Electronic transfers in banks

Banks have been the traditional payment intermediaries for centuries. They maintain accounts for their customers, process payments, and provide other financial services. They also manage the relevant financial infrastructure. Currently, electronic bank transfers are done in the following way:

1.  An account holder orders a bank transfer from his or her bank account to another bank account.
2. The sending bank uses IBAN and BIC codes to direct the payment to its destination. IBAN stands for International Bank Account Number. It is an international system for identifying bank accounts to facilitate cross-border transactions. BIC stands for Business Identifier Code, which is also used for payment identification.
3. The sending bank transmits a message to the receiving bank via a secure communication network, called SWIFT. This stands for Society for Worldwide Interbank Financial Telecommunication. The message contains instructions to the receiving bank, to make the payment to the destination account.
4. The banks involved must hold reciprocal accounts with each other, or the payment must be routed through a corresponding bank, which is another intermediary holding accounts with both banks on the opposite sides of the transaction.
5. The actual transfer is not instantaneous; funds may take several hours, or even days, to move from the sender's account to the receiver's account.
6. All of the banks participating in the transfer get fees for the services provided, from the sender and the recipient.

This whole process can be summarized with the following diagram: