International wires are a bit of a mess. But there are alternatives to SWIFT.
Also, SWIFT is just a messaging protocol. The actual settlement is handled separately. This was Ripple’s original pitch, but it changed along the way.
If I want to send someone a few USD and I know their IBAN or SWIFT + name, address, what does my bank do? Is there a Visa/MC for wire transfer? (I know that SWIFT operates a network for banks, but then how do banks settle? Is the SWIFT message a legal claim?)
1. Your bank sends a secure message to the overseas bank through the SWIFT network (this is where the SWIFT number is used for routing the message) to the recipient's bank, detailing the transaction.
2. Through the SWIFT standard message format, the overseas bank validates whether the account exists in their bank. Some additional screening is done at this stage to detect fraud, money laundering, etc.
3. Your bank and the overseas bank have a predefined agreement on a correspondent account, i.e. a bank account in the US owned by the overseas bank to receive USD. If everything checks out, your bank wires the money via a domestic system like Fedwire to settle the transaction.
4. The overseas bank confirms that the money was wired to their US account, and then adjusts the recipient's balance accordingly.
Or have accounts with banks that have accounts overseas, yes. For example, Fidelity piggybacks on JPMorgan for a lot of its overseas transfers.
Is there a routing system between SWIFT members based on who has settlement (nostro/vostro) accounts between each other?