How do international bank transfers work?
Understanding the payment journey helps finance teams anticipate timing, fees and the amount ultimately credited to the beneficiary.
Ask SwissFx
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When a business initiates an international bank transfer, the funds do not necessarily move directly from the sender’s account to the beneficiary’s account. The institutions involved transmit the payment instruction, carry out the required checks and settle the transaction through their banking relationships.
Currency conversion or intermediary banks may also be involved, depending on the currencies, destination and payment rail.
What happens after an international payment is initiated?
1. The company creates the payment instruction
The sender enters the beneficiary’s name, account details, bank information, transfer currency, amount and payment reference. For an eligible euro payment within the Single Euro Payments Area (SEPA), the beneficiary’s full name and IBAN are usually central. Other international routes may also require a BIC or Swift code, the recipient bank’s name and address, and country-specific information.
2. The sending institution checks the instruction
The bank or payment provider checks that the required information is present and consistent. It may also apply sanctions, fraud-prevention and compliance controls. Missing or incorrect beneficiary details are a common reason for payments to be delayed, rejected or returned.
3. The currency is converted, if required
If the sender does not already hold the payment currency, the funds must be converted. This can happen before the payment leaves the sending institution, during the route through an intermediary or at the receiving bank. The point of conversion matters because it determines which provider applies the exchange rate and FX margin.
4. The payment route is selected and the instruction is transmitted
Many international bank transfers use Swift, but not all do. Swift is a secure financial messaging network: it carries standardised payment instructions but does not itself hold the funds or manage customer accounts.
If the sending and receiving institutions have a direct banking relationship, the route may be relatively short. If they do not, one or more correspondent banks can connect them. These intermediaries may process the instruction, update balances held between institutions and apply charges.
5. The bank settle the payment
Settlement is the stage at which the relevant financial institutions update the accounts or balances they hold with one another. The route can involve several entries before the funds reach the recipient’s institution.
6. The recipient’s bank credits the beneficiary
Reaching the beneficiary bank does not always mean that the money is immediately available in the recipient’s account. The bank may still need to complete a compliance review, confirm beneficiary information, convert the currency or allocate the payment to the correct customer account.
Swift reports that many payment instructions reach the beneficiary institution quickly. However, final availability can take longer because of local regulation, operating hours, payment infrastructure and manual checks.
Why can the recipient receive less than the amount sent?
International payment fees may be allocated in different ways, depending on the provider and payment route. When setting up such a payment, the sender may be asked to choose how the transfer charges should be distributed:
OUR: the sender agrees to pay the applicable transfer charges.
SHA: the sender and beneficiary each pay the charges applied by their own institution.
BEN: the beneficiary pays the transfer charges, which are generally deducted from the amount received.
Intermediary-bank charges may also be deducted while the payment is in transit. A finance team should therefore check both the fee option selected and the expected amount to be credited. The exchange rate and any currency-conversion costs should be reviewed separately from the transfer fee.
For SEPA transfers, the allocation of charges follows a different rule: the sender and beneficiary each pay the fees charged by their own institution. More precisely, the sender and beneficiary can each only be charged by their own payment service provider, and the full original amount must be transferred without deductions.
When can a local payment route be used instead?
An international business payment does not always need a traditional international wire. SEPA provides a harmonised route for eligible euro payments across participating countries and territories. Other markets have their own domestic payment systems.
Where local payment capabilities are available, using a domestic payment rail may reduce the number of intermediaries and avoid an unnecessary international transfer or currency conversion. Please note: it is not automatically free or faster, and availability depends on the country, currency, provider and beneficiary account.
How can a multi-currency account change the payment journey?
A multi-currency account allows a business to hold balances in different currencies. A company that already holds GBP, for example, may be able to pay a UK supplier in GBP without converting CHF when the payment is initiated.
SwissFx combines multi-currency capabilities with local payment routes in selected currencies.
This can give finance teams more control over when currency is converted and which payment route is used. Before sending a payment, check:
Review how your international payments are routed
Different currencies and destinations can require different payment routes. SwissFx can review where conversion occurs, how fees are applied and whether local payment capabilities or a multi-currency account could simplify part of your payment process.