Yesterday, the Central Bank of Iran announced that a dozen Iranian banks were re-connected to SWIFT (Society for Worldwide Interbank Financial Telecommunication), the most widely used payment messenger service for international interbank messaging. This includes some of Iran’s major state-owned banks – such as Bank Melli, Bank Sepah, and Post Bank of Iran – that had been cut off from using the SWIFT payment messaging service since March 2012.

More than a few people regard this move as a critical one. In their view, Iran’s isolation from the global financial system was in large part due to its inability to utilize payment messaging services with which most global financial institutions conduct business. Being reconnected to SWIFT should thus herald Iran’s re-accession to the global financial system and make cross-border payments much easier in the future.

This view is mistaken, however. Despite the significance which some attach to Iran’s reconnection to SWIFT, the fact is that lots of Iranian financial institutions had access to the payment messaging service during the worst of the sanctions years. (Only Iranian banks subject to an EU asset freeze were cut off from using the SWIFT payment messaging service.)  That, however, didn’t make conducting cross-border financial transactions any easier for those Iranian banks.

That’s because the real source of the problem for Iran’s banks is the (lack of) willingness on the part of global financial institutions to (re-)engage with them. Remember that the SWIFT payment messaging service is useful only to the extent that there is an architecture in place in which transactions can be effectuated (i.e., correspondent banking relationships between Iranian banks and foreign financial institutions). Absent such correspondent relations, an interbank payment messaging service lacks its greatest utility.

Those Iranian banks that remained connected to SWIFT ran into this problem during the sanctions era. They could utilize SWIFT to issue payment messages to other banks, but those banks often either suspended or closed down their correspondent banking relations with Iranian banks in light of the substantial compliance and reputational costs of maintaining such relations. Being connected to SWIFT meant little for Iranian banks under conditions such as these. The big problem was that global financial institutions were shunning Iran’s banks en masse for fear of being seen doing business with Iran.

The big question now, then, is whether Iran’s banks will be able to consummate correspondent banking relations with global financial institutions in the post-Implementation Day era in order to properly utilize the renewed access some now have to SWIFT’s payment messaging services. My best guess is that second- and third-tier European financial institutions will take an incremental approach towards Iranian banks, approaching them with interest but with caution as well. Some will be quick to resume correspondent relations with certain Iranian banks, particularly those that never lost access to SWIFT, while others will take a wait-and-see approach to be determined by the potential benefit of transacting with Iran or Iran-related parties. First-tier European financial institutions will, however, be much more hesitant to re-engage their Iranian counterparts and will largely sit on the sidelines for the foreseeable future.

The truth of the matter is that access to SWIFT will not deliver the goods to Iran, so long as Iran has no one to deliver the goods to. Right now, Iran’s banks remain largely disconnected from their foreign counterparts and the pace will be a measured one at which they re-connect more broadly to the global financial system.