and cheque clearing, which have no ISO 20022 equivalent in general use. Domestic cheque cleari
The Collection Process Step by Step
What you will learn
Your objective. By the end of this lesson, you will be able to explain collection process. The process begins with the sales contract between exporter and importer, which must state the collection terms clearly.
Why it matters. This matters because cross-border payments involve more banks, more charges, more time and more ways to fail than any domestic payment. Getting the chain right is the job.
Chapter objective: Learner explains documentary collections, the roles of remitting and collecting banks, and the SWIFT Category 4 messages used at each stage. Learner uses real examples with amounts, banks and message names to show how the topic works in practice.
Key learning points
- Process begins with the sales
- Exporter then ships
- Document must match the contract on amount
- Collecting bank
- Final steps close
Key terms
Return: A payment that is sent back to the sender after settlement because it cannot be credited to the beneficiary.
SWIFT: The Society for Worldwide Interbank Financial Telecommunication, a member owned cooperative that provides secure messaging services for financial institutions.
MT400: A SWIFT message used to advise a bank of the collection of a documentary credit or a bill, and to request payment or acceptance.
SWIFT MT message viewer showing The Collection Process Step by Step.
Practise this lesson
Exercise
Trace the payment in this lesson through its lifecycle stages.
Use the lifecycle stages in this lesson: acceptance, processing, clearing, settlement, beneficiary credit, ledger posting and reconciliation.
- What to do. Name each stage, state what happens, and say when the payment is truly final.
Correct result. Acceptance validates the instruction. Processing prepares it. Clearing sorts and nets it. Settlement moves the funds. Beneficiary credit puts the money in the creditor account. Ledger posting records it. Reconciliation proves it. Finality is only at settlement, not at acceptance or at status update.
Why. The lifecycle is the map of a payment. If you cannot say which stage a payment is in, you cannot answer where the money is.
Check your understanding
Practice question
Which of the following best describes collection process?
Takeaway and next step
What to remember
If the importer refuses to pay or accept, the collecting bank notifies the remitting bank promptly, holds the documents, and waits for fresh instructions from the exporter.
Build a cross-border payment like the one in this lesson and watch the chain, the charges, and the final amount change.
Open the Cross-Border Payment Configurator →
Builds on "Documents Against Payment and Documents Against Acceptance".
Transcript and full text
Show transcript
The collection process has a clear sequence, and an SME should be able to walk through it step by step. Step 1, the exporter and the importer agree the sale contract, including the payment terms, D/P or D/A, the documents required, and the banks involved. Step 2, the exporter ships the goods and obtains the shipping documents, including the bill of lading, the commercial invoice, the certificate of origin, and the insurance certificate. Step 3, the exporter draws the bill of exchange on the importer, for the invoice amount, and prepares the collection instruction for its bank. Step 4, the exporter gives the documents, the bill of exchange, and the collection instruction to the remitting bank. The instruction states the documents enclosed, the amount, the terms of release, D/P or D/A, the charges arrangement, and what to do if the drawee refuses. The remitting bank checks that the instruction is complete, and that the documents listed in the instruction are present. It does not examine the documents for compliance with the sale contract, because that is not its role under URC 522. Step 5, the remitting bank sends the documents to the collecting bank by courier, and sends a SWIFT message, normally an MT410 acknowledgement is returned, and the collection is advised by an MT400 series message or by a covering letter. The remitting bank retains a copy of the instruction and the documents. The collecting bank receives the documents, checks that they match the instruction, and registers the collection in its system. It sends an MT410 acknowledgement of the collection to the remitting bank, confirming receipt. Step 6, the collecting bank presents the documents to the drawee. It notifies the drawee that documents have arrived, and it asks the drawee to pay or to accept, as the instruction states. The drawee examines the documents, checks that they match the goods it ordered, and decides whether to pay or accept. The collecting bank should present the documents without delay, and should not release them to the drawee before payment or acceptance, unless the instruction authorises it to do so. Step 7, the drawee pays or accepts. In a D/P collection, the drawee pays the amount of the bill, and the collecting bank releases the documents. In a D/A collection, the drawee accepts the bill, promising to pay on the maturity date, and the collecting bank releases the documents. The drawee takes the documents to the carrier, presents the bill of lading, and takes delivery of the goods. The collecting bank holds the payment, or holds the accepted bill, as the case may be. Step 8, the collecting bank remits the proceeds to the remitting bank. In a D/P collection, it sends the money, less its charges, and it sends an MT400 advice of payment to the remitting bank, stating the amount, the value date, and the charges deducted. In a D/A collection, it holds the accepted bill until maturity, and on maturity it presents the bill for payment, collects the money, and then remits the proceeds with an MT400. The remitting bank receives the proceeds and credits the exporter account, less its own charges. The exporter is paid, and the collection is closed. Step 9, if the drawee refuses, the collecting bank follows the instruction. It may hold the documents and await further instruction, it may protest the bill, it may return the documents to the remitting bank, or it may store the goods. It advises the remitting bank of the refusal by SWIFT, normally with an MT416, and it does not release the documents to the drawee. The remitting bank advises the exporter, and the exporter decides whether to find another buyer, to ship the goods back, or to take legal action. A collection that ends in refusal is not a failure of the bank, it is a commercial risk the exporter accepted when it chose a collection instead of a letter of credit. For a business analyst, the process requirement must cover the documents, the presentation, the release condition, and the remittance. The requirement should state that the system records each step with a date and a status, that it prevents the release of documents before payment or acceptance, that it diaries the maturity date for a D/A collection, and that it generates the MT400 when the proceeds are remitted. A system that cannot enforce the release condition, or that cannot diary a maturity date, cannot process a collection safely.
The collection process has a clear sequence, and an SME should be able to walk through it step by step. Step 1, the exporter and the importer agree the sale contract, including the payment terms, D/P or D/A, the documents required, and the banks involved. Step 2, the exporter ships the goods and obtains the shipping documents, including the bill of lading, the commercial invoice, the certificate of origin, and the insurance certificate. Step 3, the exporter draws the bill of exchange on the importer, for the invoice amount, and prepares the collection instruction for its bank.
Step 4, the exporter gives the documents, the bill of exchange, and the collection instruction to the remitting bank. The instruction states the documents enclosed, the amount, the terms of release, D/P or D/A, the charges arrangement, and what to do if the drawee refuses. The remitting bank checks that the instruction is complete, and that the documents listed in the instruction are present. It does not examine the documents for compliance with the sale contract, because that is not its role under URC 522.
Step 5, the remitting bank sends the documents to the collecting bank by courier, and sends a SWIFT message, normally an MT410 acknowledgement is returned, and the collection is advised by an MT400 series message or by a covering letter. The remitting bank retains a copy of the instruction and the documents. The collecting bank receives the documents, checks that they match the instruction, and registers the collection in its system. It sends an MT410 acknowledgement of the collection to the remitting bank, confirming receipt.
Step 6, the collecting bank presents the documents to the drawee. It notifies the drawee that documents have arrived, and it asks the drawee to pay or to accept, as the instruction states. The drawee examines the documents, checks that they match the goods it ordered, and decides whether to pay or accept. The collecting bank should present the documents without delay, and should not release them to the drawee before payment or acceptance, unless the instruction authorises it to do so.
Step 7, the drawee pays or accepts. In a D/P collection, the drawee pays the amount of the bill, and the collecting bank releases the documents. In a D/A collection, the drawee accepts the bill, promising to pay on the maturity date, and the collecting bank releases the documents. The drawee takes the documents to the carrier, presents the bill of lading, and takes delivery of the goods. The collecting bank holds the payment, or holds the accepted bill, as the case may be.
Step 8, the collecting bank remits the proceeds to the remitting bank. In a D/P collection, it sends the money, less its charges, and it sends an MT400 advice of payment to the remitting bank, stating the amount, the value date, and the charges deducted. In a D/A collection, it holds the accepted bill until maturity, and on maturity it presents the bill for payment, collects the money, and then remits the proceeds with an MT400. The remitting bank receives the proceeds and credits the exporter account, less its own charges. The exporter is paid, and the collection is closed.
Step 9, if the drawee refuses, the collecting bank follows the instruction. It may hold the documents and await further instruction, it may protest the bill, it may return the documents to the remitting bank, or it may store the goods. It advises the remitting bank of the refusal by SWIFT, normally with an MT416, and it does not release the documents to the drawee. The remitting bank advises the exporter, and the exporter decides whether to find another buyer, to ship the goods back, or to take legal action. A collection that ends in refusal is not a failure of the bank, it is a commercial risk the exporter accepted when it chose a collection instead of a letter of credit.
For a business analyst, the process requirement must cover the documents, the presentation, the release condition, and the remittance. The requirement should state that the system records each step with a date and a status, that it prevents the release of documents before payment or acceptance, that it diaries the maturity date for a D/A collection, and that it generates the MT400 when the proceeds are remitted. A system that cannot enforce the release condition, or that cannot diary a maturity date, cannot process a collection safely.
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