The Society for Worldwide Interbank Financial Telecommunication (SWIFT), legally S.W.I.F.T. SC, is a cooperative established in 1973 in Belgium () and owned by the banks and other member firms that use its service. SWIFT provides the main messaging network through which international payments are initiated. It also sells software and services to financial institutions, mostly for use on its proprietary "SWIFTNet", and assigns ISO 9362 Business Identifier Codes (BICs), popularly known as "SWIFT codes".
As of 2018, around half of all high-value cross-border payments worldwide used the SWIFT network, and in 2015, SWIFT linked more than 11,000 financial institutions in over 200 countries and territories, who were exchanging an average of over 32 million messages per day (compared to an average of 2.4 million daily messages in 1995).
SWIFT is headquartered in La Hulpe near Brussels. It hosts an annual conference, called Sibos, specifically aimed at the financial services industry.
History
Before SWIFT's establishment, international financial transactions were communicated over Telex, a public system involving manual writing and reading of messages. The collapse of the Bretton Woods agreement in 1971, the decoupling of the US dollar's convertibility to gold, a period in economic history now known as the "Nixon shock", shifted major currencies to floating exchange rates and increased the volume of cross-border transactions. That in addition to already increasing amounts of international trade made the existing Telex system insufficient. In this novel period of international trade in a floating exchange rate environment, SWIFT was set up out of fear of what might happen if a single private and fully American entity controlled global financial flows – which before was First National City Bank (FNCB) of New York – later Citibank. In response to FNCB's protocol, FNCB's competitors in the US and Europe pushed an alternative "messaging system that could replace the public providers and speed up the payment process".
SWIFT was founded in Brussels on 3 May 1973. Individuals who played a key role in its creation included bankers Jan Kraa (at AMRO Bank) and François Dentz (at the Banque de l'Union Parisienne) as well as Carl Reuterskiöld and Bessel Kok, who became respectively its first two chairmen and chief executives. It was initially supported by 239 banks in 15 countries. It soon started to establish common standards for financial transactions and a shared data processing system and worldwide communications network designed by Logica and developed by the Burroughs Corporation. Fundamental operating procedures and rules for liability were established in 1975, and the first message was ceremonially sent by Prince Albert of Belgium on .
SWIFT's first non-European operations centre was inaugurated by Governor John N. Dalton of Virginia in 1979. In 1989 SWIFT completed a monumental new head office building in La Hulpe, designed by Ricardo Bofill Taller de Arquitectura.
Ownership and governance
SWIFT's shareholding structure is adjusted every three years in proportion to volumes of activity incurred by the members, ensuring that the most active members get the most voice irrespective of geography; additional rules are aimed at ensuring some geographical diversity within the board of directors. The 25 directors are elected by the shareholders, on three-year terms with the renewal of one-third of the board every year; all directors are member representatives.
As of May 2024, the members directly represented on the board of directors were JPMorgan Chase (chair), Lloyds Bank (deputy chair), Bank of China, BNP Paribas, BPCE, Citi, Clearstream, Commerzbank, Commonwealth Bank, Deutsche Bank, Euroclear, FirstRand, HSBC, ING, Intesa Sanpaolo, KBC, MUFG, NatWest, Nordea, Royal Bank of Canada, Santander, SEB, UBS (2 representatives following the acquisition of Credit Suisse), as well as the Association of Banks in Singapore.
Operations
SWIFT acts as a carrier of the "messages containing the payment instructions between financial institutions involved in a transaction". However, the organisation does not manage accounts on behalf of individuals or financial institutions, and it does not hold funds from third parties. It also does not perform clearing or settlement functions. After payment has been initiated, it must be settled through a payment system, such as T2 in Europe. In the context of cross-border transactions, this step often takes place through correspondent banking accounts that financial institutions have with each other.
SWIFT means several things in the financial world: a secure network for transmitting messages between financial institutions; a set of syntax standards for financial messages (for transmission over SWIFTNet or any other network) a set of connection software and services allowing financial institutions to transmit messages over SWIFT network.
Under 3 above, SWIFT provides turn-key solutions for members, consisting of linkage clients to facilitate connectivity to the SWIFT network and CBTs or "computer-based terminals" which members use to manage the delivery and receipt of their messages. Some of the more well-known interfaces and CBTs provided to their members are:
SWIFTNet Link (SNL) software which is installed on the SWIFT customer's site and opens a connection to SWIFTNet. Other applications can only communicate with SWIFTNet through the SNL. Alliance Gateway (SAG) software with interfaces (e.g., RAHA = Remote Access Host Adapter), allowing other software products to use the SNL to connect to SWIFTNet Alliance WebStation (SAB) desktop interface for SWIFT Alliance Gateway with several usage options: administrative access to the SAG direct connection SWIFTNet by the SAG, to administrate SWIFT Certificates so-called Browse connection to SWIFTNet (also by SAG) to use additional services, for example, the Eurosystem's T2 Alliance Access (SAA) and Alliance Messaging Hub (AMH) are the main messaging software applications by SWIFT, which allow message creation for FIN messages, routing and monitoring for FIN and MX messages. The main interfaces are FTA (files transfer automated, not FTP) and MQSA, a WebSphere MQ interface. The Alliance Workstation (SAW) is the desktop software for administration, monitoring and FIN message creation. Since Alliance Access is not yet capable of creating MX messages, Alliance Messenger (SAM) has to be used for this purpose. Alliance Web Platform (SWP) as new thin-client desktop interface provided as an alternative to the existing Alliance WebStation, Alliance Workstation (soon) and Alliance Messenger. Alliance Integrator is built on Oracle's Java Caps which enables customer's back-office applications to connect to Alliance Access or Alliance Entry. Alliance Lite2 is a secure and reliable, cloud-based way to connect to the SWIFT network which is a light version of Alliance Access specifically targeting customers with low volume of traffic.
Services There are four key areas that SWIFT services fall under in the financial marketplace: securities, treasury & derivatives, trade services, and payments & cash management.
Securities SWIFTNet FIX (obsolete) SWIFTNet Data Distribution SWIFTNet Funds SWIFTNet Accord for Securities (end of life October 2017)
Treasury and derivatives SWIFTNet Accord for Treasury (end of life October 2017) SWIFTNet Affirmations SWIFTNet CLS Third Party Service
Cash management SWIFTNet Bulk Payments SWIFTNet Cash Reporting SWIFTNet Exceptions and Investigations
Trade services SWIFTNet Trade Services Utility
SWIFT Ref, the global payment reference data utility, is SWIFT's reference data service. SWIFT Ref sources data from central banks, code issuers and banks.
Operations centres The SWIFT secure messaging network is run from three data centres, located in the United States, the Netherlands, and Switzerland. These centres share information in near real-time. In case of a failure in one of the data centres, another is able to handle the traffic of the complete network. SWIFT uses submarine communications cables to transmit its data.
Shortly after opening its third data centre in Switzerland in 2009, p. 12. SWIFT introduced a new distributed architecture with two messaging zones, European and Trans-Atlantic, so data from European SWIFT members no longer mirrored the US data centre. European zone messages are stored in the Netherlands and in part of the Swiss operating centre; Trans-Atlantic zone messages are stored in the United States and in another part of the Swiss operating centre that is segregated from the European zone messages. Countries outside of Europe were by default allocated to the Trans-Atlantic zone but could choose to have their messages stored in the European zone. + Data centres SN SWIFT data centres Type 1 Zoeterwoude, Netherlands OPC (Operating Centre) 2 Culpeper, Virginia, United States OPC (Operating Centre)3 Diessenhofen, SwitzerlandMultiple sources:
OPC (Operating Centre)4 Hong Kong Command and control
SWIFTNet network SWIFT moved to its current IP network infrastructure, known as SWIFTNet, from 2001 to 2005, providing a total replacement of the previous X.25 infrastructure. The process involved the development of new protocols that facilitate efficient messaging, using existing and new message standards. The adopted technology chosen to develop the protocols was XML, which now provides a wrapper around all messages legacy or contemporary. The communication protocols can be broken down into:
InterAct SWIFTNet InterAct Realtime SWIFTNet InterAct Store and Forward
FileAct SWIFTNet FileAct Realtime SWIFTNet FileAct Store and Forward
Browse SWIFTNet Browse
SWIFT provides a centralized store-and-forward mechanism, with some transaction management. For bank A to send a message to bank B with a copy or authorization involving institution C, it formats the message according to standards and securely sends it to SWIFT. SWIFT guarantees its secure and reliable delivery to B after the appropriate action by C. SWIFT guarantees are based primarily on high redundancy of hardware, software, and people.
During 2007 and 2008, the entire SWIFT network migrated its infrastructure to a new protocol called SWIFTNet Phase 2. The main difference between Phase 2 and the former arrangement is that Phase 2 requires banks connecting to the network to use a Relationship Management Application (RMA) instead of the former bilateral key exchange (BKE) system. According to SWIFT's public information database on the subject, RMA software should eventually prove more secure and easier to keep up-to-date; however, converting to the RMA system meant that thousands of banks around the world had to update their international payment systems to comply with the new standards. RMA completely replaced BKE on 1 January 2009.
Standards
SWIFT has become the industry standard for syntax in financial messages. Messages formatted to SWIFT standards can be read and processed by many well-known financial processing systems, whether or not the message travelled over the SWIFT network. SWIFT cooperates with international organizations to define standards for message format and content. SWIFT is also a registration authority (RA) for the following ISO standards: ISO 9362: 1994 BankingBanking telecommunication messagesBank identifier codes ISO 10383: 2003 Securities and related financial instrumentsCodes for exchanges and market identification (MIC) ISO 13616: 2003 IBAN Registry ISO 15022: 1999 SecuritiesScheme for messages (Data Field Dictionary) (replaces ISO 7775) ISO 20022-1: 2004 and ISO 20022-2:2007 Financial servicesUniversal Financial Industry message scheme In RFC 3615 urn:swift: was defined as Uniform Resource Names (URNs) for SWIFT FIN.
Supervision