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Debunking the “Archaic” SWIFT Global Payments Myth

Cloud Powering Its Modernization and Transformation

Globalization of trade between nations, payments between businesses and individuals cannot happen unless there are facilitating trusted intermediaries to assist in these transactions. Some if not many people may not know about how this global “plumbing” system that is interconnecting between everyone.

From a consumer perspective, we are most familiar with Paypal, Alipay, Apple Pay and Google Pay, but I hope to write in this article about SWIFT, what does it do from a business perspective and how does it work in terms of modern cloud architecture. Some others might be thinking it is still running in mainframe and brand it as “archaic” since it has been around for decades since the earliest days of computing.

But first, let us first understand what SWIFT stands for.

Swift, or the Society for Worldwide Interbank Financial Telecommunication, is a global messaging system for financial transactions that connects more than 11,000 banks and other organizations in more than 200 countries and territories. While it doesn’t handle actual money transfers itself, it is an essential part of the financial plumbing because it transmits transfer requests safely from one bank to the other, allowing the money to ultimately land where it is supposed to.

From Jan to Dec 2021, SWIFT processed more than 10 billion messages or transactions with an average monthly volume 44 million messages/day.

SWIFT volumes for December 2021
Source: SWIFT in Figures (December 2021)

SWIFT is a apolitical global organization, and is based in Brussels, Belgium, where it still needs to comply to local regulatory supervision. Other countries meanwhile setup their own competing payment messaging systems in SPFS and CIPS respectively in the hope of avoiding such reliance on SWIFT.

Without the scale and economics of a large distributed ecosystem though, the SPFS only have only 400 direct users with limited participation from foreign banks. CIPS on the other hand have a larger number with 1280 participants from 103 countries with a growing transaction volume (2.68m transactions worth 64 trillion yuan).

This leaves SWIFT as the dominant platform for performing international payments today. Barring any immediate change to the status quo, it would be of interest to look at the business use cases and technology architecture of this global messaging system.

Business

Modern banking institutions, corporations and consumers expect real-time and instant payments throughout the world.

37% of consumers are now aware of instant payments as of 2021 as compared to 25% the year prior. Business to business transactions have been hit hard during the ongoing COVID pandemic where 47% of small businesses received late payments from large corporations.

Payroll payments from businesses to employees are now expected with 83% of workers saying they want access to their wages after the end of each shift or workday instead of waiting for the scheduled pay-day. Below shows the different generation of consumers awareness of instant payments.

Growing Demand for Instant Payments
Source: Growing Demand for Instant Payments

According to SWIFT, this modern convenience of instant payments is now available for its cross-border transactions.

SWIFT gpi is now already in production use with over 4000 financial institutions using this service. 75% of the SWIFT payments are now sent via gpi. This means over 7.5 billion messages are instant every year supporting their claim for digital platform capability that delivers value to its banking and corporate customers.

For low-value cross-broader payments, SWIFT Go is also available for small businesses to pay their overseas suppliers or consumers can facilitate payments to friends and family. Still in pilot, there are around 123 financial institutions (as of July 2021).

Technology

Essentially Swift’s flagship product is called Alliance Access and the diagram below shows the interaction of their different offerings.

SWIFT Alliance Messaging Hub offers
Source: SWIFT Alliance Messaging Hub Info Sheet

Let’s look at the standard/modular on-premise offering in its portfolio. The latest version 7.2 released in 2016 runs most on-premise hardware from the major vendors like IBM, Oracle and on modern x86 Intel based machines. This looks like quite big broad support at the hardware layer for most vendors.

The software runs on at least Windows 2016, AIX 7.2 and Oracle Solaris 11.3.7.5 and Redhat Linux 7.2. This looks quite up-to-date and modern at the operating system layer.

The Alliance Message Hub is built using Java Run-time toolkit with its application servers built on IBM MQ 8.5.x, JBOSS EAP and Weblogic. This looks like modern software at the application layer.

The more interesting product offer however is Alliance Cloud. Cloud is where most modern technology architectures are now being developed. SWIFT writes in its factsheet this is a private cloud offer. At the same time, SWIFT is also working with hyperscale public cloud providers to reap the full benefits of cloud.

For example, sample high-level reference architectures are now published in here for Microsoft Azure for Swift Alliance Connect

SWIFT’s Alliance Access in Microsoft Azure
Source: SWIFT’s Alliance Access in Microsoft Azure

Other reference architectures for SWIFT products are not yet available for Production use at this time of writing, but it will become generally available soon in 2022.

Conclusion

The global payment system SWIFT is an important function of an interconnected world that we live in today.

It is estimated that without such a system, it will take a bank clerk hours to process every single payment. Imagine how many productive hours is lost if banks worldwide were to process more than 40 million transactions every day! It is therefore estimated that SWIFT adds $1 trillion to the global economy each year.

SWIFT is without doubt that this important function of human society continues to develop regardless of conflicts, pandemics and disasters with huge investments in digital technologies. In time, more business innovations using cloud should benefit us all in the near future.

This article was first published here.

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