Banks forced to upgrade communications

The global banking messaging service, Swift, has announced a compulsory migration to IP that will force every bank in the region to upgrade at least part of its IT infrastructure.

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By  Neil Denslow Published  August 28, 2002

|~||~||~|The global banking messaging service, Swift, has announced a compulsory migration to IP that will force every bank in the region to upgrade at least part of its IT infrastructure.

For most banks, the switch from the current X.25 protocol to IP will mainly be a software upgrade as they already use IP for other systems. However, all banks will have to reassess their security arrangements for connecting to the Swift service.

Traditionally, Swift has run its core FIN store-and-forward messaging services, which is used by every bank in the world, over X.25, but this will be discontinued by the end of 2004 and replaced with the IP service, SWIFTNet FIN.

“The change has been mandated by Swift, and it’s a technology change. X.25 is really becoming a legacy protocol and IP is the protocol of the future. It really is just... to move away from X.25 which is becoming more costly and difficult to support,” explains Geoff Land, regional manager for Eastern Networks, Swift’s partner for most of the region.

The move to IP will greatly boost the bandwidth available to users of the system.

“With X.25 as the main method of communication, bandwidth is limited as you can only use copper wires. IP takes it up to a different level, you’ve got fibre optics and your bandwidth increases dramatically,” says Sajid Gani, business implementation manager, Eastern Networks.

The increased bandwidth will allow Swift to offer additional services along side its core messaging service. These will include the transmission of large files between banks and the formation of closed user groups, which will let banks inquire each others’ accounts or make position inquiries at central banks.

Aside from increased data flow, the IP system will also be cheaper and easier to run in the long term than X.25. Gani says the older system is suffering from a skills shortage with most network consultants now only familiar with IP. The telcos are also phasing out X.25 services.

“In a lot of countries, the cost attached to having an X.25 line is a lot higher than that attached to an IP line. A lot of telecom providers are [also] starting to remove support for X.25, as it’s become very antiquated,” he adds.

SWIFTNet FIN will run as a virtual private network (VPN) and form one layer inside the IP pipe running into the bank. Some banks will therefore have to invest in new routers or firewalls, but for most banks the switch will only involve a software upgrade, as they already have the infrastructure needed for the system in place.
“We don’t see a major hardware migration from the internal platform perspective,” says Land.

However, the transition will force banks to reconsider how they connect to Swift, as it will no longer be a truly private network. Running over IP means Swift needs to be considered within wider network security, something it was previously isolated from.

Banks will therefore be faced with a range of possible connections and security options, such as an M-CPE (Managed Customer Premises Equiment) or dial-up router and a single firewall, or an M-CPE with a de-militarised zone (DMZ), depending on their usage and resilience requirements.

For this reason, Swift and Eastern Networks are strongly advising banks to form an internal team, including the network administrator, security administrator and internal auditor, to oversee the transition and ensure that security is properly considered.

“Each of these wants security in the bank to be implemented in a very specific way, so it’s very important to get these people on board right from the start and make the correct decisions upfront,” argues Gani.

To facilitate the transition, Swift has drawn up a series of national windows in which it expects most banks to make the upgrade. Egypt and Lebanon lead the way in the region, with windows assigned in April of next year. Banks are able to make the switch outside of these timeframes, but Swift strongly recommends that they don’t.

“The priority will be to get the countries migrated in the windows that have been assigned to them and all the support services will be focused there,” explains Land.

“What Swift is saying is that if you move during that window you’ve
got their 100% attention, which is good as it means you know there is a time when you are going to get it,” he adds.

Land believes that most banks will stick to the windows, the only exceptions being ones that want to make the switch as part of other projects.

“There is no real drive to get outside of the window for any other reason that it falls in with their personal convenience,” he notes.
No matter when the switch is made, the banks will make a clean break and move all of their traffic in one go. However, Swift recommends that the X.25 connection be maintained for the first month, but only as a back up.

“Just give it a month to make sure there aren’t any problems, then get rid of it [X.25],” Gani advises.

To prepare banks for the transition, Swift and Eastern Networks are running a series of road shows in the region to explain how and why the switch is being made. Furthermore, Eastern Networks has also created a two-step migration care package to help banks through the process.

“There’s no doubt that the efforts of [Eastern Networks] and Swift have really been a catalyst for the banks to think through their strategy and what they are doing to move forward,” contends Land.||**||

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