The Society for Worldwide Interbank Financial Telecommunication (SWIFT) streamlines the process of sending money between financial institutions worldwide. It also provides a platform through which banks and other institutions can send and receive, not only money but also information about financial transactions in an environment that is known to be secure, and which operates according to a pre-agreed standard. SWIFT was founded in 1973 and represented the first step towards establishing a common standard for financial transactions, as well as a system which could be used to allow banks to collaborate on processing data.
Prior to the founding of SWIFT, financial institutions were using telex, a system which even in 1975 was becoming antiquated and unfit for purpose. Today, SWIFT handles in excess of five billion messages between banks, and in doing so facilitates the transfer of trillions of dollars globally every year. If SWIFT wasn’t available then global trade would be impeded; investments would take longer, cost more, and be less reliable.
SWIFT has helped to address a number of issues that existed in the banking system. Most of these issues are hidden from those of us who only interact with banks as consumers. For people working in the banking system, however, SWIFT was addressing a number of problems that had been clear to those with intimate knowledge of financial institutions for some time.
One of the new roles that SWIFT has taken on in recent times is helping to enforce economic sanctions. In 2012, the European Union voted to instigate sanctions against the Iranian government and SWIFT was required, under EU law, to ensure that Iranian banks could not access the system. A similar situation unfolded a few years later when Russia’s interference in Ukraine saw it facing sanctions of its own.
While there is still some debate amongst analysts and observers as to how effective the sanctions against Iran were, the prevailing opinion seems to be that the actions of SWIFT were instrumental in convincing the regime to return to the negotiating table and hammer out the eventual agreement it signed with other world powers regarding its nuclear programme. During negotiations, it was the SWIFT ban that Tehran were most eager to have lifted. Even though many suspect, while Iranian banks were banned from making SWIFT payments, they were able to keep moving some money by using friendly countries such as Dubai, Turkey, and China, as well as the few Iranian institutions unaffected by the ban. However, the ban still had enough of an impact on day-to-day operations that it bought Iran back to the negotiating table.
The other major innovation in the way SWIFT has been designed is the level of security that it offers its users. Of course, security is absolutely vital for any financial institution and banks have historically been at the forefront of security technology. The main threat to banks is no longer physical. It isn’t huge blast doors to protect underground vaults that banks are investing in; it’s cybersecurity technologies which keep the bank networks and information safe from outside interference.
While banks may operate excellent internal security protocols, the point at which messages are sent between banks is when they are vulnerable. SWIFT takes care of this problem elegantly by providing a common platform through which messages can be securely shared. You can install SWIFT technology into your system through reputable SWIFT suppliers like AccessPay whose system has a single point of entry for increased security.
A Global Standard
It is hard to overstate just how much of a positive impact the introduction of SWIFT has had on the global banking system. The introduction of a standard that is recognised across the globe has been a key step in unifying financial services and economies from across the globe. Because it is not just money that flows through SWIFT, but also information, it is crucial that that information can be read and understood by others on the network.
Without this piece of the puzzle, the value of SWIFT would be questionable. The moving of money through SWIFT is important and has brought many benefits to the global financial system, but it is information, rather than money, that gives financial institutions power. Without a common standard, information received through SWIFT could be interpreted wrong and the results could be very costly.
SWIFT has, for several decades now, provided a universal banking platform which has revolutionised the way that the financial services industry approaches international transactions. SWIFT makes sending money and information between banks quick, efficient, and secure.