The Society for Worldwide Interbank Financial Telecommunication (SWIFT)

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) This book traces the history and development of a mutual organization in the financial sector called SWIFT, the Society for Worldwide Interbank Financial Telecommunication. Over the last 40 years, SWIFT has served the financial services sector as proprietary communications platform, provider of products and services, standards developer, and conference organizer (Sibos). Founded to create efficiencies by replacing telegram and telex (or “wires”) for international payments, SWIFT now forms a core part of the financial services infrastructure. It is widely regarded as the most secure trusted third-party network in the world serving 212 countries and over 10,000 banking organizations, securities institutions, and corporate customers. Through every phase of its development, SWIFT has maintained the status of indus- try cooperative, thus presenting an opportunity to study broader themes of globaliza- tion and governance in the financial services sector. In this book the authors focus on how the design and current state of SWIFT were influenced by its historical origins, presenting a comprehensive account in a succinct form which provides an informative guide to the history, structure, activities, and future challenges of this key international organization. This work will be of great interest to students and scholars in a wide range of fields including IPE, comparative political economy, international economics, business studies, and business history. Susan V. Scott is a Reader in the Information Systems and Innovation Group, Department of Management, at The London School of Economics and Political Science. She received a Ph.D. from the Judge Business School at the University of Cambridge. Her research interests include information systems and risk management; electronic trading; post-trade services; organizational reputation risk management; rating, ranking and review mechanisms in social media; business transformation and global business management. Markos Zachariadis is an Assistant Professor of Management and Information Systems at Warwick Business School, University of Warwick. He received a Ph.D. from the Information Systems and Innovation Group, Department of Management, at The London School of Economics and Political Science. His research interests include the history and economics of innovation, technology adoption, and the diffusion of data, information and knowledge across digital and social networks. Routledge Global Institutions Series Edited by Thomas G. Weiss The CUNY Graduate Center, New York, USA and Rorden Wilkinson University of Manchester, UK About the series The Global Institutions Series has two “streams.” Those with blue covers offer comprehensive, accessible, and informative guides to the history, structure, and activities of key international organizations, and introductions to topics of key importance in contemporary global governance. Recognized experts use a similar structure to address the general purpose and rationale for specific organizations along with historical developments, membership, structure, decision-making procedures, key functions, and an annotated bibliography and guide to electronic sources. Those with red covers consist of research monographs and edited collections that advance knowledge about one aspect of global governance; they reflect a wide variety of intellectual orientations, theoretical persuasions, and methodological approaches. Together the two streams provide a coherent and complementary portrait of the problems, pros- pects, and possibilities confronting global institutions today. Related titles in the series include: The International Organization for Standardization (2009) by Craig N. Murphy and JoAnne Yates Global Think Tanks (2011) by James G. McGann with Richard Sabatini Corporate Social Responsibility (2013) by Oliver F. Williams Private Foundations and Development Partnerships (2014) by Michael Moran The UN Global Compact (forthcoming) by Catia Gregoratti The Society for Worldwide Interbank Financial Telecommunication (SWIFT) Cooperative governance for network innovation, standards, and community Susan V. Scott and Markos Zachariadis First published 2014 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business. © 2014 Susan V. Scott and Markos Zachariadis The right of Susan V. Scott and Markos Zachariadis to be identified as authors of this work has been asserted by them in accordance with the Copyright, Designs and Patent Act 1988. The Open Access version of this book, available at www.tandfebooks.com, has been made available under a Creative Commons Attribution-Non Commercial-No Derivatives 3.0 license. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library. Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN: 978-0-415-63164-8 (hbk) ISBN: 978-1-315-84932-4 (ebk) Typeset in Times New Roman by Cenveo Publisher Services Contents List of illustrations vi Foreword ix Acknowledgments xii Abbreviations xiv Introduction 1 1 Origins of the society 7 2 How SWIFT works 27 3 SWIFT standards 55 4 Development of the SWIFT network 95 5 Current debates in historical perspective 119 6 Conclusion 151 Select bibliography 157 Index 159 Illustrations Figures 2.1 Board committees 31 2.2 V-shaped message flow structure 36 2.3 Y-copy message flow via SWIFTNet 37 2.4 Evolution of security 42 3.1 Parsing of a user-to-user MT 62 3.2 A paper customer transfer instruction translated into a SWIFT MT 100 message 64 3.3 Components of a SWIFT address (BIC) 67 3.4 Mapping a FIN MT 103 customer credit transfer on to an ISO 20022 XML-based message 76 4.1 SWIFT network in 1977 97 4.2 Cross-country diffusion of SWIFT (1977–2006) 101 4.3 SWIFT II network infrastructure 105 4.4 SWIFTNet system configuration 108 4.5 Diffusion of SWIFT 111 Tables 1.1 Chairpersons of SWIFT 16 1.2 CEOs of SWIFT 17 2.1 Description of payment system processes 34 2.2 Transaction Infrastructure Services activities 35 2.3 Sibos locations, themes, and numbers of participants (1978–2013) 44 3.1 First SWIFT Message Types (MT) categories 63 3.2 XML versus SWIFT proprietary syntax 71 3.3 Standards for securities trade lifecycle 78 3.4 Key SWIFT standards-related documents 82 4.1 SWIFT system traffic volumes (1977–1982) 103 Illustrations vii 4.2 Benefits from the use of the SWIFT network in the early years 106 4.3 Growth of SWIFT connections, countries, and annual traffic (1977–2012) 113 Boxes 1.1 The Citi chimney sweep 12 2.1 SWIFT II and a new approach to operations 40 3.1 Standards, process innovation, and business transformation 58 3.2 XML 71 3.3 A Tale of Two Standards 77 4.1 SWIFT Interface Device 98 5.1 Heidi Miller’s speech at Sibos 2004 120 Foreword The current volume is the 83rd title in a dynamic series on global institutions. These books provide readers with definitive guides to the most visible aspects of what many of us know as “global governance”. Remarkable as it may seem, there exist relatively few books that offer in-depth treatments of prominent global bodies, processes, and associated issues, much less an entire series of concise and complementary volumes. Those that do exist are either out of date, inaccessible to the non-specialist reader, or seek to develop a specialized understanding of particular aspects of an institution or process rather than offer an overall account of its functioning and situate it within the increasingly dense global institutional network. Likewise, exist- ing books have often been written in highly technical language or have been crafted “in-house” and are notoriously self-serving and narrow. The advent of electronic media has undoubtedly helped research and teaching by making data and primary documents of international organizations more widely available, but it has complicated matters as well. The growing reliance on the internet and other electronic methods of finding information about key international organizations and processes has served, ironically, to limit the educational and analytical materials to which most readers have ready access — namely, books. Public relations documents, raw data, and loosely refereed websites do not make for intelligent analysis. Official publi- cations compete with a vast amount of electronically available information, much of which is suspect because of its ideological or self-promoting slant. Paradoxically, a growing range of purportedly independent websites offering analyses of the activities of particular organizations has emerged, but one inadvertent consequence has been to frustrate access to basic, authoritative, readable, critical, and well-researched texts. The market for such has actually been reduced by the ready availability of varying quality electronic materials. For those of us who teach, research, and operate in the area, such access to information and analyses has been frustrating. We were delighted several years ago when Routledge saw the value of a series that bucks this trend and x Foreword provides key reference points to the most significant global institutions and issues. They

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