Is SWIFT the next BBM?

BBM, formerly known as BlackBerry Messenger, was the first mobile messaging service to reach a critical mass of users, and reportedly was signing up half a million users an hour when the texting service was introduced to non-BlackBerry users in 2013.

Then last year, BBM Consumer - a large segment of the service - shut down.

What led to the rapid demise of such a ubiquitous brand and service? Competition, largely from Apple and Android devices and their embedded text messaging services, as well as WhatsApp, Skype, Facebook Messenger...and the list goes on.

While the broad explanation is that competition breeds innovation and only the strong survive, there are some specific reasons why BBM rapidly started losing its user base.

1. The competition provided additional value, focusing not only on the key service of email/texting, but on a package of services which included email/texting. The App store, high resolution camera, screen size, phone specs, etc.

2. Cross platform texting apps gained a critical mass before BBM could figure out the importance of that concept.

3. For text messaging - security became a commodity. The popularity of BBM was never about the love of BBM or security, but the love of texting. Security is obviously important, but at some point it is just expected. Once security standards are defined, these standards can be applied to any text messaging service, and can be adopted by any texting app. Commercial texting apps at some point might effectively be no longer differentiated at all by level of security if standards are defined and adopted globally, and security is demanded by users as privacy becomes more top of mind than ever.

BBM's demise was indeed swift, and one institution that should heed this case study...is SWIFT.

As described on Wikipedia, SWIFT is "a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment." The 'moat' that SWIFT has been able to dig is one dependent on legacy infrastructure and the bureaucratic lethargy of large risk-averse financial institutions and central banks. It is not easy, for example, to re-structure the back-office of financial institutions around the world that are designed to handle straight-through-processing of SWIFT messages.

But SWIFT, as a single communications provider, and thus single point of failure, has already shown weaknesses. The Bangladesh incident (though not SWIFT's fault) raised concerns around the world that international reliance on a single messaging solution/design for payments messaging is perhaps not the greatest risk management idea. And while financial institutions indeed exhibit bureaucratic lethargy, they are also unceasingly focused on managing risk - and at some point the benefits from a risk perspective of using SWIFT may be outweighed by the risk of depending on SWIFT, not only for the messaging solution, but for defining and managing the security standards around the solution. There is no doubt that financial institutions around the world are considering payment message contingencies and ways to reduce dependency on SWIFT for transmitting payment messages. And still other countries are looking to drop SWIFT altogether, through for less noble reasons.

SWIFT has deep pockets and a stranglehold on the payments messaging world - not unlike a cash-rich BlackBerry in the texting and cell phone world a few short years ago. But when the standardization of payment messaging security is mature, with fin techs continuing to drive innovation in finance and payments, and given the never ending institutional appetite to reduce risk - change will inevitably come to payments messaging. And when it does - it will come swiftly.