23 September 2014

New Research Paper – The Global Network of Payment Flows

Work has now been completed on a SWIFT Institute research grant looking at the global network of payment flows, based on analysis of the SWIFT network and MT103 country-to-country message flows.

You can download the paper here.

The Global Network of Payment Flows

Samantha Cook
Kimmo Soramäki

SWIFT provides a network for financial institutions to send and receive information about financial transactions in the form of secure standardised messages. Here, the authors analyse the global network created by flows of a particular type of SWIFT message, the MT103, which represents a single customer credit transfer.  The MT103 is the most commonly-sent SWIFT message type and therefore may be a useful measure of global economic activity.

The authors find that certain aspects of the MT103 networks are notably affected by global political and economic events; for example, there is a large reduction in links beginning in 2007 likely due to increased financial regulation, and there is a lasting effect of the financial crisis of 2007-2009 demonstrated by a reduction in the number of messages sent.  At the same time, however, the underlying structure of the MT103 network remains quite stable during the period of study.

The networks are well-described by a tiered model also seen in many payment system networks, with a stable core of densely connected countries.  In addition, the networks exhibit a strong community structure, the largest communities roughly corresponding to Europe, the former Soviet Union, and the United States plus much of Latin American and Asia.  The United States is consistently the most important country in the networks according to various metrics.  The empirical analysis conducted here not only increases understanding of the SWIFT MT103 network in particular, but also may lead to improved modeling of financial systems in general.

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