SWIFT

Based on Wikipedia: SWIFT

In February 2022, when Western nations decided to punish Russia for invading Ukraine, they didn't send troops or fire missiles. They pressed a few buttons and cut Russian banks off from a messaging system. Within days, the ruble collapsed. That messaging system—SWIFT—might be the most powerful weapon you've never heard of.

The Backbone of Global Money

Here's a puzzle. When you send fifty dollars to a friend across town, your bank simply moves numbers in a database. But what happens when a corporation in Germany needs to pay a supplier in Japan? The German bank doesn't have an account at the Japanese bank. There's no shared database. Different currencies, different time zones, different languages, different legal systems.

This is where SWIFT comes in.

The Society for Worldwide Interbank Financial Telecommunication isn't a bank. It doesn't hold anyone's money. It doesn't move funds from one place to another. It does something more fundamental: it lets banks talk to each other in a language they all understand.

Think of it like the postal service for the financial world. When Bank A in Frankfurt wants to send money to Bank B in Tokyo, it composes a message—a highly standardized, cryptographically secure message—and sends it through SWIFT. That message contains all the instructions Bank B needs: how much money, in what currency, to which account, and under what terms. The actual money moves through a separate system, often through a chain of "correspondent banks" that maintain accounts with each other. But SWIFT is what makes them understand each other.

As of 2018, roughly half of all high-value international payments flowed through SWIFT's network. Over eleven thousand financial institutions in more than two hundred countries exchange upwards of thirty-two million messages per day. To put that in perspective, in 1995, the network handled about 2.4 million messages daily. The growth has been staggering.

Born from Fear of American Dominance

SWIFT exists because European bankers were afraid of Citibank.

Before SWIFT, international financial messages traveled over something called Telex—essentially a network of electric typewriters that could send text across phone lines. Every message had to be manually typed, manually read, and manually processed. It was slow, error-prone, and increasingly inadequate for the growing volume of global trade.

In the early 1970s, one bank saw an opportunity. First National City Bank of New York—the institution that would later become Citibank—developed its own proprietary system for international financial messaging. It worked beautifully. It was also controlled entirely by a single American bank.

European bankers looked at this situation with alarm. If one American institution controlled the arteries of global finance, what would stop it from favoring its own interests? What if American regulators decided to use that control for political purposes?

So they built an alternative.

On May 3, 1973, SWIFT was founded in Brussels, Belgium. The location was deliberate—a neutral European country, not beholden to any major financial power. The structure was equally deliberate: a cooperative owned by its member banks, with voting power allocated in proportion to how much each bank used the system. No single country, no single institution could dominate it.

Two hundred thirty-nine banks from fifteen countries signed on as founding members. They hired the British technology firm Logica to design the system and the American company Burroughs Corporation to build it. The first message was sent ceremonially by Prince Albert of Belgium on May 9, 1977.

How It Actually Works

At its core, SWIFT is deceptively simple. It's a store-and-forward messaging system—messages go in, get validated and stored, then get delivered to the recipient. The complexity lies in making this process absolutely reliable and absolutely secure.

The network runs from three data centers: one in the United States, one in the Netherlands, and one in Switzerland. These centers mirror each other in near real-time. If any one of them fails completely, the others can handle the entire global load. The data travels through undersea fiber optic cables—the same physical infrastructure that carries your internet traffic, but on dedicated, heavily secured channels.

After Edward Snowden revealed that American intelligence agencies had been accessing SWIFT data, the organization restructured. European messages now stay in Europe, stored in the Netherlands and part of the Swiss facility. Trans-Atlantic messages—those involving American banks or countries that choose the American zone—are stored separately in the United States and another section of the Swiss center. It's an architectural acknowledgment that not everyone trusts data that passes through American jurisdiction.

The messages themselves follow rigorous standards. Every field has a specific format. Every transaction type has a specific code. A bank in Vietnam and a bank in Brazil, with no common language and no prior relationship, can exchange instructions precisely because both speak SWIFT's standardized language. This is why the organization is also responsible for assigning Business Identifier Codes—those eight or eleven character strings you might see on international wire transfer forms, popularly called "SWIFT codes."

The Peculiar Governance of Global Finance

SWIFT occupies a strange position in the world. It's not a government agency. It's not regulated as a payment system—because technically, it doesn't move money, only messages. Yet it's so critical to the functioning of global finance that central banks from twenty-six countries actively oversee its operations.

The National Bank of Belgium takes the lead role, which makes sense given SWIFT's Brussels headquarters. But representatives from the Federal Reserve, the European Central Bank, the Bank of Japan, and many others participate in formal oversight arrangements. They focus on systemic risk—what happens if SWIFT fails?—and on security, confidentiality, and business continuity.

The board of directors, meanwhile, represents the major banks that use the system most heavily. As of May 2024, JPMorgan Chase holds the chair position. Lloyds Bank serves as deputy chair. The other seats include familiar names: Bank of China, Deutsche Bank, HSBC, Citi, and the like. Every three years, shareholding gets rebalanced based on transaction volumes, ensuring that the most active participants have the loudest voice.

This structure creates an interesting tension. SWIFT is owned by banks but overseen by central banks. It's based in Belgium but serves the entire world. It's technically just a messaging service but functionally serves as critical infrastructure for the global economy.

The Weapon Nobody Wanted to Use

For decades, SWIFT's power remained theoretical. Everyone knew that being cut off from the network would be devastating—like having your phone line cut while trying to run a business—but the option was considered too drastic to deploy.

Then came the sanctions.

In 2012, SWIFT disconnected Iranian banks from its network, the first time such action had been taken against an entire country's banking system. The move came under pressure from European Union regulations implementing international sanctions over Iran's nuclear program. Iranian oil exports, which had been humming along at 2.5 million barrels per day, plummeted. The country's currency lost half its value within months.

The Iran episode demonstrated something important: SWIFT might be technically neutral infrastructure, but it could be weaponized. The cooperative, headquartered in Belgium, operates under Belgian and European Union law. When the EU passes sanctions, SWIFT must comply. And American pressure can influence EU decisions.

Russia took notice.

As early as 2014, after the annexation of Crimea, Russian officials began warning about the danger of SWIFT dependence. They accelerated development of an alternative system called SPFS—the System for Transfer of Financial Messages. By 2022, when Russia launched its full-scale invasion of Ukraine and Western nations responded by cutting major Russian banks off from SWIFT, the country had a domestic alternative ready.

But SPFS only works within Russia and with the handful of foreign banks that have bothered to connect to it. For international trade, Russian companies now rely on workarounds: routing payments through third countries, settling in currencies like the Chinese yuan, or using newer systems that bypass SWIFT entirely.

The Challengers

Russia isn't alone in seeking alternatives. China operates CIPS—the Cross-Border Interbank Payment System—which handles yuan-denominated transactions. Over 1,400 financial institutions in 111 countries have connected to it, and the system reaches banking networks in 182 countries. India has SFMS, its Structured Financial Messaging System. Brazil developed Pix, originally designed for domestic instant payments but with international ambitions.

The BRICS nations—Brazil, Russia, India, China, and South Africa, along with their expanding membership—have discussed creating BRICS Pay, a shared alternative that would let them settle transactions without touching SWIFT or American-influenced systems.

Whether any of these alternatives can truly rival SWIFT remains uncertain. Network effects are powerful: SWIFT is valuable because everyone uses it, and everyone uses it because it's valuable. Building a competing network means convincing thousands of banks to implement new systems, train new staff, and maintain parallel infrastructure. That's expensive and slow.

But the geopolitical incentives are strong. Every country that watched Iran struggle or Russia scramble has an interest in having backup options. The dollar's dominance in global trade, which SWIFT reinforces, may gradually erode as alternatives mature.

The Criticism: Slow, Opaque, Expensive

For all its importance, SWIFT has been criticized for failing to keep up with modern expectations. International wire transfers can take days to complete. They often pass through multiple intermediary banks, each taking a fee, with the sender having little visibility into how much money will actually arrive at the destination.

A 2018 Financial Times analysis highlighted these problems: transfers that bounce through three or four correspondent banks before reaching their destination, each hop adding time and cost and uncertainty. Customers sending money to family overseas often had no idea whether the transfer would take two days or two weeks, or how much would be eaten by fees along the way.

SWIFT has responded with improvements. Its Global Payments Innovation initiative, launched in 2017, promised faster and more transparent transfers. The organization claimed that half of GPI payments complete within thirty minutes. A newer service called SWIFT Go targets low-value transfers—the kind ordinary people make—with promises that the amount sent will equal the amount received.

But adoption has been uneven. Banks must upgrade their systems to support these new standards, and many smaller institutions lag behind. In places like Tajikistan, as one local expert noted, the core banking systems themselves need overhaul before the new SWIFT services can work properly.

Meanwhile, cryptocurrency advocates argue that blockchain-based systems could eventually bypass the entire correspondent banking model. Why route a payment through four banks over three days when a stablecoin transfer can settle in minutes? So far, regulatory concerns and volatility have limited crypto's role in mainstream international payments. But the pressure for something better isn't going away.

The Infrastructure We Forget

Most people go their entire lives without thinking about SWIFT. They send money abroad and it arrives, eventually, somehow. They don't consider the standardized message formats, the submarine cables, the redundant data centers, the diplomatic negotiations over oversight, the careful balance of power among competing nations.

Yet this hidden infrastructure shapes the world. It enables global trade, making it possible for a factory in Bangladesh to receive payment from a retailer in Canada. It enforces international sanctions, cutting off countries that violate global norms from the financial system. It represents a kind of global governance—not of states, but of the banks and central banks that keep the money flowing.

The system emerged from European fears of American dominance, only to become a tool that American and European policymakers can jointly wield. It was built for efficiency and neutrality, yet has become a weapon in geopolitical conflicts. It remains indispensable even as competitors multiply and critics multiply faster.

Every time you hear about sanctions "cutting off" a country, every time you read about frozen assets or blocked transactions, SWIFT is almost certainly involved. It's the plumbing of global finance—invisible until it stops working, essential in ways we barely comprehend.

And in a world of rising tensions between great powers, control over that plumbing has become one of the most consequential forms of power there is.