top of page
  • Epico Finance

How Do International Payments Work? [Full Guide]

Updated: Mar 7

Why International Payments Fees Are Important?

If you’ve ever wondered how international payments work, then please keep reading on.

It is important to understand how international payments work and how the fees for such payments are derived. On top of that, to comprehend the impact of the correspondence banking network (or payment routes) and currencies, and why this process can be complex sometimes.

For businesses or individuals wishing to make international transactions, transaction fees might impact the final cost of such transactions and become a burden if these transactions are needed on a frequent basis.

Another reason to understand those fees is that it will help reduce them. Using a well-established banking partner or payments specialist can save tonnes of money. They are going to use smart payment routing to avoid expensive correspondent banks and ultimately make the transactions cheaper.

Understanding the International Payments Process

By initiating a transaction to send money abroad, a complex system of reconciling and balancing between banks and financial institutions starts.

For a bank to implement a cross-border transaction, it must have both currencies or exchange one currency for another in order to execute the payment. The bank will have a relationship with other banks to conduct a foreign transaction that is outside of their own network. Because of this, international payments involve more financial institutions than you can see.

Here comes the term "correspondent banking. The correspondent bank will be used by a domestic bank to service such international payment requests from a client by leveraging the correspondent bank's payment routes, or in other words, banking relations.

The correspondent bank will be holding different bank accounts with different banks nostro and vostro accounts. In general, banks in correspondent relationships will hold accounts for one another in order to transact internationally.

Logically, if more institutions are involved in a transaction, there will be more fees. So choosing a provider or bank that manages its payment routes efficiently is important if you wish to save on fees.

Currency Exchange for International Payments

Most of the international payments will be conducted in foreign currency. For that reason, the currency exchanged is involved in the transaction and can be a huge part of the total cost.

Moreover, it is reasonable to compare the exchange rate offered by your bank to a mid-market rate or a currency's current buy/sell value on the FX market. If this analysis is done correctly, it will reveal what margin is being charged by the bank for a simple currency exchange transaction.

While banks get direct market access to foreign exchange, they pay mere fractions of a percentage for their own conversions. While end clients are being charged sometimes up to 2–3% for their conversions.

One reason why independent payment platforms are more transparent and flexible is that they are focusing solely on delivering the best experience and cost-value ratio for payments and FX, while traditional banks have a variety of focuses or lack business development efforts to optimise in specific areas.

How Do I Make International Payments?

The natural question is how to make international payments and save money not only on sending the funds but also on the currency conversions. And why some payment specialists are able to offer those services cheaper.

The best payment specialists will offer cross-border payments at lower costs by negotiating bulk deals with banks around the globe. Such providers are also able to offer clients greater flexibility, efficiency, and advice, besides the lower fees.

On the foreign exchange part, some specialists are also getting very small fees for FX as they are buying in bulk. So their aggregate volumes are very high, and it makes sense for the prime broker to do wholesale business.

To find a payments specialist that can provide cheap payments and currency conversion, you need to do some homework. We have an article on this topic here.

Furthermore, we recommend our readers reach out to us to get a free consultation or a list of the best-in-class payment providers.

How To Receive International Payments?

Sometimes traditional banking accounts are not capable of receiving multi-currency payments. And it can cause some difficulties for businesses that have clients or partners overseas.

A multi-currency solution via a single account is the best option for ALL international payments and currency exchanges that you or your business have.

We can help you get named multi-currency accounts with top-tier institutions that will enable you to receive payments from across the globe in 40 different currencies and send payments in 50+ currencies to 170 countries. Reach out to us to learn more.


All in all, understanding how fees for international payments are derived and what the process looks like will help you save a great deal of money. We hope that this article was helpful!


24 views0 comments

WHATSAPP +370 655 75558

Contact Us


© 2024 by EpicoFinance.

bottom of page