5 Things to Know About Secure Financial Messaging Services
Correspondent banks are a key player in the global economy. They enable and improve the liquidity of currency, which is one of the fundamental factors in economic growth. Moving money around the world is not only beneficial for the economy, but it’s also a good way to lose track of the money, its destination and its original source. This fact is often leveraged by people who intend to commit financial crimes.
This makes the correspondent banks a medium to such acts and that’s why regulatory authorities and governments focus on correspondent banks. Unfortunately, this chain of actions and reactions narrows the activity area of correspondent banks and forces them to choose a path of de-risking in order to evade fines and accusations. However, they are also trying to devise ways to overcome the obstacles and improve their security measures so that they can continue their international financial activities. Secure financial messaging is one of those methods. So let’s cover some facts about secure financial messaging.
SWIFT System is Old But Constantly Evolving
SWIFT is almost 50 years old today. This may sound like it’s yesterday’s technology but that is not the situation. SWIFT financial messaging system was first implemented as a method more than technology but today, it’s a full-scale preventive system and a security measure against the financing of terrorism and legal crimes.
SWIFT standards constantly change and improve, which results in the SWIFT system becoming faster, more efficient and secure; without bulking up the system.
SWIFT Network Doesn’t Only Include Banks
SWIFT was originally a society created by a handful of banks. Today, it’s a vast network that includes thousands of institutions, including both banks and other types of financial institutions. In fact, if a financial institution performs any cross-border payments or money transfers, it must be included in the SWIFT system. Otherwise, their credibility and trustworthiness will be questionable in the financial industry.
SWIFT Messages are Very Safe
SWIFT guarantees the delivery of messages with a network and system availability greater than 99.999%. SWIFT has elaborate additional measures, including data encryption, audit tracking and intrusion detection to ensure data confidentiality and integrity.
This means that the information carried around in millions of SWIFT messages are completely safe from any kind of harm or prying eyes.
SWIFT Reduces Costs
The cost of cross-border payments and money transfers are major issues in the banking sector. In addition to its speed and security advantages, the SWIFT system also reduces the cost of such operations. This is the main factor in the sustainability of the current financial system.
SWIFT is the Most Dominant Player
The SWIFT system has reached 230 banks in only three years after its introduction. While SWIFT started primarily for simple payment instructions, it now sends messages for a wide variety of actions, including secured transactions and treasury transactions. Nearly 50% of SWIFT traffic is still for payment-based messages but 43% now concern security transactions, with the remaining traffic flowing from treasury transactions.
Although there are other financial messaging systems like Fedwire, Ripple and CHIPS, SWIFT is by far the most dominant player in the globe. There are valid reasons for this too, which have been listed above.
In conclusion, SWIFT is an effective tool for correspondent banks and other kinds of financial institutions to retain their operational flexibility under regulatory stress.