SWIFT Explained: The Secret Banking Network Moving Trillions

Introduction



When you transfer money overseas - maybe paying university fees in U.S. or sending money to a family in Europe - your bank doesnt stuff cash into an envelope and ship it across the ocean. Instead, a hidden global network passess the message that triggers your payment.

That network is called SWIFT - the Societ for Worlwide Interbank Financial Telecommunication.

It's not flashy. It doesn't "move" money. But without it, global finance would grind to a halt. Let's break down how it works, why it matters, and how countries like China, Russia, and the BRICS are trying to challenge it.

A Quick History: Why SWIFT was Born

Back in the 1970s, international banking relied on telex machines. Imagine sending financial instructions like you would send a telegram - slow, insecure, and prone to mistakes. Banks needed a faster, standardized way to communicate securely.

So, in 1973, 239 banks from 15 countries founded SWIFT in belgium. Today, it connects 11,000+ institutions in over 200 countries, with oversight by centrak banks worldwide.

Its job remain simple: make sure the banks speak the same financial language.

How SWIFT Works (With a Simple Example)


Think of SWIFT as WhatsApp for Banks - but instead of chatting, they send highly structured payment instructions.

  • Let's say Ravi in India wants to send $1000 to his sister Anita in New York.
  • Ravi's bank in Mumbai doesn't hold Anita's Account directly.
  • Instead, it sends a SWIFT message (MT-103) across the network to Anita's bank in New York.
  • That message contains: Ravi's account  → Anita's account → Amount → Currency.
  • Anita's bank receives the message and credits her account.
Key Point: SWIFT didn't move the money. It only passed the instruction. Actual settlement happens through correspondent banks or clearinghouses. SWIFT is just the "language highway."

How Big is SWIFT? 


SWIFT's scale is mind-boggling:
  • In 2022, banks exchanged 11.3 billion payment messages (about 44 million per day).
  • Over 80% of global cross-border payments involve either the U.S. dollar or the euro.

Currency Share on SWIFT (2022):


Currency             Share of Payments
USD             41.8%
EUR             34.7%
GBP             6.3%
JPY             3.1%
CNY             2.1%
Others             ~12%

The U.S. Leverage: SWIFT as a Sanctions Weapon

Although SWIFT calls itself "neutral", history shows otherwise. Western powers - especially like the U.S. and EU -  have learned that cutting a country off from SWIFT is like pulling the plug on its financial lifeline.

Key Moments When SWIFT was used Geopolitically:


Year             Country                 Action
2012                 Iran             EU forced SWIFT to disconnect Iranian banks.
2017            North Korea             SWIFT expelled remaining DPRK banks.
2022                Russia             EU cut 7 Russian banks after Ukraine invasion.

For businesses in those countries, being cut off meant: no imports, no exports, no access to global banking.
And the U.S, has another advantage: because most payments use dollars, it can track or block flows via its own financial networks. After 9/11, the Terrorist Finance Tracking Program even allowed U.S. treasury to access SWIFT's American data center - turning financial flows into an intelligence tool.


The BRICS Response: Building Alternatives


No country like being vulnerable to another's system. That why China and Russia in particular have been working on SWIFT alternatives:
  • CIPS (China's Cross-Border Interbank Payment System): RMB- based system. Growing fast but still small (~$46B daily vs. $1.8T on U.S, CHIPS).
  • SPFS (Russia's System for Trasnfer of Financial Messages): Created after 2014 sanctions. Mostly domestic, with limited foreign uptake.
  • Other efforts: BRICS "Pay" discussions, India's UPI expansion, currency-swap deals.
For now, none of these come close to SWIFT's 50-year head start and global network effects. But they serve as insurance policies  against Western sanctions.


What It All Means

  • For the West: SWIFT remains a tool of financial statecraft. Cutting access equals economic isolation.
  • For Risisng Powers: There's a push for "de-dollarization" and parallel systems (like CIPS).
  • For the World: We may see a slow fragmentation of global finance - with SWIFT still dominant, but alternatives quitely growing.
In short: SWIFT is the central nervous system of the financial world. It makes your everyday international transfers possible while also shaping global geopolitics.


Key Takeaway:

The next time you send money abroad, remember - behind that simple transaction is a hidden network, one that doubles as a financial weapon in international politics.

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