What is SWIFT System in Banking ? gkanswers
SWIFT System

SWIFT System

SWIFT Stands for “Society for Worldwide Interbank Financial Telecommunication”. once we send money to one living on the opposite side of the globe the local bank is connected to a worldwide messaging system called SWIFT.

It doesn’t hold funds or manage accounts on behalf of consumers. it’s a sort of financial messaging system.

The financial messaging services went board  from1977. The Telex Technology , which was widely employed by banks to speak long ago. Technology has advanced during recent years and also the competition has emerged.

What do banks use to communicate ?

SWIFT is that the system that banks use to securely send messages to every other.

It is one among the key pillars of the financial world, connecting over 11000 member banks in some 200 countries and territories globally. Trillions of dollars’- worth of currency are sent across borders every single day and it’s largely due to the messages sent by SWIFTS.

Banking system uses a code called “SWIFT Code” which consists of 8 to 11 characters. Bank Code + Country Code + Location Code + Branch Code.

Recently SWIFT announced partnership with MICROSOFT. this is often a cloud native proof of concept to host SWIFT Infrastructure and enable cloud native payment transfers on Microsoft Azure.

SWIFT has been thrown into the spotlight with the Russian invasion of Ukraine, when numerous Russian and Belarussian banks were faraway from the SWIFT network as a part of economic sanctions. This essentially means Bank’s ability to conduct financial transactions on a world scale has been disrupted.

Can see that within the cross-border payments, it came to be slow and expensive.

Also note that SWIFT isn’t the sole system for international transactions. Russia has its system for transfer of monetary messages or SPFs , serving 400 users as on February 2021. Twenty three of the users were foreign banks. The people’s bank of China also has the Cross- Border interbank payment system, or CIPS. By 2019 it reached over 3000 banks directly and indirectly, across 167 countries and in vast regions.

A company called Ripple provides cross-boarder payment service by using distributed ledger technology. It boasts superior transfer speed and lower transaction costs. But the corporate claims to possess signed up just quite 100 financial institutions.

Alternate networks like cryptocurrencies and blockchain technologies are advancing.

Block chain technology : a ditributed ledger technology (DLT) makes the history of any digital asset. This technology records the provenance of a digital asset .

Blockchain are often described as * Collection of records * within which data stored in blocks, each block linked with one another, * Strongly proof against alteration and * Protected using encryption.

Cryptocurrencies are a kind of digital or virtual currency. Cryptocurrencies are resistant to counterfeiting, don’t require a central authority. Protected by strong and sophisticated encryption algorithms. Transaction details are permanently inscribed within the blocks.

This records also holds the amount of bitcoins each of the account holder holds their own. A hacker won’t be able to alter the info within the blockchain because * each user incorporates a copy of the ledger and * the information within the blocks are encrypted by complex algorithms. All of this can be made possible with the assistance of blockchain technology.

Caroline Malcolm, who heads international policy at blockchain data company chain analysis acknowledges that, ” a legacy system like SWIFT is difficult to detach from. But there are certain capabilities and features in blockchain based system that cannot be matched by traditional systems. “

She said in an interview ” Blockchain allows people to carry their own funds and control that in a very divert way”.

Time will tell if newcomers can dethrone the SWIFT.

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