Cross-border payments explained: how they work, cost and speed

How a cross-border payment actually works

When you send a cross-border payment through a traditional bank, the process begins in your bank's own systems. Your bank debits your account and creates a payment instruction containing account identifiers, currency, amount and beneficiary details. That instruction is then transmitted across a financial messaging network, most commonly SWIFT (the Society for Worldwide Interbank Financial Telecommunication), which acts as a global postal service for payment messages between banks.

Because your bank and the recipient's bank rarely hold accounts with each other directly, the payment often travels through one or more intermediary banks, known as correspondent banks. Each holds nostro and vostro accounts on behalf of other banks, allowing funds to move across currency zones without a direct bilateral relationship. Each deducts its fee at every hop, which is one reason the amount arriving at the other end can be less than what you sent.

The actual settlement, the movement of the underlying funds between institutions, happens through central bank systems. In the UK, CHAPS (the Clearing House Automated Payment System), operated by the Bank of England, settles high-value sterling payments in real time throughout the business day. Between July 2023 and June 2024, CHAPS settled 51.6 million payments totalling more than 87 trillion pounds, around 28 times UK GDP. Cross-border payments accounted for at least 52 percent of CHAPS payment volume and at least 41 percent of CHAPS value settled, according to Bank of England analysis.

Foreign exchange conversion adds another layer. Unless both parties use the same currency, at least one party's bank must convert the funds, applying a spread to the mid-market rate that is frequently larger than the headline transfer fee. A 2 to 5 percent FX markup on a 50,000-pound supplier payment costs 1,000 to 2,500 pounds, a figure that rarely appears clearly on a bank statement.

Modern alternatives to the correspondent banking chain include platforms such as Nasara Pay, which use pre-funded local accounts or direct access to local payment rails. This removes intermediary hops and their fees, compresses settlement from days to minutes, and gives upfront certainty on the exchange rate.

What cross-border payments cost UK businesses

Cost is the most persistent complaint about cross-border payments. For UK businesses using a high-street bank, an outgoing international transfer typically carries a flat fee, often larger for branch or non-SEPA payments than for online ones, while receiving a payment from overseas can attract a separate handling charge. These headline fees are only part of the picture. The exchange-rate markup that most banks apply adds a further 2 to 5 percent on each conversion, which for anything beyond a small sum dwarfs the transfer fee.

Banks remain the most expensive type of service provider in the cross-border market. The World Bank's Remittance Prices Worldwide database recorded an average cost of 14.99 percent for sending 200 US dollars via banks in Q3 2025, against 4.72 percent via money transfer operators (MTOs) and 5.58 percent via post offices. While business-to-business transfers and consumer remittances are not identical products, the underlying cost structures are similar: correspondent banking chains, FX spreads and compliance overhead all apply.

The global average cost of sending 200 US dollars stood at 6.36 percent in Q3 2025, more than double the UN Sustainable Development Goal and G20 remittance target of 3 percent by 2030. Sending from the United Kingdom specifically averaged 4.61 percent in the same quarter. For businesses making regular international payments, these costs accumulate rapidly.

Digital channels are consistently cheaper. The World Bank's global average for digital remittances was 4.59 percent in Q3 2025, against 7.30 percent for non-digital methods, and the digital-only MTO index sat at 3.54 percent. Some business-focused platforms offer rates near the interbank mid-market rate plus a small fixed fee, so switching from bank transfers can produce material savings for high-frequency payers.

Hidden costs matter too. Delays can trigger late-payment penalties, create cash-flow gaps requiring short-term financing or damage supplier relationships, so a payment taking four days to arrive carries an opportunity cost that never appears on a fee schedule.

How long cross-border payments take

Settlement speed for cross-border payments has improved substantially over the past decade but remains uneven. Traditional bank-to-bank international transfers settled via correspondent banking can take one to five business days, depending on the corridor, the currencies involved, the compliance checks required and whether the payment crosses a weekend or public holiday.

SWIFT, which carries the majority of global cross-border payment messages, has made significant progress through its SWIFT gpi (Global Payments Innovation) initiative. SWIFT reported in October 2024 that 90 percent of cross-border payments on its network reach the destination bank within one hour, ahead of the G20 target of 75 percent reaching the end customer's account within one hour by 2027. Regional breakdowns show 92 percent of payments to the eurozone settling within an hour, 88 percent to the Middle East and 87 percent to Africa.

The distinction between reaching the destination bank and reaching the end customer's account is important. SWIFT's own data shows that only 43 percent of cross-border payments reach the end customer's account within an hour, because compliance checks, cut-off times at receiving banks and local settlement windows can add delays even after the SWIFT message has arrived. The G20 target explicitly references the end customer's account, which is the more demanding benchmark.

The G20's cross-border payment roadmap, coordinated by the Financial Stability Board (FSB), set end-2027 targets: 75 percent of retail payments credited within one hour, the remainder within one business day. The FSB's 2025 progress report found only a slight improvement in the key performance indicators since they were first calculated in 2023 and concluded that it is unlikely that satisfactory improvements at the global level will be achieved in line with the 2027 roadmap timetable.

For UK businesses, practical speed depends heavily on the corridor. Euro payments within the Single Euro Payments Area (SEPA) typically settle same or next day and US dollar wires often within one business day, but payments to emerging markets in Asia, Africa or Latin America can still take two to four days where correspondent banking coverage is thinner.

The regulatory framework for cross-border payments in the UK

Cross-border payments in the UK sit within a layered regulatory framework. Firms providing payment services, including those facilitating international transfers, must be authorised or registered with the FCA under the Payment Services Regulations 2017. This covers banks, e-money institutions and specialist payment institutions alike. The FCA requires firms to safeguard client money, maintain adequate capital and comply with anti-money-laundering rules.

Safeguarding rules are tightening. In late 2024 the FCA consulted (CP24/20) on strengthened interim requirements and new end-state rules for payment and e-money institutions. It confirmed the interim rules in policy statement PS25/12, published in 2025, with the strengthened interim safeguarding regime due to come into force on 7 May 2026.

Anti-money-laundering and sanctions compliance adds cost and friction to every international transaction. Payments must be screened against sanctions lists and assessed for suspicious activity under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. The travel rule, requiring originator and beneficiary information to accompany transfers above 1,000 euros, applies in the UK as a post-Brexit continuation of the retained EU Funds Transfer Regulation.

The Bank of England is modernising the plumbing underpinning UK cross-border payments through its RTGS renewal programme. In June 2023, CHAPS migrated to ISO 20022, the global messaging standard that carries richer structured data including full beneficiary names, addresses and purpose codes. This underpins the G20 roadmap's transparency goals and is expected to improve straight-through processing rates.

Sterling is a globally significant payments currency. As of December 2025, GBP made up 6.73 percent of customer and institutional payment messages by value on the SWIFT network, the third most-used currency after the US dollar (50.49 percent) and the euro (21.90 percent), according to SWIFT's RMB Tracker. The UK's participation in multilateral initiatives, including potential interlinking of instant payment systems, will shape the future cost and speed of cross-border payments for UK firms.

Business-to-business cross-border payments: the commercial reality

For UK firms with international supply chains, cross-border payments are a routine treasury function but the costs are far from trivial. Financial institution and corporate transfers make up the bulk of global cross-border payment value: the IMF found that in 2024 financial institution payments accounted for around 80 percent of total SWIFT customer and financial-institution-related payment value, with large-value transactions of 50 million US dollars and above making up roughly 83 percent of financial institution payment value.

UK importers face currency risk between agreeing a price and paying. If sterling weakens, the sterling cost of the invoice rises. Businesses manage this with forward contracts, FX options or pre-funded currency accounts, and the choice of payment platform affects which tools are available and at what cost. Invoice currency is a related decision: paying in a supplier's local currency transfers exchange-rate risk to the UK buyer, while paying in sterling shifts it to the supplier, who may price in a buffer.

Payment terms in international trade commonly run from 30 to 90 days, and slow cross-border settlement compounds that friction: a supplier in Vietnam or Brazil waiting four days for funds to clear is effectively providing extended trade credit, which can affect their pricing.

Platforms such as Nasara Pay address this by providing local account details in multiple currencies, so overseas suppliers receive payment as if it were domestic, while the UK firm manages everything from a single dashboard with transparent FX rates and same-day or next-day settlement in most corridors.

What is changing: the G20 roadmap and new payment rails

The G20 launched its cross-border payments roadmap in 2020 with a mandate to make international payments faster, cheaper, more transparent and more inclusive by end-2027. The quantitative targets are demanding: a global average cost of no more than 1 percent for retail payments, with no payment corridor exceeding 3 percent, and 75 percent of payments credited within one hour. As noted above, the FSB's 2025 progress report judged that meeting these at the global level by 2027 is unlikely, with a fragmented correspondent banking system and thin digital infrastructure in lower-income corridors proving durable barriers.

Several developments are nonetheless reshaping the landscape. Instant payment systems such as the UK's Faster Payments scheme, SEPA Instant and India's UPI are being interlinked for faster cross-border settlement, ISO 20022 adoption across major central banks provides a common data language that reduces manual intervention, and the pre-funded liquidity models used by specialist platforms bypass the correspondent banking chain entirely for common corridors. Central bank digital currencies are a longer-term prospect: the Bank of England's digital pound research is exploring settlement models with fewer commercial intermediaries, though any practical implementation remains years away.

For UK businesses, the most immediate gains are available now by switching payment infrastructure. Purpose-built platforms already offer speed and cost profiles materially better than traditional bank transfers, and FCA oversight and safeguarding rules mean they carry strong consumer and commercial protections, removing a significant reason to default to a high-street account for international payments.

Conclusion

Cross-border payments are a core operational requirement for any UK business trading internationally, yet the traditional system charges high fees, applies opaque FX markups and can take several days to settle. The data is unambiguous: the global average cost of sending money internationally remains above 6 percent, more than double the UN's SDG remittance target, while correspondent banking chains and compliance overhead continue to slow settlement. The G20's 2027 roadmap sets ambitious targets but progress is behind schedule, meaning the burden of action falls on businesses choosing better payment infrastructure now rather than waiting for the system to reform itself.

The good news is that better options exist today. Digital channels already deliver average costs below 5 percent, and the most competitive dedicated business payment services offer transparent FX rates, same-day or next-day settlement across major corridors, and full FCA authorisation. For UK firms making regular international supplier payments, reviewing your current cross-border payment arrangements is one of the more straightforward ways to improve cash flow, reduce operational cost and strengthen supplier relationships. Nasara Pay is built to give UK businesses that advantage, combining regulated, controlled payments with the transparency and speed that modern international trade demands.

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