International payments for business

An international payment costs the transfer fee plus the margin the provider builds into the exchange rate, and on a large payment the margin can cost far more than the fee. Banks and specialist payment firms both make these payments. Money held at a payment or e-money firm is protected by safeguarding under FCA rules, which works differently from the Financial Services Compensation Scheme.

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What an international payment costs

Four charges can sit on a payment abroad. The sending provider's transfer fee is the visible one. The exchange rate margin is the gap between the rate you are given and the mid-market rate, the midpoint between buying and selling prices on the wholesale currency market, and it is taken from the amount exchanged. Intermediary banks that pass the payment along the chain can deduct their own fees. And the receiving bank may charge the recipient.

On a bank's international payment instruction you choose who pays the fees. SHA shares them: you pay your bank's fee and the recipient pays theirs. OUR means you pay all the fees, so the recipient receives the full amount. BEN means the recipient bears all the fees, which are deducted from the payment. If a supplier's invoice must arrive in full, OUR is the code that does it.

The margin grows with the size of the payment and the fee does not. A £15 fee on a £100,000 payment is 0.015% of it; a 2% margin on the same payment is £2,000. A business that pays foreign suppliers every month pays the margin every month, so the rate it gets matters more than the fee it sees.

The exchange rate margin

Illustrative example

A UK company pays a supplier invoice of €100,000. Assume a mid-market rate of 1.1600 euros to the pound, a bank margin of 2.5% and a specialist payment firm's margin of 0.5%. Transfer fees are left out.

Cost at the mid-market rate of 1.1600: £86,206.90
Bank rate after a 2.5% margin, 1.1310: £88,417.33
Specialist rate after a 0.5% margin, 1.1542: £86,640.10
Difference on one payment: £1,777.23

The margin is built into the quoted rate and does not appear as a separate charge on the statement. To find it, compare the rate you were given with the mid-market rate at the time of the payment.

Two accountants going through figures at a desk

Banks and specialist payment firms

A bank sends international payments from the business current account, and money waiting to be sent sits in a deposit covered by the Financial Services Compensation Scheme. Payment firms that specialise in currency are authorised by the FCA as payment institutions or e-money institutions. The business sends pounds to its account with the firm, and the firm exchanges and pays out at the rate it quotes for each trade. Some offer accounts that hold several currencies, so a business paid in euros can pay euro suppliers without exchanging the money twice.

Swoop's platform compares international payment providers and runs an analysis of what the business pays for foreign exchange, as part of the same savings check that covers banking, cards, insurance and energy.

Check the provider on the FCA register before sending money. The register shows whether it is an authorised payment institution, an e-money institution or a small payment institution. The type matters: a small payment institution does not have to safeguard customer money.

Bank or payment firm

	Bank	Payment or e-money firm
Protection for money held	Financial Services Compensation Scheme, up to £120,000 per eligible depositor per banking licence	Safeguarding under FCA rules. Small payment institutions do not have to safeguard
Exchange rate	The bank's rate, with its margin built in	The firm's rate, with its margin built in
If the firm fails	The compensation scheme pays eligible depositors up to the limit	An administrator returns safeguarded money. The FCA warns it can take time and may not be the full amount
Complaints for eligible small businesses	Financial Ombudsman Service	Financial Ombudsman Service

Currency risk and forward contracts

Currency risk arises when the business agrees a price in one currency and pays or gets paid later. Take a UK importer that agrees to pay a US supplier $200,000 three months from now, when a pound buys $1.30. At that rate the invoice costs £153,846.15. If the pound falls 5% to $1.235 by the payment date, the same invoice costs £161,943.32: £8,097.17 more, all of it out of the margin on the goods.

A forward contract fixes the exchange rate today for a payment on a set date or within a set window. The forward rate is the current rate adjusted for the difference in interest rates between the two currencies, plus the provider's margin. The business gives up any gain if the pound rises, and it knows the sterling cost of the invoice from the day it books the forward, so it can price its own sales.

Providers can ask for a deposit when you book a forward, and for more if the rate moves against the contract before it settles. A forward is binding: if the order behind it is cancelled, the business still has to settle the forward, and closing it early can cost money if the rate has moved. Book forwards against firm orders and invoices, for amounts the business is sure to need.

Other ways to reduce the risk are invoicing customers in pounds, matching income and costs in the same currency through a currency account, and buying currency as soon as an order is firm. An exporter waiting on payment from overseas customers can look at export finance and trade finance.

How safeguarding differs from deposit protection

Safeguarding and deposit protection

Money a bank holds as a deposit is covered by the Financial Services Compensation Scheme, up to £120,000 per eligible depositor. Money held by a payment or e-money firm is outside that scheme. The firm must safeguard it, by keeping it in a separate safeguarding account at a bank or covering it with an insurance policy or comparable guarantee. If the firm fails, the FCA says getting the money back may take time and may not return the full amount, because the administrator's or liquidator's costs can be taken from it. Stricter FCA rules took effect on 7 May 2026, adding reconciliations of safeguarded money, a resolution pack to help return funds in an insolvency, and annual safeguarding audits for firms holding £100,000 or more of customer money.

Questions people ask

What is the exchange rate margin on an international payment?

It is the difference between the mid-market rate, the midpoint between wholesale buying and selling prices, and the rate the provider gives you. The provider keeps the difference. On a €100,000 payment at an assumed mid-market rate of 1.16, a 2.5% margin costs about £2,210 against the mid-market cost, and a 0.5% margin about £433. Compare the rate you were given with the mid-market rate at the time.

Is my money protected if a currency payment firm goes bust?

Not by the Financial Services Compensation Scheme, which covers bank deposits. An authorised payment institution or e-money institution must safeguard customer money by keeping it separate from its own, so an administrator can return it. The FCA warns that this can take time and may not return the full amount. A small payment institution does not have to safeguard, so check the firm's status on the FCA register.

What is a forward contract in foreign exchange?

An agreement to exchange a set amount of currency at a rate fixed today, for settlement on a future date or within a window. It protects the sterling cost of a known payment from a fall in the pound, and gives up any gain if the pound rises. The provider can ask for a deposit and for more if the rate moves against you. The business must settle it even if the underlying order is cancelled.

What do SHA, OUR and BEN mean on an international payment?

They set who pays the bank charges. SHA shares them: you pay your bank's fee and the recipient pays their bank's fee. OUR means you pay every fee, including intermediary banks', so the full amount arrives. BEN means the recipient pays all the fees, which are deducted from what arrives. Use OUR when a supplier's invoice has to be settled in full.

Is it cheaper to make business payments abroad through a specialist than a bank?

It depends on the margin and fees each one charges for your payments, and on how they protect money held. Compare the total sterling cost of the same payment, at the same moment, from each provider, including the margin built into the rate. A bank deposit is covered by the Financial Services Compensation Scheme; money at a payment firm is safeguarded, which works differently if the firm fails.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

All business funding

International payments for business

What an international payment costs

The exchange rate margin

Banks and specialist payment firms

Bank or payment firm

Currency risk and forward contracts

How safeguarding differs from deposit protection

Safeguarding and deposit protection

Questions people ask

Business savings

Business savings

Export finance

Trade finance

Business bank accounts

International payments for business

What an international payment costs

The exchange rate margin

Banks and specialist payment firms

Bank or payment firm

Currency risk and forward contracts

How safeguarding differs from deposit protection

Safeguarding and deposit protection

Questions people ask

Business savings

Business savings

Export finance

Trade finance

Business bank accounts

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