DUBLIN -- Putting an end to years of debate, the Society for Worldwide Interbank Financial Telecommunication announced this week that it is welcoming broker-dealers and investment managers to become members of the bank-owned payment messaging network.
The unanimous decision of Swift's board of directors last month reflected the adoption of a law in the United States that has broken down the barriers between banks and brokerages, Swift said, and a recognition that securities firms are the fastest-growing category of the network's users.
Securities companies have been able to use the network since 1992 but have been denied membership, which would entitle them to use certain additional messaging capabilities, to vote, and to buy shares. Swift said it will begin contacting investment managers and broker-dealers about their membership eligibility in June.
Leonard Schrank, Swift's chief executive officer, said "things are cooking" in securities. Such messages make up one-quarter of the network's estimated one billion annual transactions and generate about 40% of its revenues. So far this year, securities messages on the network have increased 80%.
"Financial modernization in the United States was clearly part of our consideration," Mr. Schrank said. "With Glass-Steagall fading and the Citi/Travelers merger, attitudes have changed, and we want as strong an organization as possible."
Richard Genin, executive vice president at Bank of New York, one of Swift's two U.S. directors, and chairman of its Securities Steering Council, said securities firms will generate the greatest portion of Swift's growth in the next 10 years. "To treat investment managers and broker-dealers as anything other than equal partners is a mistake," he said.
Discussion of securities firms' status within Swift has gone on for about three years, Mr. Genin said, and it intensified in the last year. "As financial firms all merge, different types of organizations now end up under the same umbrella," he said.
With securities firms now allowed in, Swift may be closer to accepting other nonbank members as well.
"I think the day is coming where Swift will have to seriously address opening up membership to corporations," Mr. Genin said, a move that would give companies direct access to information about their payment transactions without the need to go through banks. He stressed that his opinion does not necessarily reflect those of the eight bank representatives on Swift's U.S. Steering Committee.
Corporations are becoming increasingly adept at using the Internet, Mr. Genin said, and if Swift does not grant them entry, "they'll go around" banks, brokers, and investment managers. "The chances of this happening are greater now than ever before," he said.
Bankers, however, fear they would bring on the demise of their control over the payments network if they let in more nonbanks.
"It's like the card utilities and associations feeling that if they let in those who are not exactly the same, they will start the process of disintermediation," said Nick Viner, who heads the worldwide payment systems practice at the Boston Consulting Group in London. But "if someone wants to join," he said, "there's not a lot of mileage to be gained by keeping them out."
Mr. Schrank said that part of Swift's electronic commerce strategy is examining whether the network would be sustainable in the Internet economy if corporations were excluded as members.
"This decision is about the securities industry and on a parallel track the world of e-commerce," he said.