The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a ‘secure financial messaging service’ provider. SWIFT provides financial institutions worldwide the means to send and receive information about financial transactions in a secure, standardized and reliable environment.
History
In 1973, SWIFT was founded in Brussels. Under the leadership of its inaugural CEO, Carl Reuterskiöld (1973–1989), it was supported by 239 banks in fifteen countries.
Logica, which at that time was a multinational IT company, and Burroughs Corporation, a manufacturer of business equipment, collaborated to create the international communications network used by SWIFT. In 1975, SWIFT began to establish common standards for financial transactions, fundamental operating procedures, rules for liability, etc., and in 1977, the first message was sent.
Within one year, 10 million messages had been sent and customer numbers grew to 518. In 1979, SWIFT connected with the US and established an operations centre, and a year later SWIFT connected with Asian countries.
In 1987, SWIFT members voted to expand the user base to include broker-dealers, exchanges, central depositories and clearing institutions. This expanded the range of messages carried on the network to include securities messages.
As of 2015, SWIFT linked with over 11,000 financial institutions in more than 200 countries and territories, who were exchanging an average of over 15 million messages per day (compared with an average of 2.4 million daily messages in 1995). While SWIFT transports financial messages, it does not hold accounts or perform any form of clearing or settlement.
The secure messaging network operates from three data centres: one in the US, one in the Netherlands and one in a secret location known only by a restricted number of employees. The centres share information in near real-time, and if one centre has a network failure, one of the data centres takes control of the traffic to securely complete the work. The data is sent via submarine communications cables.
Purpose
SWIFT is a standardised and secure system for the transferal of financial data. It does not facilitate funds transfers, it only sends payment orders, which must be settled by correspondent accounts that the institutions have with each other.
For the exchange of banking transactions to take place, each financial institution must have a banking relationship by either being a bank or affiliating itself with one (or more) banks.
SWIFT assigns each financial organization a unique code that has either eight characters or 11 characters. The code is interchangeably called the bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code.
The system is used internationally to transmit financial data and facilitate the business relationship between financial institutions in a regulated and secure environment.
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