Why does sending money across borders have to be so headache-inducing?
Well, there’s quite a lot that goes on between initiating a payment and it arriving with a beneficiary overseas. There are numerous fees to take into consideration, exchange rates fluctuate and vary from provider to provider, payments usually pass through multiple intermediary banks, and every country has different requirements and regulations. All of this can take multiple days and to make matters worse, you often don’t have much visibility, particularly when making a payment with a traditional bank.
But it doesn’t have to be this way.
In this guide, we'll break down everything you need to know to make your international business payments efficient and as hassle-free as possible:
- How international payments work (and what makes them so complex)
- The main types of international payments you can make
- Who the major providers are and which one makes the most sense for businesses like yours
Let's start with the obvious question...
What are international payments?
An international payment — also known as a cross-border payment — happens any time money moves between people or organisations in different countries. For businesses, this may be to pay international suppliers, partners and employees or to receive payments from overseas customers.
Unlike a domestic transfer that moves directly from one bank account to another within the same country and currency, international payments typically involve three key elements:
- Currency conversion, to exchange your euros into dollars, for example.
- Payment networks that your money travels through, such as SWIFT and SEPA.
- Intermediary banks that your payment passes through before reaching your beneficiary — potentially as many as five banks, depending on the currency pair and destination.
Exchange rates, markups and fees explained
The costs involved in international payments can vary a lot, which does add some additional complexity.
The exchange rate you might find online is generally the mid-market rate — the midpoint between what banks are willing to buy and sell a currency for. Most providers will then add several different types of fees on top of this:
- Exchange rate markups: The difference between the mid-market rate you see online and what a provider quotes you. It might be a fixed or a percentage-based markup, depending on the cross-border payment provider.
- Transfer fees: A flat or percentage-based fee your provider may charge for each money transfer.
- Intermediary bank fees: Extra charges from the banks that help route your payment to its destination.
- Recipient bank fees: Sometimes the destination bank also takes a fee, which may be percentage-based or fixed.
Frustratingly, many providers aren't particularly transparent with their pricing and fees. That's why it's crucial to understand the total costs involved in making an international payment rather than choosing a provider based on their lowest quoted fee. What may at first seem like a low-cost solution may actually eat into your margins depending on the currencies you use and where you’re sending money.
Types of international business payments
If your business is based in Europe, you've got three main options to send money across borders.
1. SWIFT payments & wire transfers
A wire transfer is simply moving money electronically from one bank account to another.
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the messaging network banks and cross-border payment providers use to tell each other where the money is going. SWIFT works with a large number of currencies and is used by more than 11,500 financial institutions for wire transfers around the world.
Here's what you need to know about SWIFT payments:
- In most cases, SWIFT payments take two to five business days to be processed. This depends on when you initiate the payment, local holidays, time zones and individual banking processes and procedures.
- Your payment typically moves through one or several intermediary banks before reaching its destination.
- SWIFT instructions contain a code (SHA, BEN, OUR) that identifies who will pay the fees.
2. SEPA transfers
Introduced in 2014, SEPA (Single Euro Payments Area) is a European-based payment network. It covers 38 countries both in the eurozone and some countries outside (including Iceland, Switzerland and the UK). However, it’s limited to euro-denominated bank accounts.
SEPA includes three main types of payments:
- SEPA Credit Transfers (SCT), which typically arrive on the same or next business day.
- SEPA Direct Debits (SDD), which pull money directly from an account (used for recurring payments, for example).
- SEPA Instant Credit Transfers (SCT Inst), fairly self-explanatory — transfers that arrive instantly (and are available even during weekends).
While often quicker and less expensive than SWIFT payments, SEPA payments can include conversion fees when made outside the eurozone, such as those originating or arriving in the UK.
2. Digital payment solutions
You can technically use digital payment solutions like PayPal for international transfers — but when you factor in currency conversion, the associated fees can climb above 5% per transfer. That might be fine for a one-off payment to friends and family, but it adds up frighteningly fast for regular business use.
The European Payments Initiative (EPI) is introducing new account-to-account solutions like Wero — a simplified money transfer system that uses phone numbers, not IBANs. But since this and other alternative solutions are still in their infancy and better suited to occasional transfers, they're not ready for major business payments just yet.
How to make international payments
When it comes to choosing a provider for sending money across borders, you've got two main options: traditional banks and cross-border payment providers.
Option 1: Use a traditional bank
Traditional banks have been the go-to option for cross-border payments for decades. Why? Well, they’re familiar and fairly dependable. But they're not always the best option. Here are some of the downsides of going through your bank:
- Exchange rates come with significant markups — often 4-6% above what you see online.
- You're paying a mix of fixed fees and percentage-based charges, many of which aren't always made clear upfront.
- Limited visibility of your payment once initiated — you may get a confirmation when your funds leave your account and another when they reach their destination, but that's about it in terms of tracking.
- Dedicated support isn't always available to SMBs, which usually means dealing with general call center agents — and it's unlikely they deeply understand FX or your specific business needs.
- Banks are usually built on legacy systems that don't always play well with modern business tools and software and may not be the most user-friendly.
Option 2: Use a cross-border payment provider
Cross-border payment providers are the modern way to send international payments.
You've probably heard of Wise and Revolut. But another provider making waves in this space is iBanFirst — built specifically for SMBs with significant volumes of international payments.
These providers give you a multi-currency account that acts as your home base for managing international payments. You can hold different currencies, convert them whenever exchange rates work in your favor and send and receive international payments.
Here's what makes cross-border payment providers a better option than traditional banks for most growing businesses:
- Typically better exchange rates and more transparent pricing and fees
- Multi-currency accounts create more flexibility for you
- Most providers offer modern platforms to make the user experience more streamlined
iBanFirst takes things a step further.
Why 10,000+ SMBs use iBanFirst to manage international payments
iBanFirst is SWIFT and SEPA certified, so we can securely and efficiently facilitate international and domestic financial transactions in compliance with industry standards and regulations.
You can hold, send and receive funds in 25+ currencies, track international payments in detail and see your current cash flow across every currency account you open, as well as a consolidated total — all from a single dashboard. You can also work directly with our FX experts to protect your profits from exchange rate swings.
Hold, send and receive cross-border payments
With iBanFirst, you can open multiple currency accounts digitally — no opening fees or monthly subscription costs. Customers can pay you in their local currency and you can pay suppliers or transfer funds between subsidiaries at your chosen speed.
Leveraging our extensive network of local and global financial partners, we ensure every payment takes the fastest, most cost-effective route, every time.
Track your payments across borders
When you make a SWIFT payment, you can access detailed payment tracking thanks to the iBanFirst Payment Tracker. You'll get timestamped updates that cover the entire payment journey — including which intermediary banks are involved along the way.
The Payment Tracker also lets you share tracking links with your partners and suppliers so they can see the same timestamped updates. This means fewer anxious back-and-forth emails about the payment status and better business relationships built on transparency.
Manage currency risk the smart way
If you're moving significant volumes, we can help you minimise the impact of fluctuating exchange rates on your margins by using our range of deliverable forward contracts to lock in exchange rates over a set period of time.
Unsure which to choose? Our skilled FX specialists can help you design and implement the right FX risk management strategy for your business goals and needs. Yes, real humans who actually understand international payments and FX risk management — and who know your business inside out.
Common questions on international payments
Before we wrap up, let's tackle some of the most frequently asked questions about sending money across borders.
What information do you need to make an international business payment?
The exact details you need will vary slightly between regions and providers, but here are the essentials you'll likely need to collect before sending money internationally:
- Your beneficiary's full name (individual or business)
- Their BIC or SWIFT code
- An IBAN (International Bank Account Number)
- Purpose of payment (often required for compliance)
How do exchange rates work for international payments?
The rate at which one currency can be exchanged (or converted) for another currency is called the exchange rate. Currency values rise and fall based on changes in the foreign exchange market, and this fluctuation can affect how much you pay to convert your funds. Here are a few more terms worth knowing:
- Mid-market rate: The midpoint between bank buying and selling prices. You may also see this rate referred to as the interbank rate. Think of the mid-market rate as the "base" rate before any markups are applied.
- Markups: A fixed or percentage-based fee providers add on top of the mid-market rate to facilitate the conversion.
- Spreads: A fixed or variable difference between the price you sell a currency at and the buying price. The size of the spread varies by provider.
Can I schedule international payments in the future?
Yes, but your options depend on the payment provider you use. The options you may have access to will typically fall within three buckets:
- Spot payments: Lock in current rates a set number of business days ahead of time (with iBanFirst, it's two business days).
- Recurring payments: Schedule recurring payments that take place at whatever the rate happens to be at the time.
- Forward contracts: Set rates now for future payments. How these contracts work will depend on the type of forward contract you use, with the most common being fixed forwards. IBanFirst also offers flexible and dynamic forward contracts.
Start sending your international payments with iBanFirst today
Ready to see why thousands of businesses trust us with their international payments? Request an account today to get started.