Quick answer: SWIFT is a bank-owned cooperative that carries the standardized messages banks use to move money across borders. It does not hold or settle funds itself; it tells the parties what to pay and to whom. Because almost every international transfer touches this messaging layer, governments can use access to it as a tool of financial sanctions, and the industry is now rebuilding the standard behind it (ISO 20022) to carry richer data.
Updated 07/17/2026. By Jake Claver. Educational content, not investment advice.
When people picture an international payment, they imagine money flying from one account to another. What actually travels first is a message. A bank in one country sends a structured instruction to a bank in another, and that instruction has to be legible, verifiable, and trusted on both ends. The dominant carrier for those instructions is SWIFT, the Society for Worldwide Interbank Financial Telecommunication.
The clearest primary source on how this works is a Congressional Research Service report, International Financial Messaging Systems (R46843), published in July 2021 (full PDF here). Much of the factual grounding below comes from that report.
What SWIFT actually is (and is not)
SWIFT was founded in 1973 and is a cooperative headquartered in Belgium. Per the CRS report, it is owned by more than 2,400 member financial institutions and governed by an elected board of 25 directors, with oversight from the National Bank of Belgium alongside the G-10 central banks. It connects financial institutions across roughly 200 countries.
The important distinction: SWIFT is a messaging service, not a settlement system. It moves the instruction that says a payment should happen. It does not clear or settle the money the way a domestic system like the Federal Reserve’s Fedwire does. A single SWIFT message carries the details a receiving bank needs to verify a transaction before it settles: sender, recipient, transaction type, and amount.
The scale is large. The CRS report notes SWIFT carried about 8.4 billion messages in 2019, an average of roughly 33.5 million per day, up from 3.8 billion in 2009. Industry figures in 2025 put the network at more than 11,000 connected institutions.
The language of the message: ISO 20022
A message is only useful if both banks read it the same way. That shared grammar comes from the International Organization for Standardization, which sets the codes and formats banks use to structure payment data. The current standard for financial messaging is ISO 20022, and its rollout is one of the biggest changes to cross-border payments in decades.
SWIFT’s older MT message types (the MT103 for a customer credit transfer, the MT202 for a bank-to-bank transfer) are being retired in favor of richer ISO 20022 MX equivalents. The coexistence period, during which both formats were allowed on the network, ended on November 22, 2025; after that date cross-border payment instructions on SWIFT’s FIN network must be ISO 20022. A further deadline in November 2026 phases out unstructured address data in favor of structured or hybrid formats.
Why the industry cares: the older format packed limited, loosely structured data into each message. ISO 20022 carries structured fields for parties, purpose, and references, which improves automation, screening, and reconciliation. Better-structured data is also easier to check against sanctions and anti-money-laundering rules, which brings us to the second half of this story.
How messaging becomes a sanctions tool
Because nearly every cross-border payment touches a shared messaging layer, access to that layer is leverage. If an institution cannot send or receive standardized messages that other banks trust, it is effectively cut out of the mainstream payment system even if it is otherwise solvent.
The CRS report gives a concrete example. Congress authorized sanctions targeting international messaging systems unless they removed designated Iranian financial institutions from their networks, and SWIFT removed the designated Iranian entities. In the United States, financial sanctions are administered by the Treasury’s Office of Foreign Assets Control (OFAC), which maintains the lists of blocked persons, entities, and jurisdictions that banks must screen every payment against.
This is educational context on how the mechanism works, not a comment on any specific current designation. The general point stands on its own: the payment rail and the enforcement rail run through the same pipes.
The alternatives that sanctions pressure created
When access to a shared network becomes a policy lever, some governments build their own. The CRS report identifies two named alternatives:
- CIPS, China’s Cross-Border Interbank Payment System, a government-developed alternative for handling cross-border transactions.
- SPFS, Russia’s System for Transfer of Financial Messages, which operates on similar messaging principles.
These systems are far smaller than SWIFT and do not replicate its global reach, but their existence shows why messaging infrastructure is treated as strategic. The report also notes that financial-technology and private firms are building blockchain-based cross-border payment networks that claim advantages in speed, cost, and transparency over legacy messaging.
From the source
The screenshots below are captured directly from the underlying research so the claims here can be traced to their origin.
Where tokenization enters the picture
The current model separates three jobs: messaging (SWIFT), clearing, and settlement (domestic systems and correspondent banks). Each handoff adds time, cost, and risk. The Bank for International Settlements has argued for collapsing those layers. In its 2023 annual report chapter on the future monetary system, the BIS describes a “unified ledger” that would combine messaging, clearing, and settlement onto a single programmable platform, enabling what it calls atomic settlement, where the two sides of a payment complete at the same instant instead of days apart.
That is a design proposal, not a deployed system. It is worth understanding because it explains why so much attention is going toward tokenized deposits, wholesale central bank digital currencies, and settlement assets: the friction in cross-border payments is not an accident, it is the cost of stitching together separate networks that were never built to talk to each other in real time.
Why this matters
For a business or an individual sending money across borders, the practical stakes are speed, cost, and access. Payments route through correspondent banks and multiple messaging hops, which is why an international transfer can take days and carry fees that are hard to see up front. The ISO 20022 migration is meant to reduce errors and manual review over time. Sanctions screening, meanwhile, is a legal requirement that every regulated institution in the chain must satisfy, which is part of why compliance checks add friction.
Understanding that payments are messages first, and money second, also clarifies the technology debate. Networks that promise faster settlement are really promising to shorten or merge the messaging, clearing, and settlement steps. Whether any particular network delivers on that is a separate question from whether the underlying idea is sound.
Common questions
Is SWIFT a bank or does it hold my money?
No. SWIFT is a member-owned cooperative that carries payment messages between financial institutions. It does not hold accounts, clear, or settle funds. The actual movement of money happens through banks and domestic settlement systems; SWIFT transmits the standardized instruction that tells them what to do.
What is ISO 20022 and why did banks switch to it?
ISO 20022 is the international standard for structuring financial messages. Banks migrated to it because it carries richer, more structured data than the older MT format, which improves automation, reconciliation, and compliance screening. On SWIFT, the coexistence period for legacy MT payment messages ended on November 22, 2025.
How are sanctions connected to payment messaging?
Because most cross-border payments pass through a shared messaging network, access to that network is a point of control. Governments can require messaging systems to exclude designated institutions, and banks must screen every payment against sanctions lists such as those maintained by the U.S. Treasury’s OFAC. The payment rail and the enforcement rail run through the same infrastructure.
What are CIPS and SPFS?
CIPS is China’s Cross-Border Interbank Payment System and SPFS is Russia’s System for Transfer of Financial Messages. Both are government-developed alternatives to SWIFT-style messaging. They are much smaller than SWIFT and do not match its global reach, but they exist in part because access to shared messaging infrastructure can be restricted.
Could tokenization replace SWIFT?
Not today. The BIS has proposed a “unified ledger” that would merge messaging, clearing, and settlement onto one programmable platform with near-instant settlement. That is a research blueprint, not a live replacement. It explains the direction of a lot of current experimentation without guaranteeing any specific outcome.
This content is educational only. It is not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
