Blockchain and SWIFT’s dominance in global finance
We’re excited to bring back Transform 2022 in person on July 19 and virtually from July 20-28. Join leaders in AI and data for in-depth discussions and exciting networking opportunities. Register today!
Over the past two years, the capital markets ecosystem has gone through a period of accelerated digital transformation, largely due to COVID-19. But the technological landscape is constantly changing and often challenges the effectiveness of traditional practices.
Having been a major player in the execution of financial transactions and payments between more than 11,000 banks and financial institutions in more than 200 countries and territories, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a stable financial messaging service and secure that executes international transactions among banks.
SWIFT has greatly simplified the sending of cross-border payments and established itself as a dominant player in global financial transactions. But it only recently caught the attention of the general public, when the United States and the European Union withdrew the main Russian banks from the cooperative, including Bank Otkritie, Novikombank, Promsvyazbank and many others. others, for new economic sanctions that began in February 2022.
As the financial industry takes interest in SWIFT, the question arises as to whether there is a better and faster way to make cross-border payments? Many now see blockchain technologies becoming the driving mechanism for the next generation of global financial solutions.
The old guard: a brief history of SWIFT
Based in Belgium, SWIFT’s vision has always been to create a common language for international financial messaging and a service to enable this. It is now the mechanism for most international money and securities transfers, but maintaining a legacy payment system can be difficult and reveals the need for innovation.
The kinds of transformations that are needed across the payments ecosystem must respond to slow processing speeds matched by high fees and a history of cyber breaches due to high volumes and bulk data transfers.
The power of blockchain and the entry of new players
The introduction of blockchain has changed the path of the technology and the industries around it. Blockchain technology is a universal, immutable ledger to transparently record transactions and track assets, and businesses around the world are taking advantage of and embracing the technology. The application of blockchain in the financial sector can offer the opportunity for new players to provide fast, cost-effective and more secure solutions to move value, while transactions can be approved directly and simultaneously by validators.
The growing conversation around blockchain technology and its benefits in the financial industry is sparking much-needed discussion about the viability of SWIFT.
Enter new players
As blockchain technology continues to increase, it has led to new conversations about the future of finance, monetary transactions, and payment use cases. Seeing the success of blockchain in the crypto industry is undoubtedly sparking interest in its potential use cases for other applications. One obvious use case is for cross-border transactions, making blockchain a major competitor to SWIFT. While some may scoff at this idea, the potential for blockchain to disrupt this space is gaining momentum and becoming a more serious discussion to have.
With blockchain eliminating reliance on intermediaries, international banks can connect directly to each other on the same network, reducing time and incurring minimal fees. While current cross-border transactions are expensive and can take days, blockchain technology allows them to happen in seconds. These transactions can also be better tracked, as the blockchain keeps a record of all data transfers, which are stored and timestamped in the main ledger.
Banks that invest in decentralized systems and embrace blockchain technology will soon realize its many benefits. With the regulations in place for commercial banks, standards and guidelines will first need to be established. Once these standards are established, financial institutions will have the opportunity to redefine the entire industry and prove the transformative use cases of blockchain for global finance.
To look forward
As the financial industry has recently turned to SWIFT, it’s time to take a step back and re-evaluate how global transactions are conducted. Blockchain-powered alternatives have arrived that offer users in banks and financial institutions the ability to perform the same tasks at a lower pace, with greater security and speeds. Blockchain’s full immersion in the global financial industry allows for greater trust in a user’s shared system available worldwide.
Yamini Sagar is Senior Vice President of Rox.
Welcome to the VentureBeat community!
DataDecisionMakers is where experts, including data technicians, can share data insights and innovations.
If you want to learn more about cutting-edge insights and up-to-date information, best practices, and the future of data and data technology, join us at DataDecisionMakers.
You might even consider writing your own article!
Learn more about DataDecisionMakers