Have you ever thought how you can now easily do financial transactions between countries? This article will provide information about the history of financial transaction platform (include: Telex, SWIFT, and Kvantor)
If you are currently in New York you can easily send funds to your colleagues who are in Berlin or other parts of the world.
The trick is quite simple, you only need to go to the bank (or use the method provided by the bank either through ATMs, internet banking, or mobile banking) and prepare the bank account of the recipient of the funds.
Usually, you need to provide the code of each bank for the purpose of sending your transaction or commonly known as SWIFT Code.
For those of you who do not know, SWIFT is a network platform for various financial institutions, consisting of Banks, Brokers, Securities Dealers, Exchanges, Clearing Houses, and various other financial institutions.
Most people often mistakenly think SWIFT is a bank technology. SWIFT is an extension of the Society for Worldwide Interbank Financial Telecommunications.
From the name, maybe you will understand that SWIFT is a communication platform for financial transactions in which there are many members gather to make a financial transaction.
If you can equate with other things, SWIFT is similar to Visa, Mastercard, American Express, or UnionPay networks in terms of credit card networks.
Maybe because SWIFT is for financial institutions only, so that it may be less familiar to your ears.
Technology in Financial Transactions
SWIFT is a more advanced system from the previous system, namely Telegraphic Transfer (TT) or also commonly known as Telex. Telex was popular before the 1990s.
In the past, if there was an interbank transaction, the bank would contact the recipient bank using a cable network. This causes each bank to tie a partnership in the context of the need for interbank transactions.
Telex is considered a slow system. In addition, the absence of standards that causes delivery often takes longer because each bank has different standards.
Until the development of technology and the existence of internet networks, a new technology emerged, SWIFT. This technology is a network that initially consisted of around 200 member banks. Each member has a unique membership code commonly referred to as swift code.
With this new technology, it is clear that the increase in transaction speed is also increasingly significant. This is because banks do not need to make direct contact with the recipient bank, but only need to contact Swift as an intermediary for the transaction to proceed to the destination bank.
The growing age and technology, this function has used a system that works automatically.
Unresolved Issues and Current Technology Development
Even though SWIFT is currently using a lot, this technology is not without problems. If analyzed there are 3 main problems, namely regarding Limited & Demanding, Privacy & Security, and Monopoly.
To enter the swift network, of course, the fees charged for each transaction are needed. And unfortunately, at this time the fees charged have not been able to use the nominal currency of each country.
Of course, this is very unfortunate considering that for some countries fluctuations in the exchange rate against the dollar are quite high. In addition to making transactions, a lot of documents are needed.
This often makes new transactions complete within a few days. Even less than 2 weeks.
Another problem that arises is the matter of privacy where the transactions carried out can be known by other parties besides buyers and sellers. This is because many intermediaries are involved.
The intermediary here is not intangible in the form of someone who is like a broker, but the existing transaction will pass through several institutions, such as a buyer, bank from the buyer, intermediary, bank from the seller, and the last is the seller.
In addition to causing a long process, this also makes the potential for data leakage to increase.
The last problem is a monopolization. Currently SWIFT seems to be a platform without competitors.
Monopolization always makes the same problem, the fee will be charged high. Each transaction can be charged up to 10-20 USD. Not a small amount of remembering every day can reach thousands to millions of transactions.
Blockchain Technology and How It Is an Update from an existing system
For those of you who don’t know, blockchain is a decentralized system, where blockchain data servers don’t only exist in one place but in several places around the world.
If suddenly server shut down or under attack, another server will be active immediately and no data will be lost.
This makes you seem to have a backup spread in several parts of the world and will automatically update without having to manually update it.
Another plus is that blockchain occurs directly without intermediaries. Several computers who available in the network will complete the process randomly and anonymously.
And the good news is that there is the Kvantor (https://kvantor.com), a company where they use this technology to update what SWIFT has done in completing a financial transaction.
Obviously, there will be several main advantages if using this system include:
- Faster and More Compact
Because blockchain is without intermediaries, transactions will occur directly between the sender and recipient, or the seller and buyer
The fees charged by Kvantor are 100,000 times cheaper than those charged by SWIFT so far. This is because blockchain is a network that consists of many computers around the world. With these very abundant resources, blockchain can reduce the cost. Below is the price comparison between SWIFT and Kvantor
- Privacy & Security
One of the main features of blockchain is that it is anonymous, where you don’t need to feel that your transaction will be tracked by others. In terms of security, blockchain is also safer because it has a decentralized server.
If you have an interest in Kvantor, you can read full explanation, comparison, advantages and investment in the link below: