Jul, 2025
The SWIFT Network and the Future of Global Payments
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has been the backbone of international financial messaging since the 1970s, facilitating trillions of dollars in global transactions daily. However, incidents have occurred, including cyberattacks, geopolitical weaponization, and technological disruption, which revealed structural shortcomings in the SWIFT network. This article explores the vulnerabilities of the current system, highlights emerging alternatives, and examines how investors can respond to a shifting global payments landscape.
Structural Shortcomings and Security Vulnerabilities
SWIFT functions as a secure messaging platform rather than a settlement system, where it transmits payment instructions without moving funds directly. This separation introduces latency, higher costs, and inefficiencies, particularly in cross-border transactions where transfers can take up to multiple days to settle and include transaction fees.
A key concern is the responsibility for cybersecurity for intermediaries within the system. While SWIFT maintains the network infrastructure, the security of end-user systems is managed by individual member institutions. This model has created systemic vulnerabilities, as demonstrated by the 2016 Bangladesh Bank cyberattack. In that incident, attackers gained access to the bank’s SWIFT credentials and attempted to initiate nearly $1 billion in fraudulent transfers, successfully extracting $81 million. Although SWIFT itself was not compromised, the episode highlighted the risks of relying on uneven cybersecurity standards across a global network.
Additionally, SWIFT has become a mechanism for enforcing international sanctions, as evidenced by the exclusion of several Russian banks from the system in 2022. This has raised concerns about the political neutrality of the network and its susceptibility to external influence.
Emerging Alternatives to SWIFT
While the SWIFT framework remains the global standard for financial messaging, several countries and blocs have developed alternative payment systems to reduce their dependence on it as can be seen in Exhibit 1, which contains some of the largest and most competitive frameworks available today aside from the SWIFT framework. These systems offer distinct advantages and face their own challenges.
In response to strategic and operational considerations, certain countries have implemented independent financial messaging systems designed to serve as substitutes for the SWIFT network:
Russia’s SPFS (System for Transfer of Financial Messages): Launched in 2014, SPFS was developed by the Central Bank of Russia to ensure financial sovereignty in the face of sanctions. It is compatible with SWIFT’s messaging formats and supports both domestic and limited cross-border transfers, particularly with countries in the BRICS and EAEU blocs. Its main advantage is insulating Russian banks from Western sanctions. However, its international adoption is limited, and it is highly dependent on political alliances.
China’s CIPS (Cross-Border Interbank Payment System): CIPS, which was established in 2015, facilitates yuan-denominated payments globally. It provides both clearing and messaging services and is integrated with SWIFT to expand its reach. CIPS promotes the international use of the yuan and offers faster settlement times than traditional banking. A major drawback is its partial reliance on SWIFT and its global acceptance is tied to the yuan’s international usage.
Advancements in digital infrastructure and collaborative initiatives among nations are leading to the development of alternative models for cross-border payments:
BRICS Pay: Currently in development, this decentralized payment system aims to integrate the national systems of BRICS nations (like India’s UPI and Russia’s Mir) to facilitate intra-BRICS trade and local currency settlements. While it promotes de-dollarization and builds on existing digital infrastructure, it is still in its early stages and faces challenges with technical coordination and governance.
Cryptocurrency and Stablecoin Systems: Solutions like the Bitcoin Lightning Network and stablecoin-based systems (e.g., USDC, USDT) offer near-instant, low-cost global payments 24/7. They operate on blockchain networks and bypass traditional banking rails. However, they face regulatory uncertainty, potential volatility risks, and have limited adoption among traditional financial institutions.
Some countries are working to adapt their existing domestic payment platforms to facilitate international transactions and improve cross-border payment efficiency:
Brazil’s Pix: Launched in 2020, Pix has become the dominant method for digital transactions in Brazil, offering instant, 24/7 payments. A “Cross-Border Pix” feature is being developed to allow users to send Brazilian Real (BRL) to be received in another currency. While it has massive domestic adoption and promotes financial inclusion, its cross-border functionality is still a work in progress.
Singapore’s RTP Infrastructure: Built on FAST and PayNow, Singapore’s system allows instant domestic transfers and has been a pioneer in bilateral cross-border linkages (e.g., with Thailand, India, and Malaysia). While these links enable seamless transfers in local currencies, expanding to more countries requires complex regulatory alignment, and user awareness of these international features is still growing.
Exhibit 1
| System | Currency Scope | Real-Time | Global Reach | Political Independence | Key Features | Advantages | Disadvantages |
|---|---|---|---|---|---|---|---|
| SWIFT | Multi-currency | Partial | Very High | Low | Secure messaging for interbank transfers | Global standard, secure, widely adopted | Sanctions risk, slow settlement, high fees |
| SPFS | RUB, limited FX | No | Low | High | SWIFT-compatible messaging, domestic focus | Sanction-resilient, promotes sovereignty | Limited adoption, low liquidity |
| CIPS | CNY | Partial | Medium | Medium | Clearing and messaging for yuan payments | Supports yuan internationalization, faster than SWIFT | Still relies on SWIFT, limited currency use |
| BRICS Pay | Multi-currency | Planned | Low | High | Decentralized, QR-based, integrates national systems | De-dollarization, regional cooperation | Early stage, governance challenges |
| SEPA | EUR | Yes | Regional | Medium | Standardized euro payments across Europe | Fast, low-cost, regulated | Euro-only, not global |
| CHAPS | GBP | Yes | Low | Medium | High-value GBP payments via Bank of England | Real-time, secure, no limits | Domestic scope, high cost |
| Project Nexus | Multi-currency | Yes | Growing | High | Interlinks national RTP systems | Promotes interoperability, financial inclusion | Pilot phase, regulatory complexity |
| Lightspark | Multi-currency | Yes | Growing | High | Uses Bitcoin Lightning Network for fiat transfers | Fast, low-cost, 24/7 | Crypto volatility, regulatory uncertainty |
| Stablecoins | USD, others | Yes | Growing | Medium | Blockchain-based fiat-pegged tokens | Instant settlement, programmable | Regulatory risk, issuer trust |
| Brazil’s Pix | BRL | Yes | Planned | High | Instant payments, QR codes, Pix Keys | Mass adoption, financial inclusion | Fraud risk, domestic focus |
| Singapore’s RTP | SGD + partners | Yes | Growing | High | PayNow, FAST, cross-border links | Cross-border real-time payments, secure | Limited currency support, awareness |
Source: Multiple Sources
Investment Implications in a Changing Landscape
The growing awareness of systemic risk and geopolitical influence in global payment networks can have implications for capital allocation as well. Investors can consider assets and sectors that are more resilient to financial system disruptions or can benefit from innovation within the industry.
Gold: A longstanding store of value, gold continues to play a role in hedging monetary uncertainty and currency risk. Central banks globally have increased gold purchases as part of reserve diversification strategies.
Payment Infrastructure and Cybersecurity: Companies involved in secure cross-border payments, remittance technologies, and cybersecurity solutions can play a role in the development of more efficient systems and solutions. These sectors would be positioned to benefit from structural changes in global finance.
Bitcoin: While volatile, Bitcoin is increasingly considered by some institutional investors as a decentralized store of value. Its non-sovereign nature and transaction finality independent of traditional networks offer potential utility in scenarios where access to centralized financial infrastructure is restricted.
Financial Technology (Fintech): Fintech platforms that improve transaction speed, transparency, and cost-efficiency, particularly those operating in emerging markets, are positioned to capture growing demand for alternative payment rails. This includes mobile-first banking and international remittance platforms.
Conclusion
The limitations of the SWIFT network, ranging from security vulnerabilities to political exposure, underscore the need for modernized and resilient payment systems. As alternative infrastructures continue to develop, investors may find value in assets and sectors aligned with securing or hedging against monetary uncertainty on the one hand, and innovative developments in these systems on the other hand.
Contact:
Anirudh Kar, CFA
Investment Associate
anirudh@mef.bh
+973-1711 1700
Yusuf Ahmed
Sr. Investment Associate
yusuf@mef.bh
+973-1711 1700
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