24 July 2014

Stanley Epstein

Stanley Epstein - Citadel Advantage Ltd

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Why has SWIFT become so SLOW?

03 May 2012  |  3041 views  |  1

The dictionary defines the word SWIFT as “coming, happening, or performed quickly or without delay”. I suspect that the founders of SWIFT had this thought in mind when they came up with the full name of this new interbank messaging service way back in 1973. After all, the full name (of which SWIFT is the acronym) is the Society for Worldwide Interbank Financial Transactions.

SWIFT’s founding fathers wanted to convey the idea that funds could be transferred swiftly across the globe.

I must admit back in those days I was never a fan of this new method of funds transfer. The pre-SWIFT method we used back then to move funds swiftly was that old stalwart of the early days of applying technology to banking – the telegraphic transfer (dating back to the late 1880s) - was still much faster.  

In 1973 we could get a US dollar transfer to New York for same day value via the humble Post Office telegraph – disbursement instructions, settlement instructions, validation codes, authentication codes - all in a couple of lines on a telegram. We could even get the funds there before they left so-to-speak (Einstein eat your heart out!). A 3 pm TT sent from Johannesburg would be available before noon the same day in New York. Included in this timing was the need to visit the local post office, stand in the queue while a little old lady deposited her small change to her Post Office Savings account; and the telegram delivery on the New York side.  If you were lucky enough to have a telex machine in your office, initiation to receipt of really urgent funds could be even swifter.

Along came SWIFT and immediately we took a step back into the past with irritating things like 2-day value.  Two days was nowhere near as good as same day. However one could live with it.

Now skip forward to 2012. The 21st century! Today we have really incredible technology; the world in terms of interpersonal communications and information availability is a truly fantastic place. Mobile phones, smart phones, Skype (which has made the videophone of mid-20th century sci-fi a reality) as well as many other really smart gizmos, processes and ideas – far too many to mention.   

So you can imagine my consternation and dismay when I discovered that today a routine international transfer can now take between five and seven days as the norm! Both the sending and the (thus far "non")receiving bank gave me the same time-worn excuses. They don’t wash and I don’t by them.

Why has SWIFT become so SLOW?

True, we had fewer transactions back then. However, today greater volumes have been offset by the massive infusion of highly advanced technology and largely automated processing at source. Also, much of a banks payments work is now “processed” by the bank clients themselves (through input via the Internet); for which banks still have the gall to charge exorbitant fees.

Correspondent relationships between banks tend to add in extra time (regrettably counted in days!) to the time to complete transfers. There surely is a solution on the SWIFT side to this issue.

Perhaps I am too quick to put the blame at the door of SWIFT. After all it is always easy to shoot the messenger (pun intended).

What is it then? Is it SWIFT or is it the user banks?           

If SWIFT is OK then it must be the banks. And if it’s the banks, why are they slipping? Is it bad organisation on their part in how the work is processed or a cavalier attitude to their clients? Or perhaps it is a bit of both?

If banks are guilty of errors of commission (or omission) then it is exactly this hubris that in the long run could lead to the banking industry losing its “natural” franchise – the payments system.

There must be a better way of moving funds from point A to point B. PayPal has it; MoneyGram has it; so why not the banks?

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Comments: (1)

A Finextra member | 09 May, 2012, 10:34

I hate to be picky but actually it is the "Society for Worldwide Interbank Financial Telecommunication".

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Stanley Epstein

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