Where does the money go between send and received?

Most businesses assume international payments work like email — you send, they receive. The reality is different, and understanding the gap between those two moments is one of the most practical things a business owner can do.

A payment is not money in motion. It is a message. When you press Send on a bank transfer, your bank does not move money directly to your recipient’s account. It creates a payment instruction — a standardised message — that travels through a chain of institutions before anything settles.

For domestic UK transfers via Faster Payments, that chain is short. The instruction moves between two banks in seconds, and settlement follows almost immediately. For international transfers, the chain is longer. Your bank sends the instruction to a correspondent bank — an intermediary institution that neither you nor your recipient has a direct relationship with. That correspondent bank may route it to another correspondent bank. Each institution in the chain processes according to its own schedule, in its own time zone, within its own business hours.

You send it on Friday. It arrives Tuesday. Nothing went wrong. That is how the system was designed.

Where the money actually goes — and what it costs along the way

There are three places where value is lost between the moment you press Send and the moment funds are settled.

1. The Exchange Rate Spread

This is the most significant and least predictable cost. When a payment requires currency conversion, the rate applied is almost never the mid-market rate you see on Google. Banks and intermediaries apply their own rate with a margin built in. It is crucial to note that in a properly structured correspondent network, conversion happens only at the entry or exit point, not between intermediary banks. Multi-layered conversions are standard for card payments, not bank transfers. However, even a single conversion carries heavy costs. On a £10,000 payment, a 2% spread means £200 disappears — not as a named line item, but embedded in the rate itself.

2. Correspondent Bank Fees

In a SWIFT transfer, the allocation of costs depends entirely on the chosen payment instruction (OUR, BEN, or SHA). The sender is free to choose who bears the cost — the sender, the recipient, or a 50/50 split. While many business senders opt to cover these costs, each intermediary institution in the chain may still deduct a processing fee. These charges are not always itemised as a separate line in your transaction history. They are applied in transit, and a payment passing through two correspondent banks can reach its destination £60–80 short of the original amount.

3. Incoming Transfer Fees

Many banks charge a flat fee simply for receiving an international transfer — regardless of the amount. This fee is charged to the recipient, often without clear disclosure upfront. For businesses receiving multiple international payments per month, this adds up predictably.

What this means in practice: a realistic example

A UK business receives a payment from a US client for the equivalent of £8,000. The US bank converts USD to GBP at a rate including a 2.5% currency exchange markup — £200 lost. One correspondent bank deducts a processing fee — £25 lost. The UK receiving bank charges an incoming international transfer fee — £15 lost. Amount received is approximately £7,760. The business invoiced £8,000, but they received £7,760.

While this example shows deductions on the recipient’s end, in real business operations, these shortfalls ultimately push the burden back onto the payer. The invoice remains short-paid. The client will be required to make an additional payment to cover the missing gap and fully satisfy the invoice. This is how the correspondent banking model actually impacts business relationships, though exact figures vary depending on the banks, currencies, and specific fee structures. Run this calculation on your last three international payments — the number is usually larger than expected.

Three things that reduce the gap

To bridge this gap and protect your cash flow, businesses can actively manage their payment infrastructure using three practical approaches.

Understand which payment infrastructure is being used

SWIFT routes through correspondent banks and carries the costs described above. SEPA — for payments within the SEPA zone, which covers more than 36 countries — operates differently with standardised rules and no correspondent intermediaries. The amount sent is the amount that arrives. For transfers within Europe, SEPA is worth choosing where available.

Know when conversion happens — and who controls it

If your account only holds one currency and you receive a payment in another, conversion happens automatically at the moment of receipt at whatever rate your bank applies. A multi-currency account gives you the option to receive in the original currency and convert at a time of your choosing, rather than automatically at the moment of arrival.

Factor transfer time into payment terms

Because the correspondent chain requires time to process instructions, this operational delay must be directly reflected in your contracts. If funds are strictly needed by Friday, the invoice payment deadline for the client should be set no later than Tuesday. Building this transit time into your payment schedule protects the business from sudden liquidity gaps.

Navigating alternative infrastructure

Understanding how cross-border payments work is not a specialist subject; it is basic operational knowledge for any business dealing internationally. However, traditional networks are no longer the only option, and modern financial infrastructure offers alternative routes to manage these costs.

One practical alternative is Electronic Money Institutions — including Payver. It is important to clearly distinguish them from traditional commercial banks. EMIs do not accept deposits and do not extend credit. What they provide is dedicated payment infrastructure — accounts for sending and receiving money, multi-currency management, and direct access to various payment rails.

For businesses whose primary need is operational payment capability rather than lending or traditional deposit protection, this distinction is worth understanding clearly before making any infrastructure decisions.

Educational content only. Not financial advice. Payver is authorised by the Financial Conduct Authority as a Small Electronic Money Institution (sEMI).