The Nihon Keizai Shimbun reported as the front-page lead in its January 3 print edition that Society for Worldwide Interbank Financial Telecommunication (SWIFT) is preparing to build a system that enables instant settlement for small-value cross-border transfers. The article was also published in English by NIKKEI Asia. According to the report, 32 commercial banks from 17 countries are expected to participate.
As of the time of writing, no official announcement has been made by SWIFT, and no reports other than those by Nikkei have been confirmed.
Why Has This Initiative Emerged Now?
Nikkei reports that participating banks include Bank of America, Wells Fargo, BNP Paribas, and Société Générale. From Japan, Mizuho Bank is said to be the only institution participating from the outset.
Nikkei explains that the initiative is intended to counter fintech companies such as Wise. At the same time, PayPal is also widely used globally for payments and transfers among individuals and small businesses. While Wise was founded in 2011, PayPal dates back to 1998.
From SWIFT’s perspective, this means that fintech firms have taken the lead in the domain of small-value, instant payments and settlements.
Is SWIFT a Legacy System?
SWIFT is a global financial messaging network that connects more than 11,500 financial institutions worldwide. It was founded in 1973 and is headquartered in Belgium.
What is crucial to understand is that SWIFT itself does not move money. Its role is strictly to transmit payment instructions—who sends how much, from which bank to which bank—in a secure and standardized format.
This may give the impression that SWIFT is a legacy system. In reality, however, this perception is misleading. According to SWIFT’s official website, more than 75% of SWIFT payment messages reach the next financial institution within ten minutes. While this is slower than cryptocurrency transactions, it is sufficiently fast when considering that funds are transferred and settled in accounts at commercial banks using fiat currencies.
The real challenge lies in banking hours. For example, when it is daytime in Japan, it is typically nighttime in the continental United States. In such cases, even if a transfer is initiated from Japan to a U.S. bank account, the settlement process may be deferred until the next business day. This is precisely why an instant settlement mechanism is required.
SWIFT is effectively the only interbank messaging infrastructure that is widely used on a global scale and is deeply integrated with national financial regulations and sanctions regimes. As a result, it is unrealistic for emerging players such as PayPal or cryptocurrencies to fully replace SWIFT.
For this reason, there is a clear and substantial demand for SWIFT to develop an instant settlement mechanism.
