Could anyone explain to me how a wire transfer is implemented between banks?
Let's say you have two accounts at the same bank, and you want to transfer money between them. Since none of the cash leaves the banks, a transfer is very simple: subtract x amount in account1 and add it to account2. No physical money exchanged either - it's just numbers you see on the screen.
Now, the scenario is: you want to transfer money to another bank in US, or even more complex: internationally.
You have the SWIFT code of the bank you transfer the money to, and the account number of the recipient. The actual protocol details are probably not very interesting: maybe there's a direct dial into another bank's phone bank, and a message is sent over to deposit amount X into account Y.
What I am interested is: how does the actual cash gets transferred? How does the bank-sender liquidate some of its assets (and subtracts them from your account) and how does the bank-recipient obtain the transferred asset? What are the safeguards that control the process? I just don't understand at which point the ephemeral numbers on the screen get associated with actual money, which is then transferred, and then disassociated back, as your account-recipient gets credited, and the bank-recipient moves the received assets into its daily operations.
Thanks.
Let's say you have two accounts at the same bank, and you want to transfer money between them. Since none of the cash leaves the banks, a transfer is very simple: subtract x amount in account1 and add it to account2. No physical money exchanged either - it's just numbers you see on the screen.
Now, the scenario is: you want to transfer money to another bank in US, or even more complex: internationally.
You have the SWIFT code of the bank you transfer the money to, and the account number of the recipient. The actual protocol details are probably not very interesting: maybe there's a direct dial into another bank's phone bank, and a message is sent over to deposit amount X into account Y.
What I am interested is: how does the actual cash gets transferred? How does the bank-sender liquidate some of its assets (and subtracts them from your account) and how does the bank-recipient obtain the transferred asset? What are the safeguards that control the process? I just don't understand at which point the ephemeral numbers on the screen get associated with actual money, which is then transferred, and then disassociated back, as your account-recipient gets credited, and the bank-recipient moves the received assets into its daily operations.
Thanks.
