Updated Mar 11, 2022

What is Swift?

What is Swift?

 

 

The Society for Worldwide Interbank Financial Telecommunication, often known as SWIFT, is a Belgian cooperative society that provides services connected to the execution of financial transactions and payments between banks all over the world. Its primary function is to serve as the primary message network for initiating international payments. It also sells software and services to financial institutions, primarily for usage on its proprietary "SWIFTNet" network, as well as ISO 9362 Business Identifier Codes (BICs), sometimes known as "SWIFT codes."

 

The SWIFT communications network is an integral part of the worldwide payments system. SWIFT transports "messages conveying payment instructions between financial institutions involved in a transaction." The organization, on the other hand, does not manage accounts on behalf of individuals or financial institutions, nor does it hold the cash from third parties. It also does not provide clearing or settlement services. Payment must be settled through a payment system, such as TARGET in Europe, once it has been initiated. This step is frequently taken in the context of cross-border transactions via correspondent banking accounts that financial institutions hold with one another.

 

Since around 2018, the SWIFT network was used by around half of all high-value cross-border payments globally, and in 2015, SWIFT connected more than 11,000 banking firms in over 200 countries and territories, exchanging an average of over 32 million messages per day.

 

Despite its widespread use, SWIFT has been chastised for inefficiency. According to the London-based Financial Times in 2018, transfers "often transit through multiple banks before reaching their final stage, making them time-consuming, pricey, and without information on how much money will arrive at the other end." SWIFT has since created an upgraded service called "Global Payments Innovation" (GPI), saying that it has been accepted by 165 banks and that 50% of its payments are now completed within 30 minutes.

 

SWIFT is managed by its member financial institutions as a cooperative society under Belgian law. Its headquarters are in La Hulpe, Belgium, near Brussels; its main structure was designed by Ricardo Bofill Taller de Arquitectura and finished in 1989. SWIFT's chairman is Pakistan's Yawar Shah, and its CEO is Spain's Javier Pérez-Tasso. SWIFT organizes an annual conference called Sibos, which is geared primarily toward the financial services industry.

 

 

History of SWIFT

 

SWIFT was formed on May 3, 1973, in Brussels, under the supervision of its first CEO, Carl Reuterskiöld (1973–1989), with the assistance of 239 institutions from 15 countries. Before its inception, international financial transactions were communicated using Telex, a public system involving manual message writing and reading. It was established out of concern for what may happen if a single private and entirely American corporation – previously First National City Bank (FNCB) of New York, later Citibank – controlled worldwide financial flows. In response to FNCB's protocol, FNCB's competitors in the United States and Europe advocated for an alternative "message system that may substitute public providers and speed up the payment process."

 

SWIFT began to build universal standards for financial transactions, as well as a shared data processing system and global communications network planned by Logica and implemented by the Burroughs Corporation. The basic operational procedures and liability regulations were established in 1975, and the first message was transmitted in 1977. SWIFT's first foreign (non-European) operations center was opened in 1979 by Virginia Governor John N. Dalton. 

 

 

Who controls SWIFT?

 

SWIFT is a cooperative, which means it is not controlled by a single government. The G-10 central banks (Bank of Canada, Deutsche Bundesbank, European Central Bank, Banque de France, Banca d'Italia, Bank of Japan, De Nederlandsche Bank, Sveriges Riksbank, Swiss National Bank, Bank of England, USA Federal Reserve System), the European Central Bank, and the National Bank of Belgium govern it.

 

SWIFT is a neutral utility, hence it makes no sanctions decisions. However, because SWIFT is governed by Belgian law, it must abide by all EU legislation, including sanctions. The most recent incident occurred in 2012 when EU Regulation 267/2012 imposed sanctions on Iran.

 

 

Who Makes Use of SWIFT?

 

SWIFT's founders initially intended for the network to exclusively facilitate communication on Treasury and correspondent transactions. The robustness of the message format architecture enabled massive scalability, allowing SWIFT to progressively grow to provide services to the following:

 

• Banks
• Brokerage firms and trading houses
• Brokers of securities
• Asset management firms
• Clearinghouses
• Depositories
• Exchanges
• Corporations and corporations
• Participants in the Treasury Market and Service Providers
• Moneylenders and currency exchangers

 

 

SWIFT Provides Services

 

The SWIFT system provides a variety of services to help organizations and people perform seamless and accurate commercial transactions. Some of the services provided are detailed below.

 

Applications

SWIFT connections provide access to a wide range of applications, such as real-time instruction matching for treasury and forex transactions, banking market infrastructure for processing payment instructions between banks, and Clearing and settlement orders for payments, securities, currencies, and derivatives transactions are processed through the securities market system.

 

Business Intelligence Ability

SWIFT recently added dashboards and reporting utilities to provide its clients with a dynamic, real-time picture of message monitoring, activity, trade flow, and reporting. Filtering is possible in the reports depending on the area, country, message type, and other parameters.

 

Services for compliance

SWIFT's financial crime compliance services include reporting and utilities for Know Your Customer (KYC), sanctions, and anti-money laundering (AML).

 

Messaging, connectivity, and software options are all available.

The heart of the SWIFT business is to provide a secure, dependable, and scalable network for the smooth transmission of messages. SWIFT provides a variety of products and services that enable its end clients to send and receive transactional messages via its numerous messaging hubs, software, and network connections.

 

 

SWIFT Earns Money in What Ways?

 

SWIFT is a cooperative organization whose members own it. Members are divided into classes based on their share ownership. All members pay a one-time joining fee as well as annual support fees that vary according to member

class.

 

SWIFT also charges customers for each message based on the nature and duration of the message. These rates also vary based on the bank's usage volume; multiple charge levels exist for banks that create varying amounts of messages.

 

SWIFT has also announced new services, as previously mentioned. These are supported by SWIFT's extensive data history. These include business analytics, reference data, and compliance services, and they provide SWIFT with additional revenue streams.

 

 

Bottom Line

 

SWIFT's dominance in worldwide transactional message processing has not waned. It has recently expanded into new sectors, such as providing reporting utilities and data for business intelligence, demonstrating its determination to remain inventive. SWIFT appears certain to maintain its market dominance in the near to medium term.