SWIFT is an international organization founded by a group of banks that play with money. It defines a set of "jargon" in the financial industry and assigns a unique name to each participating institution. The financial transactions between these members can be fully explained by this set of jargon.
Another similar international organization is the International Air Transport Association (IATA), which was established by a group of airlines. It assigns a unique three-letter code to each airport (for example, Los Angeles is LAX and Hong Kong is HKG). Once the departure and destination codes of each flight are determined, there will be no problems with the routes and ticket sales will be standardized.
There is also ICANN, which manages Internet addresses. It defines the two-letter address of each country (for example, Japan is JP and the United Kingdom is UK). Every new Internet participant must apply for an address from it. In this way, emails on the Internet know which personal computer they should go to, and web page access has a destination. China's firewall "blocks" (kicks certain addresses out of the system) bad websites by messing with the addresses in this system.
The SWIFT guys assigned an 8-letter name BIC to every bank on earth that wanted to join. The first four letters are the bank name, such as HSBC, which is well known to everyone, and Citibank, which is CITI. The names of banks in non-English-speaking countries are a little more confusing, such as MSBC, which is Minsheng Bank, HXBC, which is Huaxia Bank, and CKLB, which is the famous Kunlun Bank. The last four addresses are the locations of the bank, such as BKCHCNBJ for Bank of China Beijing Branch, and CMBCCNBS for China Merchants Bank Shanghai Branch. There is an international standard ISO9362 that talks about this naming method.
In this way, no matter which country you are from, no matter what your native language is, no matter where you are on the earth, the description of money transfer from one bank to another is: the name of the issuing bank, the name of the receiving bank, the currency, and the amount. The currency is represented by three letters agreed in another international standard ISO 4217, such as USD, CHN, HKD. In Swift, everything is simple and clear.
If your bank does not do international business, cross-border or multi-currency operations, then this system has nothing to do with you. If your bank is very powerful and has branches in cities around the world, then you don't have to use this system. It is more convenient for you to transfer money within your own bank. This system is only useful to you if your bank's customers have international transaction needs.
When China was not yet in line with international standards, the Swift system was basically useless to us. Later, several large domestic banks obtained their own names according to Swift rules, and were able to join the international interbank transaction network. Other domestic banks, which did not have BIC names, had to rely on large domestic banks as transit stations to help their customers process international transactions. Now, most domestic banks have names that can be recognized by the Swift system. We also got a seat on the Swift board of directors.
The Swift system is headquartered in Europe. It can handle the Euro, a common European currency, and the US dollar, an international settlement currency. Later, currencies such as the Japanese yen, Canadian dollar, and Australian dollar were also able to circulate on it, and later, the RMB was also able to circulate on it. However, because the RMB is a restricted currency that cannot be freely circulated, the transaction volume on Swift is less than one percent of the total transaction volume. Even Chinese banks mostly trade in US dollars on Swift.
The so-called kicking a bank out of the Swift system means that the BIC code of a certain unlucky bank is no longer recognized under a certain currency. This is like when you want to book a flight ticket for a trip, you suddenly find that the three-letter code of the airport you want to go to is missing from the entire booking system. Of course, all the flights in and out of this airport cannot be found, and it is impossible to buy tickets.
By the way, SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. Up to now, SWIFT services cover almost all countries and regions, providing services to more than 10,000 financial institutions.
In essence, Swift is a group. Those who join the group first have a greater say. As more and more people join the group, the group becomes more and more convenient. Of course, kicking people out of the group can also become a punishment.
If you don't agree with this group, you can create one yourself in principle. The biggest challenge is how to attract more people to join. Especially those who are very successful in the original group are reluctant to change groups casually. This is the principle of "first move wins" and "winner takes all".
CN has also established a cross-border and cross-bank payment system, the English abbreviation is CIPS. The currency circulating in the entire system is not the US dollar but the RMB. We have also persuaded banks in some countries to use it. The biggest problem is that in international payments, the RMB is still regulated and is not a widely used currency.
