What’s the Big Deal About SWIFT in Banking?

You may have heard of calls for banning Russian banks from the SWIFT system. What is SWIFT and why is it important? We explain.

• The Russia-Ukraine war has demonstrated how interconnected the world is. The war has caused not only a humanitarian catastrophe, but a global economic shock.
• Economic sanctions against Russia include removal of some of its banks from SWIFT, which is a critical element for safe and secure financial transactions.
• It’s a system that encompasses over 11,000 banks across the globe. The only other SWIFT pariahs before Russia have been Iran and North Korea.
• There are alternatives to SWIFT in China and the US, but due to the lower number of member banks, these systems can’t compete with SWIFT on a level-playing field.
• However, SWIFT has had issues in the past with many bank heists exploiting weak security systems to take over SWIFT systems. There have been calls to modernise it and make the system faster.
• Blockchain-based digital money transfers are definitely proving to be a tangible threat to cross-border funds transfer systems such as SWIFT, which are slow and inflexible.