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Origins and development of SWIFT, 1973–2009

Author

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  • Scott, Susan V.
  • Zachariadis, Markos

Abstract

Research in this article traces the origins of a not-for-profit financial institution called the Society for Worldwide Interbank Financial Telecommunication (SWIFT). SWIFT is a core part of the financial services infrastructure and is widely regarded as the most secure trusted third party network in the world, serving 200 countries with over 8000 users. The analysis focuses on how the design and current state of SWIFT was influenced by its historical origins. In order to ensure widespread compatibility in a sector experiencing asynchronous technological development, legacy Telex specifications had to be accommodated in SWIFT's design. Over time, what began as a closed ‘society’ founded to reduce errors and increase efficiency in interbank payments grew into an industry cooperative supporting an enthusiastic community of practice and transformed into an unexpected network phenomenon. SWIFT achieved such success that it has been accused of being an installed base stifling innovation. In recent years, SWIFT has had to institute new categories of membership in an effort to counter concerns about its bank-dominated governance and it continues to search for ways to meet the requirements of key constituents in the financial supply chain.

Suggested Citation

  • Scott, Susan V. & Zachariadis, Markos, 2012. "Origins and development of SWIFT, 1973–2009," LSE Research Online Documents on Economics 46490, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:46490
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    File URL: http://eprints.lse.ac.uk/46490/
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    References listed on IDEAS

    as
    1. Jonathan Liebena & Tanai Khiaonarong, 2009. "Banking on Innovation," Contributions to Economics, Springer, number 978-3-7908-2333-2.
    2. Scott, Susan V. & Zachariadis, M., 2010. "A historical analysis of core financial services infrastructure: Society for Worldwide Interbank Financial Telecommunications (SWIFT)," LSE Research Online Documents on Economics 33886, London School of Economics and Political Science, LSE Library.
    3. Susan Leigh Star & Karen Ruhleder, 1996. "Steps Toward an Ecology of Infrastructure: Design and Access for Large Information Spaces," Information Systems Research, INFORMS, vol. 7(1), pages 111-134, March.
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    Cited by:

    1. Bernardo Bátiz-Lazo, 2017. "Between Novelty and Fashion: Risk Management and the Adoption of Computers in Retail Banking," Palgrave Studies in the History of Finance, in: Korinna Schönhärl (ed.), Decision Taking, Confidence and Risk Management in Banks from Early Modernity to the 20th Century, pages 189-207, Palgrave Macmillan.
    2. Scott, Susan V. & Van Reenen, John & Zachariadis, Markos, 2017. "The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services," Research Policy, Elsevier, vol. 46(5), pages 984-1004.

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    More about this item

    Keywords

    SWIFT; financial services; diffusion of innovations; networks; standards; payment systems; electronic funds transfer; ICT in banking;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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