How international business payments work, and where the costs hide

What happens between "send" and "received" on a cross-border payment, and the four places a business loses money along the way.

When a company pays a supplier in another country, the money rarely travels in a straight line. Understanding the route explains both the delay and the cost.

The traditional route

Most international bank transfers travel over the SWIFT network. SWIFT does not move money. It carries payment instructions between banks. The money itself moves through accounts that banks hold with each other, known as correspondent accounts.

If your bank has no direct relationship with the supplier’s bank, the payment passes through one or more intermediary banks. Each one receives the instruction, runs its own checks, and passes it on.

That chain is why a transfer can take three to five business days, and why the amount that arrives is sometimes less than the amount sent.

Where the costs hide

There are four separate costs in a typical international wire. Only the first is usually visible.

The transfer fee. The flat charge your bank shows when you send the payment.
The exchange rate markup. Banks rarely convert at the market rate. The difference between the market rate and the rate you are given is a cost, and on larger amounts it is usually the biggest one.
Intermediary bank fees. Each bank in the chain may deduct a charge from the payment as it passes through.
Receiving bank fees. The supplier’s bank may charge to receive an international wire, which often comes back to you as a short payment on the invoice.

A simple way to measure the real cost

Compare two numbers:

what left your account, in your currency
what your supplier received, converted back at the market rate on that day

The gap between them is the true cost of the payment. Many finance teams are surprised when they run this check for the first time.

The local alternative

Most countries have domestic payment systems that are fast and cheap: SEPA in the euro area, ACH and Fedwire in the United States, Faster Payments in the United Kingdom, Pix in Brazil.

A payment that enters and leaves through local systems, instead of crossing borders bank by bank, avoids most of the chain. That is how modern payment providers shorten delivery from days to hours and remove the intermediary deductions.

What to ask any provider

What rate will I get, and how does it compare with the market rate right now?
What is the total cost, including fees I will not see on my statement?
How much will the recipient receive, exactly?
When will it arrive?