International payments systems: How global money transfers work

Key takeaways

• International payment systems enable cross-border money transfers through networks of banks, intermediaries, and clearing systems, though traditional correspondent banking can add 1-3 days and £15-£50 in fees per transaction.

• Modern payment systems using local rails and real-time networks are reducing settlement times from 3-5 days to same-day or instant, whilst eliminating intermediary fees that erode transfer value.

• Airwallex connects to both international and local payment systems across 200+ countries, enabling businesses to send local payments without correspondent banking delays or per-transaction fees.

A single international payment through traditional banking can pass through up to four intermediary banks before reaching its destination. Each intermediary adds fees (typically £10-£25), extends processing time by 1-2 days, and reduces transparency about where your money actually is. For a business sending £50,000 to a supplier in Singapore, this could mean £75 in hidden intermediary fees and a 5-day wait—assuming nothing goes wrong.

International payment systems are the infrastructure enabling money to move across borders, but not all systems are created equal. Understanding how they work, what they cost, and which alternatives exist helps businesses move money faster, cheaper, and more reliably.

This guide explains how international payments systems function, the challenges they present, and how modern platforms are transforming cross-border money movement.

What is an international payments system?

An international payments system is the infrastructure enabling money transfers between countries, banks, and financial institutions globally. These systems provide the rails, messaging standards, and settlement mechanisms that allow businesses and individuals to send and receive payments across borders.

Unlike domestic payment systems that process transfers within a single country, international systems must navigate multiple currencies, regulatory frameworks, banking networks, and legal jurisdictions. They coordinate between sending and receiving banks, handle currency conversion, ensure compliance with anti-money laundering regulations, and settle funds across different financial systems.

The most recognisable international payment system is SWIFT (Society for Worldwide Interbank Financial Telecommunication), which connects over 11,000 financial institutions across 200+ countries. However, SWIFT is a messaging system rather than a settlement system—it transmits payment instructions between banks but doesn't actually move the money.

Other international payment systems include:

• SEPA (Single Euro Payments Area) for euro-denominated transfers across Europe 

• Bilateral correspondent banking relationships between individual banks 

• Modern API-driven payment platforms connecting directly to local payment rails 

• Regional clearing systems specific to geographic areas or currency zones

How international money transfers work

International money transfers involve a coordinated process across multiple institutions and systems. Understanding this flow reveals why cross-border payments can be complex and costly.

Step 1: Payment initiation

The process begins when a sender initiates a payment through their bank or payment platform, providing the recipient's details including bank account number, bank identifier codes (BIC/SWIFT codes), and payment amount.

The sending bank verifies the instruction, checks for compliance with regulations, and debits the sender's account.

Step 2: Message transmission

The payment instruction travels through the SWIFT network or alternative messaging system to the receiving bank.

If the sending and receiving banks don't have a direct relationship, the payment routes through one or more correspondent banks—intermediary institutions maintaining accounts with both parties.

Step 3: Correspondent banking chain

Each intermediary bank in the chain processes the payment instruction, performs compliance checks, deducts fees, and forwards the instruction to the next bank in the chain.

This correspondent banking process adds time, cost, and complexity to international transfers. A payment from the UK to Thailand might route through London → New York → Singapore → Bangkok, with each stop adding delays and fees.

Step 4: Currency conversion

Currency conversion occurs either at the sending bank, an intermediary, or the receiving bank, depending on the payment route and currencies involved.

Each institution applying its own exchange rate markup adds to the total cost. The lack of transparency means senders often don't know the final exchange rate until the payment completes.

Step 5: Final settlement

The receiving bank credits the recipient's account once all intermediaries have processed the payment and funds have settled through the banking system.

Settlement times vary from same-day to 5+ business days depending on the currencies, countries, and systems involved.

→ Discover how Airwallex simplifies international payments

Types of international payments systems

Correspondent banking networks

The traditional method for international payments, correspondent banking involves banks maintaining accounts with each other to facilitate cross-border transfers. When banks don't have direct relationships, payments chain through multiple intermediaries, each adding fees and processing time.

International wire transfer systems

SWIFT remains the dominant messaging standard for international wires, transmitting payment instructions between over 11,000 institutions. However, SWIFT only handles messaging—actual settlement occurs through correspondent banking relationships or local clearing systems.

Regional clearing systems

Systems like SEPA enable faster, cheaper payments within specific geographic regions. SEPA processes euro-denominated transfers across 36 European countries with standardised fees and 1-day settlement, bypassing traditional correspondent banking for intra-European payments.

API-driven payment platforms

Modern payment platforms connect directly to local payment systems across multiple countries, enabling businesses to send "local" payments internationally. These systems reduce intermediaries, improve speed, and enhance transparency compared to traditional correspondent banking.

Understanding which transfer method works best depends on your specific corridors, currencies, and requirements.

Common international payment methods

International payment systems provide the infrastructure, but businesses use various methods to actually move money:

• Bank transfers and wires – The most common method for B2B international payments, using SWIFT messaging and correspondent banking networks for global reach with higher fees and slower settlement

• Card-based international payments – Enable businesses to pay suppliers using corporate cards, offering convenience but typically incurring 1.5-3% processing fees

• Digital wallets and alternative payment methods – Services like PayPal provide convenience for smaller transactions but often charge higher fees for international transfers and currency conversion

• Account-to-account (A2A) cross-border payments – Growing category where platforms facilitate direct bank-to-bank transfers using local payment rails, reducing intermediaries for faster, cheaper transfers

For businesses evaluating payment methods, understanding the relationship between payment gateways and underlying payment systems helps optimise both acceptance and payout processes.

→ See how Airwallex enables multi-method international payments

Key challenges of international payments in 2026

Despite technological advances, international payments remain more complex, expensive, and opaque than domestic transfers.

1. Slow settlement times

Whilst domestic UK payments often settle within hours via Faster Payments, international transfers commonly take 3-5 business days due to correspondent banking chains, timezone differences, and batch processing schedules.

2. High and opaque fees

Sending banks charge origination fees (£15-£50 typically), intermediary banks deduct handling fees (£10-£25 each), and receiving banks may charge beneficiary fees. Total costs often remain unknown until the recipient confirms how much actually arrived.

3. Currency conversion and FX risk

Banks typically apply 2-5% markups above mid-market exchange rates, whilst exchange rate movements between payment initiation and settlement can impact the final amount received.

4. Limited tracking and transparency

Businesses often can't determine where their payment is in the processing chain or when it will arrive. Traditional correspondent banking provides minimal visibility beyond "payment sent" and eventual confirmation of receipt.

5. Regulatory and compliance requirements

Businesses must navigate anti-money laundering regulations, sanctions screening, tax reporting, and documentation requirements across multiple jurisdictions, creating operational complexity.

These challenges explain why businesses increasingly explore cross-border fee optimisation strategies.

Costs and fees in international payment systems

Understanding the full cost structure of international payments helps businesses make informed decisions and identify savings opportunities.

Transaction and processing fees from sending banks typically range from £15-£50 per international transfer, regardless of amount. These cover the bank's costs for processing the payment instruction and compliance checks.

Intermediary and correspondent bank fees add £10-£25 per intermediary bank in the payment chain. A payment routed through three correspondent banks could incur £30-£75 in intermediary fees alone, often deducted from the transfer amount rather than charged separately.

FX margins and conversion costs represent the largest hidden expense. Banks typically offer exchange rates 2-5% worse than mid-market rates. On a £50,000 transfer, a 3% FX margin costs £1,500—far exceeding visible transaction fees.

Hidden or unexpected charges include beneficiary bank fees (charged to the recipient), lifting fees (for investigating payment details), amendment fees (for correcting payment instructions), and recall fees (for attempting to retrieve sent payments).

Example cost breakdown for a £50,000 UK to Australia transfer:

• Sending bank fee: £25

• Intermediary fees: £40 (two intermediaries at £20 each)

• FX margin (3%): £1,500

• Total cost: £1,565 (3.13% of transfer value)

→ Explore Airwallex's transparent international payment pricing

Speed and settlement times for global payments

Settlement speed varies dramatically based on the payment system, currencies, and countries involved.

Traditional correspondent banking typically settles in 3-5 business days. Payments initiated on Friday may not arrive until the following Wednesday or Thursday, creating cash flow challenges for businesses awaiting funds.

SEPA transfers within the European Economic Area settle in 1 business day for standard transfers, with SEPA Instant enabling settlement within 10 seconds for participating banks.

Real-time payment networks in individual countries enable instant settlement domestically. The UK's Faster Payments, India's UPI, and Australia's NPP all process domestic transfers within seconds, though international connections between these systems remain limited.

Modern payment platforms leveraging local payment rails can achieve same-day or next-day settlement for many corridors by processing payments as "local" transfers in both countries rather than routing through correspondent banks.

Factors that impact payment speed

• Timezone differences – Payments initiated after cut-off times or weekends don't begin processing until the next business day 

• Compliance checks – Sanctions screening and anti-money laundering reviews can delay payments requiring manual intervention 

• Currency conversion processes – Exotic currencies requiring multiple intermediaries add processing time 

• Banking holidays – Non-aligned holiday calendars in sending and receiving countries extend settlement times

International payments systems vs domestic systems

The fundamental difference between international and domestic payment systems lies in complexity and the number of intermediaries involved.

Domestic systems operate within a single country, currency, and regulatory framework. UK Faster Payments, for example, connects UK banks directly through a central clearing system, enabling instant settlement with minimal intermediaries. Fees remain low (often free for consumers, minimal for businesses) because the infrastructure is streamlined and highly automated.

International systems must coordinate across multiple countries, currencies, legal systems, and banking networks. This necessitates correspondent banking relationships, currency conversion, compliance with multiple regulatory regimes, and settlement across different financial systems—each adding cost and complexity.

Key differences at a glance

Understanding these distinctions helps businesses recognise when international payment systems are necessary and when alternatives might be more efficient.

How Airwallex supports international payments

Airwallex addresses the core challenges of international payment systems by combining access to local payment rails with multi-currency account infrastructure.

Rather than routing all international payments through correspondent banking chains, Airwallex maintains direct connections to local payment systems across 200+ countries. This enables businesses to send what are effectively "local" payments in the destination country, eliminating intermediary fees and reducing settlement times.

Key capabilities

• Multi-currency accounts – Hold balances in 30+ currencies, removing the need for conversion on every transaction 

• Local payment rails – Send local payments in 200+ countries without correspondent banking 

• Transparent FX rates – Minimal markups above mid-market rates, eliminating typical 2-5% bank margins 

• Real-time tracking – See exactly where payments are in the processing cycle 

• Significant cost savings – Reduce annual payment costs by 60-80% versus traditional banking

A business sending 50 international payments monthly at £50,000 each through traditional banking might pay £75,000+ annually in fees, whilst Airwallex's model could reduce this by 60-80%.

→ Discover Airwallex's global payment infrastructure

Conclusion

International payment systems enable the global economy by facilitating cross-border money movement, but traditional correspondent banking infrastructure creates unnecessary costs, delays, and opacity. Understanding how these systems work—and their limitations—helps businesses make informed decisions about managing international payments.

Modern alternatives leveraging local payment rails, multi-currency accounts, and transparent FX pricing are transforming international payments from a necessary expense into a competitive advantage. As real-time payment networks proliferate globally and platforms create direct connections between them, the gap between domestic and international payment experiences continues narrowing.

The businesses thriving internationally aren't accepting slow, expensive payments as inevitable—they're actively optimising their payment infrastructure to move money as efficiently across borders as within them.

Ready to transform your international payments? Open an Airwallex account to access local payment rails in 200+ countries, hold 30+ currencies, and eliminate intermediary fees on cross-border transfers.

FAQs

How can businesses reduce the cost of international payments?

Use platforms with local payment rail access rather than correspondent banking, maintain multi-currency accounts to avoid per-transaction conversion, consolidate transfers to reduce fees, and compare FX rates across providers to avoid 2-5% bank markups. Platforms like Airwallex typically save 60-80% versus traditional bank wires.

What is FX risk in international money transfers?

FX risk is the potential for exchange rate movements to impact payment value between initiation and settlement. If the GBP/AUD rate moves from 1.90 to 1.85 whilst processing a AUD$100,000 payment, you'll pay approximately £2,800 more. Businesses manage this through forward contracts, holding currency balances, or using faster settlement platforms.

How do modern international payment systems differ from traditional ones?

Modern systems connect directly to local payment rails, eliminating intermediary banks and enabling same-day or instant settlement. They provide transparent FX rates, real-time tracking, and API integrations. Traditional systems rely on correspondent banking chains taking 3-5 days with limited visibility and larger FX markups—modern systems often deliver 80% faster settlement at 60-70% lower cost.

How does currency exchange work in international payments?

Currency exchange occurs at the sending bank, intermediary, or receiving bank, with each institution applying exchange rates typically 2-5% worse than mid-market rates. Multiple conversions compound these costs. Modern platforms offer near-mid-market rates and multi-currency balances, eliminating unnecessary conversions.