The Dominance of Blockchain and SWIFT in Global Finance

Over the past two years, the capital markets ecosystem has undergone a period of accelerated digital transformation, largely as a result of COVID-19. But the technology landscape is constantly changing, often testing the efficiency of traditional practices.

After being a leading participant 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 Global Interbank Financial Telecommunications Association (SWIFT) is a steadfast and secure financial messaging service that conducts international transactions between banks.

SWIFT has made it much easier to send cross-border payments and has established itself as a dominant player in global financial transactions. But it only recently gained widespread attention, when the United States and the European Union removed key Russian banks from the cooperative, including Bank Otkritie, Novikombank, Promsvyazbank and more, to impose further economic sanctions beginning in February 2022.

As the financial sector capitalizes on SWIFT, it begs the question of whether there is a better one? and faster way to make cross-border payments? Many now see blockchain technologies becoming the mechanism for powering the next generation of global financial solutions.

The Old Guard: A Brief History of SWIFT

SWIFT is headquartered in Belgium and SWIFT’s vision has always been to create a common language for international financial messaging and a service to make it possible. It is now the mechanism for most international money and security transfers, but maintaining an outdated payment system can be difficult and reveals the need for innovation.

The kinds of transformations needed across the payments ecosystem need to address the slow processing speeds associated with high fees and a history of cyber breaches due to high volumes and massive data transfers.

The power of blockchain and the arrival of new players

The introduction of blockchain has changed the path of technology and the industries surrounding it. Blockchain technology is a universal and immutable ledger for recording transactions and tracking assets with complete transparency, and companies around the world are benefiting and adopting the technology. The application of blockchain in the financial sector can provide new players with the opportunity to provide speed, cost-efficiency and more secure solutions for the movement of value, while allowing transactions to be instantly and simultaneously approved by validators.

The growing conversation about blockchain technology and its benefits in the financial sector is sparking a much-needed discussion about SWIFT’s viability.

Enter the new players

As blockchain technology continues to advance, it has sparked new conversations about the future of finance, monetary transactions and payment usage scenarios. Seeing the success of blockchain within the crypto industry is no doubt sparking interest in its potential use cases for other applications. An obvious use case is for cross-border transactions, making blockchain a major competitor against SWIFT. While some may scoff at this idea, the potential for blockchain to disrupt this space is gaining traction and becoming a more serious discussion to be had.

By eliminating reliance on intermediaries, blockchain allows international banks to connect directly to each other on the same network, saving time and resulting in minimal costs. While current cross-border transactions are costly and can take several days, blockchain technology allows them to happen in seconds. These transactions can also be tracked better, as the blockchain keeps track of all data transfers, which are stored and time-stamped in the main book.

Banks investing in decentralized systems and adopting blockchain technology will soon see its many benefits. Now that there are regulations for commercial banks, standards and guidelines must first be established. Once these standards are established, financial institutions will have an opportunity to redefine the entire industry and prove blockchain’s transformative use cases for global finance.

Looking to the future

With the financial industry recently taking on SWIFT, it’s time to step back and re-evaluate the way global transactions are completed. Blockchain-powered alternatives have arrived, offering users within banks and financial institutions the ability to perform the same tasks at a lower rate, with higher security and speeds. Completely immersing blockchain in the global financial industry creates greater trust in a user’s shared system that is available globally.

Yamini Sagar is a senior vice president at Roxe†