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WTF: SWIFT Bank Messaging


SWIFT

In 1977, a club of 500 banks joined together to create a member-owned system based in Belgium called the Society for Worldwide Interbank Financial Transactions (SWIFT). The system was the innovation that that led to a surge in global trade and investment. Now it’s 11,500 banks, across 200 countries, rely on the system to ‘message’ capital transfers. In the face of Fintech, the system was criticized as slow and cumbersome (it was started in during the Carter administration.) For the most part SWIFT has risen to the challenge of technology.


The geopolitical challenges to the system are proving trickier to handle. Washington, in its desperation to never fight a shooting war again, managed to weaponize the world’s financial plumbing. Yes, it’s based in Belgium, yes its privately owned, but it is filled with dollars. In 2012, Washington exerted pressure on SWIFT to cut Iran out of the system, which it eventually did. In 2014, in response to Russian annexation of Crimea, Washington did the same thing. This looked a lot like Washington trying to control a system that relied neutrality. Now we are dribbling into an era of dueling financial systems.


In response to being kicked out of the SWIFT system, Russia started the SPFC, in 2015, Beijing launched CIPS and as of March, some 1,511 financial institutions were using it, that’s only 13% of swift’s 11,500 membership, but a number that has more than doubled since 2018. 

A year after that, India launched UPI – which is the most advanced and fastest growing rival to SWIFT. If you haven’t heard much about it it’s because but because Delhi isn’t trying to destroy the US, and you won’t get many clicks flogging that story.


In the end, the incompatibilities in several bank messaging systems will probably be more tedious than catastrophic. It’s likely to slow things down, and it may even have a stabilizing effect on the world’s financial plumbing. The downside is that without sway over the global banking systems, Washington will have to fight its wars the old-fashioned way.

And that sucks.

 

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