The SWIFT system is a global messaging network and a member-owned cooperative society. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It was founded in 1973 in Brussels, Belgium, by 239 financial institutions from 15 countries. The system was created to solve the problem of the predecessor, Telex, which was slow, error-prone, and lacked standardized message formats and security for international financial communication.
The core mechanism of SWIFT is to provide a secure and standardized platform for institutions to exchange information and instructions, primarily for cross-border payments. Crucially, SWIFT does not move or hold funds; it only transmits the payment messages. Every financial institution on the network is identified by a unique SWIFT code, also known as a BIC (Bank Identifier Code) or ISO 9362 code. The actual settlement of funds happens separately, often through correspondent banking, where intermediary banks facilitate the transfer between institutions that do not have a direct relationship.
The network connects over 11,000 financial institutions in more than 200 countries. A significant recent change is the mandatory migration from the legacy MT (Message Type) messaging format to the richer, more structured ISO 20022 standard. This transition for financial institutions directly connected to the SWIFT FIN network is expected to conclude in November 2025. The system is also connected to the concept of economic sanctions, as exclusion from the network is a tool used against countries, such as the removal of certain Russian banks in 2022.