Banks’ transition to SWIFTNet may lead to SWIFT’s role being called into question as it could become just another software vendor competing with others. It will have to change its culture quickly if it wants to survive, says Chris Skinner.

The introduction of SWIFTNet appears to be feeding debate among investment communities. The debate could lead to some of them questioning SWIFT’s role in the future and whether it is still fit for its purpose in a world of open standards and communications.

SWIFTNet operates over internet standard communications with a software-coded security certificate known as Public Key Infrastructure, rather than the current X.25 networking, which is hardware based. Most banks will make the transition to SWIFTNet by the end of 2004, at which point support for the old hardware network will be switched off.

The logic of this transition is that it meets the market demands for real-time operations and uses lower cost internet infrastructures. The flaw in the argument is that if SWIFT moves into the world of software, then what does it become? A software vendor?

SWIFT has spent the past three decades as an industry body that dictates to the markets what they should do and how they should do it. It is unaccustomed to being responsive to customers. If it has to compete on service and support against software vendors, it will have to change its culture. Whether it will recognise this need is questionable and, as a result, several banks are wondering whether there are alternatives to SWIFT. At the moment, there are not.

The reason that SWIFT is the standard is that it was created to replace hardware (the telex) with hardware (computer messaging). It was backed by banking institutions worldwide, which were enthusiastic to use it. There was no competition. However, when settlements are implemented in a pure software network, other players can enter the market space. Just as the move from branch to online removed a key competitive barrier to entry for banking, so the move from X.25 networking to IP networking removes the barriers to competition with SWIFT.

SWIFT will still provide messaging standardisation but the infrastructure to communicate can now be provided by SWIFT or competing software firms. The latter understand customers’ requirements, the needs of service, relationship management and sales culture. SWIFT will need to build this sort of culture if it wants to maintain its industry position. If not, it may become a victim of its own success: if it is too slow to change then, as it forces everyone onto SWIFTNet, it will become surplus to requirements.

Chris Skinner is founder of Shaping Tomorrow and chief executive of Balatro Ltd. Find out more at or e-mail Chris at


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