Ever sent money to someone overseas and wondered why it takes so long? Or been shocked when less money arrived than you sent? Welcome to the world of foreign exchange payments.
So what makes FX payments so different from domestic ones? And how can you avoid the common pitfalls that trip up growing multinational businesses time and again?
In this guide, we break down exactly what makes FX payments more complex than standard payments, the challenges they create for businesses like yours, and what to look for in a provider if you're handling cross-border transactions regularly.
Let's get your international payments working smarter for you — not against you.
What is a foreign exchange payment?
A foreign exchange (FX) payment is when you send funds internationally and the money switches currency. For example, you send euros from your account and your supplier in Japan receives yen.
They may look like regular payments on the surface. But behind the scenes, a whole lot more is happening.
Why FX payments are more complex than domestic payments
When you make a domestic payment, your money travels from point A to point B in the same currency. But with FX payments, the process often involves multiple financial institutions and various checks and steps. If a domestic payment is like driving a parcel directly to a recipient, FX payments are more like connecting flights with multiple layovers.
Let's break down why these payments come with added complexity compared to their domestic counterparts.
FX payments require currency conversion
With domestic payments, euros stay as euros. You send €5,000 to a supplier who's also in Europe, they receive €5,000. Simple.
But with FX payments? Your funds need to be converted from one currency to another. And your euros don't magically become dollars — they need to be sold and exchanged through currency markets. That's an extra step that creates complexity domestic payments simply don't have.
Plus, there's the question of who handles this conversion. Your bank? The receiving bank? A payment provider? Each path brings a different set of processes, timeframes and fees.
Exchange rates are constantly shifting
The forex market operates 24/7. It responds continuously to global events, economic data releases and political developments around the world.
Today your euro might buy 1.08 dollars, tomorrow only 1.05. These shifts might appear minimal in isolation, but when you're sending a €50,000 payment to your US supplier, that difference represents real money disappearing from your margins.
This volatility becomes particularly problematic the more time passes between agreeing to a price and making the payment. Imagine negotiating terms with a Chinese manufacturer when the EUR/CNY rate is favourable, only to see it decline significantly when it's time to pay the invoice three weeks later.
This is where FX risk materialises — and many businesses don't fully grasp its impact until they see the effect on their bottom lines. For companies operating with slim margins, these currency fluctuations can transform a profitable deal into a loss.
Cross-border payments involve multiple parties
Unlike domestic transfers that move directly from your bank to your beneficiary’s, FX payments typically pass through one or multiple financial institutions called intermediary banks.
When your local bank and your supplier's bank don't have a direct relationship, they use an intermediary bank to connect the dots. If there aren't any intermediary banks that have a relationship with both parties, more intermediaries may be required to complete the chain.
Each additional participant in this process adds complexity and costs:
- Time zones create natural delays when payments cross continents, as banks only process payments during working hours.
- The level of automation used to process funds varies from country to country and even between banks.
- Every intermediary bank typically charges a processing fee.
That’s why your euro payment can take days instead of minutes to arrive with your beneficiary — your payment is navigating a multi-step financial process across different banking systems.
Common challenges SMBs face with international FX payments
Now that we've covered why FX payments are more complex, let's talk about how these complexities can affect your business day to day. These aren't just theoretical problems — they're the headaches keeping finance teams up at night.
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Juggling multiple currencies with standard bank accounts
Trying to manage multiple currencies with standard bank accounts or foreign currency accounts is like trying to fit a square peg in a round hole.
Standard bank accounts are designed around managing one currency. They're perfect when all of your incomings and outgoings are in euros or any other single currency. But as soon as you need to pay suppliers in China, Japan or the United States or want to accept payments from customers in these countries, things can get messy — fast.
- You lose control over conversion: Most banks typically convert your funds automatically when you send or receive payments, giving you little to no say in the timing.
- You lack a true picture of your global finances: Managing numerous standard or foreign currency accounts means different totals spread across currencies with no consolidated view.
- You'll pay higher exchange rate markups: Banks can charge 4-6% above the mid-market rate — much more than you need to pay with the right provider.
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Lack of transparency in fees and exchange rates
Many providers — especially traditional banks — aren't exactly eager to show you their full pricing structure. On the surface, some may seem transparent about only having to pay a flat or percentage-based transaction fee when you send an international payment. But be sure to check what their markups are on the mid-market exchange rate.
This means the exchange rate you'll actually get will vary significantly from one bank or provider to the next, and rarely (if ever) matches what you find on Google.
Factor in the processing fees of intermediary banks and your payment could quickly become a black box of fees and markups chipping away at your profits from all angles. When you're operating on thin margins, those unexpected costs can be the difference between profit and loss.
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Unexpected costs from currency fluctuations
Picture this: You agree to buy €50,000 worth of inventory from your Chinese supplier at the start of the quarter when €1 buys 7.80 CNY. But you won't actually be making the payment until two months later, by which time €1 only buys 7.65 CNY. Suddenly, that same inventory costs you an extra €980. This is FX risk in action — and it's a silent profit-killer for growing businesses.
Even small currency swings of 1-2% can dramatically impact your bottom line on larger transactions. Without protection through tools like deliverable forward payment contracts, you're essentially at the mercy of the FX market every time you agree to make a payment in the future.
These unexpected costs make budgeting and forecasting feel like you're aiming at a moving target blindfolded.
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Processing times of intermediary banks
As mentioned, intermediary banks will often be involved in processing your payment and this will have an impact on how long your payment takes. But the biggest culprit here isn’t the processing time itself but time zones.
Say you make a payment from Europe to Asia in dollars that needs to be routed through an American intermediary bank, then a Chinese intermediary bank before reaching its destination bank (that of your beneficiary). That payment will need to cross multiple time zones as it hops from one continent to another, so will inevitably end up waiting for at least one of the banks to open their doors.
The worst part? You're often completely in the dark about where your payment is in its journey. Most banks and payment providers simply mark it as "in progress" from the moment it leaves your account until it eventually arrives at its destination.
These delays don't just test your patience — they can seriously damage business relationships as you have to explain to a supplier why their payment hasn’t arrived yet, even when you have no idea where it is or why it's stuck.
How cross-border payment providers can help with FX payments
After reading about all those challenges, you might be thinking: "There has to be a better way."
And you're right.
Cross-border payment providers have built solutions specifically designed to solve these exact problems. Let's look at how the right provider can transform your international payment experience from a constant headache to a genuine competitive advantage.
Multi-currency accounts for holding funds in multiple currencies
Are you juggling multiple bank accounts across different currencies? Multi-currency accounts change the game completely.
Think of a multi-currency account as your international financial command centre — one account that lets you hold balances in multiple currencies simultaneously. No more logging into numerous different bank portals or trying to track scattered funds across the globe.
This approach offers three massive advantages:
- You control when to convert: Keep the dollars you receive from a customer until rates improve or until you next need to pay a supplier in USD. The power to decide when to exchange sits entirely with you.
- You can pay suppliers in their local currency: Nothing builds goodwill with international partners faster than sending them payments in their preferred currency, with no surprise deductions.
- Your reconciliation headaches disappear: With all your currency balances visible in one dashboard, you can finally see your complete cash position at a glance.
In short, a multi-currency account puts you back in the driver's seat — so you can make strategic decisions about when to convert based on your business needs and market conditions.
FX risk management tools like forward payment contracts
Returning to our nightmare scenario where currency fluctuations suddenly added €980 to your inventory costs, what if you could just...make that problem disappear?
That's exactly what FX forward payment contracts do; protecting you from the rollercoaster of currency markets.
Here's how they work: When you need to make a payment in the future — say, paying a supplier in three months — you can lock in today's exchange rate. No matter what happens to the markets between now and then, your rate remains fixed.
At iBanFirst, we offer three types of deliverable forward payment contracts to fit different needs:
- Fixed forward payments let you lock in a rate for a specific amount on a specific date — perfect when you know exactly how much you'll need to pay and when.
- Flexible forward payments give you the freedom to use your locked-in rate gradually over time — ideal when you're not sure exactly when you'll need the funds or need to make multiple payments.
- Dynamic forward payments offer the best of both worlds — protection if rates move against you, but the ability to benefit if they move in your favour.
Suddenly, that unpredictable part of your business becomes a lot more predictable. No more guessing what a payment will cost next quarter. No more watching profit margins shrink because of currency movements you can't control.
Support from real FX experts
Currency markets never sleep. They're constantly shifting based on global events, economic data and thousands of other factors. Even if you've got a solid financial background, keeping up with these movements while running your business is practically impossible.
That's where having access to dedicated FX experts can make all the difference.
Forget endless chatbot loops or waiting days for an email response. When you work with iBanFirst, you get direct access to people who understand both the complexity of international payments and your unique business needs.
- Need to discuss which type of forward payment makes more sense for your upcoming payment run?
- Wondering if now's the right time to convert that dollar balance?
- Looking for strategies to protect your margins against volatile currency pairs?
These are exactly the kinds of conversations our experts have every day.
While other providers increasingly push you toward self-service models with minimal support, we choose a different path. We've doubled down on the human element because we've seen firsthand how valuable that support can be for growing businesses like yours.
Get started with iBanFirst today
We've gone on quite a journey — from understanding why FX payments are so complex to exploring the challenges they create for growing businesses like yours.
There's a much better way to handle your international transactions than the status quo.
With iBanFirst, you can:
- Hold, send and receive payments in 25+ global currencies from one central account
- Track your international payments at every step with time-stamped updates and links you can share with your partners and suppliers
- Protect your margins from currency swings with forward payment contracts
- Get personalised support from real FX experts who understand your business and can help you navigate complex currency decisions
Ready to make your international payments work for you instead of against you? Open your account in minutes — with no setup fees and no monthly costs.
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