Why does SWIFT messages cost money?

#1

Post by JoelJacobson » Thu, Jun 26, 2014, 10:42 AM UTC

The SWIFT network is essentially the same thing as the Internet. It allows you to send messages from a BIC to another BIC. The BICs are like IP-addresses.

But sending messages over the SWIFT network is extremely expensive, a million times as expensive as The Internet. Why?

I cannot see why banks and financial institutions insist on using SWIFT, when they might as well use the Internet, and use public-key cryptography to verify and proove the validity of exchange messages.

It's just plain stupid.

Re: Why does SWIFT messages cost money?

#2

Post by munimkazia » Thu, Jun 26, 2014, 11:59 AM UTC

A lot of the technology that is used in financial network is there due to legacy/stability reasons. It is important to keep this in mind when talking about these types of industries.

Re: Why does SWIFT messages cost money?

#3

Post by fuj » Thu, Jun 26, 2014, 12:33 PM UTC

> It's just plain stupid

Typical HN "hacker" who has no idea how the real world works.

I also cannot see why wouldn't ALL banks in the WORLD change their established and heavily tested communications protocol that works, with another protocol. I'm also sure that change would cost a few bucks only, so.. why don't they do it?!

Re: Why does SWIFT messages cost money?

#4

Post by pkinsky » Thu, Jun 26, 2014, 3:08 PM UTC

Because if SWIFT were replaced with a decentralized system the US wouldn't be able to exert control via embargo.

(an example: http://www.ianwelsh.net/have-sanction-threats-brought-russia...)

Re: Why does SWIFT messages cost money?

#5

Post by JoelJacobson » Fri, Jun 27, 2014, 6:08 AM UTC

fuj wrote: post #3

> It's just plain stupid Typical HN "hacker" who has no idea how the real world works. I also cannot see why wouldn't ALL banks in the WORLD change their established and heavily tested communications protocol that works, with another protocol. I'm also sure that change would cost a few bucks only, so.. why don't they do it?!

I'm not suggesting they would change the protocol, the can with benefit continue to use MT-files, but the communication _channel_ could easily be replaced with The Internet (which is quite heavily tested), instead of the SWIFT network.

Re: Why does SWIFT messages cost money?

#6

Post by mamaki » Fri, Jun 27, 2014, 8:37 AM UTC

Not as much stupid as opportunistic and complacent/lazy... Why would a financial institution invest on something that would bring smaller profit margins than keeping everything as is ? Making money has a much higher priority than providing optimal customer service and as such until competition forces said institutions to adapt they have no incentive to change to a less profitable model...

Re: Why does SWIFT messages cost money?

#7

Post by JoelJacobson » Fri, Jun 27, 2014, 6:06 PM UTC

mamaki wrote: post #6

Not as much stupid as opportunistic and complacent/lazy... Why would a financial institution invest on something that would bring smaller profit margins than keeping everything as is ? Making money has a much higher priority than providing optimal customer service and as such until competition forces said institutions to adapt they have no incentive to change to a less profitable model...

Actually, the SWIFT fees is a big deal for many banks.