International Bank Transfers Explained: SWIFT, IBAN, Fees, and How Currency Exchange Works

Sending money across borders can seem complicated: codes that look like gibberish, confusing fees, and exchange rates that change every minute. Yet international bank transfers are a routine part of global life — whether you’re paying a supplier, sending remittances to family, or moving savings to another country. This guide breaks international transfers down into clear pieces: how the systems work, what the key codes mean, where the costs come from, and practical steps to send or receive money with confidence.

How international bank transfers work — the big picture

At a high level, an international bank transfer moves funds from an account held at one bank in one country to an account at a bank in another country. That simple description hides a network of systems and intermediaries that translate currencies, route payments between institutions, and ensure the transfer meets regulatory requirements.

Key steps in a typical international transfer:

1. You instruct your bank or a provider to send an amount in a specified currency to a beneficiary account abroad. The instruction includes beneficiary name, account number (or IBAN), bank identifier (SWIFT/BIC), and sometimes additional reference information.

2. Your bank debits your account and either converts the funds to the destination currency or sends the transfer in the sender’s currency if the recipient bank will handle conversion.

3. If the sending and receiving banks do not have a direct relationship, one or more correspondent banks act as intermediaries to route the payment.

4. The receiving bank credits the beneficiary’s account once funds arrive and any required checks are completed.

Different payment rails and systems (SWIFT, SEPA, Faster Payments, ACH alternatives, specialized remittance networks) determine speed, cost, and how conversion is handled.

Common types of international transfers and payment rails

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT is the most widely used messaging network for international bank transfers. It doesn’t move money itself; instead it sends secure payment instructions between banks. The SWIFT message tells the recipient bank that funds are coming, who the sender and beneficiary are, and how to route the payment. Actual settlement of funds happens through correspondent banking relationships or settlement networks.

SEPA (Single Euro Payments Area)

SEPA is used for euro-denominated transfers within participating European countries and makes cross-border euro transfers as straightforward as domestic transfers. SEPA transfers are usually low-cost or free and settle quickly compared with older international rails — but they only work for euros within the SEPA zone.

Domestic faster-payment systems with international gateways

Many countries have instant or near-instant domestic systems (e.g., UK Faster Payments, U.S. RTP for some transfers). These can be connected to international networks or fintech providers to enable near-real-time cross-border payments in certain corridors.

Proprietary and fintech networks

Companies like Wise, Revolut, Payoneer, and others use a combination of local bank accounts, currency conversion pools, and global rails to deliver cheaper and faster transfers than many traditional banks. They often offer better exchange rates and transparent fee structures.

SWIFT codes and BICs explained simply

When a bank asks for a SWIFT code or BIC, it’s requesting a standardized bank identifier used across the SWIFT network. A SWIFT/BIC code typically looks like this: AAAABBCCDDD.

Breaking it down:

– The first 4 letters identify the bank (bank code).
– The next 2 letters are the ISO country code (e.g., GB, US, FR).
– The next 2 characters identify the location (city or region).
– The last 3 characters are optional and specify the branch.

Including the right SWIFT/BIC ensures the payment message reaches the correct bank and branch. Mistakes can cause delays or returns.

IBAN: What it is and why it matters

IBAN stands for International Bank Account Number. Many countries, especially in Europe, use IBANs to standardize account numbers for cross-border payments. An IBAN encodes the country, check digits, bank code, and the account number. Example: GB29 NWBK 6016 1331 9268 19 for a UK account.

IBAN benefits:

– Reduces errors and rejected transfers because of standardized structure and check digits.
– Speeds up processing for euro and many other currency transfers.
– Makes it clearer which bank and account the funds should go to.

Not every country uses IBAN; in those cases, you’ll provide local account numbers and other bank identifiers (like ABA routing numbers in the U.S.).

How currency exchange works in bank transfers

Currency conversion is a core part of many international transfers. Banks and providers perform conversions either at the sending bank, the receiving bank, or via a separate FX provider. The quoted exchange rate determines how many units of the recipient currency are received.

Key elements in conversion:

– Interbank rate: the wholesale rate banks use when trading large amounts of currency. Retail customers rarely get this exact rate.
– Markup or spread: the difference between the interbank rate and the rate offered to you. This is a primary way banks and providers make money on FX.
– Commissions or fixed fees: some providers also charge a flat fee or percentage in addition to the spread.

When initiating a transfer, confirm whether the rate is fixed at the time you send or if it will be determined when the receiving bank converts the funds. A fixed rate gives certainty; a variable rate may lead to more or fewer funds reaching the beneficiary depending on market moves.

Why banks and providers charge what they do — unbundling the costs

Several cost components explain the total price of an international transfer:

– Outgoing fee: charged by the sending bank for initiating the transfer.
– Incoming fee: sometimes charged by the receiving bank to credit the beneficiary.
– Correspondent/intermediary fees: if funds pass through one or more correspondent banks, each may deduct fees.
– FX spread: the hidden margin applied to currency conversion.
– Regulatory/compliance fees: costs associated with KYC checks, screening against sanctions lists, and reporting requirements.

Some banks adopt a “OUR” vs “BEN” vs “SHA” notation: which party bears intermediary fees. “OUR” means the sender pays all fees (so the beneficiary receives the full amount), “BEN” means the beneficiary bears fees, and “SHA” means fees are shared. Providers have varying default approaches.

Transfer speeds and what affects them

Transfer times vary from minutes to several business days. Factors include:

– Payment rail: SEPA and some instant rails are fast; SWIFT transfers traditionally took 1–5 business days, though SWIFT gpi and fintech rails often deliver faster times.
– Currency conversion: if conversion is required and queued, it can add time.
– Correspondent bank chain: more intermediaries usually mean longer processing time.
– Compliance and verification: transfers flagged for additional checks delay funds.
– Cutoff times and weekends: banks process transfers during business hours, and weekends/holidays can add days.

In many common corridors, modern providers can deliver same-day or next-day transfers, but always check expected delivery windows.

SWIFT gpi and better transparency

SWIFT gpi (global payments innovation) is an upgrade to the SWIFT network focused on speed, transparency, and traceability. Member banks commit to faster processing and provide end-to-end tracking. Benefits include:

– Faster crediting to beneficiaries in many cases.
– A tracking reference that lets senders and recipients trace the payment status.
– Visibility into fees deducted at each step and the exchange rate applied.

Ask your bank whether they send payments via SWIFT gpi, and request the gpi tracking number (UETR) to monitor progress.

Correspondent banking and why some transfers have many stops

Not every bank has accounts with banks in every currency and country. When two banks don’t have a direct relationship, they use correspondent banks — intermediaries that hold accounts and route payments. Each intermediary may take a fee and adds processing time. This correspondent chain explains why some transfers incur multiple fees and take longer.

Large global banks maintain extensive correspondent networks and can route payments more directly. Smaller banks may rely on third-party correspondents, adding cost and time.

Documentation, compliance, and screening rules

International transfers are subject to Know Your Customer (KYC), anti-money laundering (AML), and sanctions screening. Banks must verify sender and recipient identities and screen transactions against sanctions lists and transaction typologies that may indicate illegal activity.

Common requirements:

– Full name and address for sender and beneficiary.
– Accurate account number or IBAN and bank identifier (SWIFT/BIC).
– Purpose or payment reference, especially for business transactions.
– Source of funds or supporting invoices for larger transfers or regulatory purposes.

Omission or mismatch of information often results in delays or additional documentation requests. Always be clear about the payment purpose when sending funds to avoid holds.

Tracking and proof: MT103 and other confirmations

MT103 is a standardized SWIFT payment confirmation message that provides a full audit trail for a specific transfer, including sender and receiver details, amounts, and fees. Requesting an MT103 from your bank can help prove payment has been initiated and trace where a payment might have stalled.

Fintechs and SWIFT gpi-enabled banks often provide tracking links or unique reference numbers so you can see statuses like “in process,” “in transit,” or “credited.” This reduces uncertainty compared with older rails where you might only know if the beneficiary received funds.

How banks and providers profit from international transfers

Profit sources include:

– FX spreads: applying a margin to the interbank exchange rate.
– Transaction fees: fixed or percentage-based fees charged to senders or recipients.
– Account and service fees: premium services for faster delivery or guarantees.
– Interest on float: in some setups, providers can earn interest on funds while they’re in transit or pooled in local accounts.

Because FX spreads are often opaque, the biggest difference between providers is frequently the exchange rate rather than the visible transfer fee.

Choosing between a bank and a fintech provider

Traditional banks and fintech providers each have strengths and weaknesses:

– Banks: trusted, regulated, and often better for very large corporate transfers or countries with complex compliance needs. They may be slower and more expensive for everyday personal transfers.
– Fintechs: generally offer better exchange rates, lower fees, and fast transfers for many corridors. They excel at transparency and user experience but may have limits on amounts and not operate in every country.

Consider the corridor, transfer amount, speed requirement, and whether you need the added comfort of dealing with your primary bank.

How to reduce costs and get the best value

Practical tips to minimize fees and maximize the amount received:

– Compare total cost (fee + exchange rate) not just the advertised transfer fee.
– Use local currency rails where possible (e.g., SEPA for euros) to avoid conversion markups.
– Opt for “OUR” payments if you need the beneficiary to receive the exact amount, but be prepared to cover higher fees.
– Use fintech providers if they offer significantly better rates for your corridor.
– Consolidate transfers to reduce per-transfer fixed fees when timing allows.
– Negotiate with your bank for better rates if you’re a high-value customer or business client.
– Avoid unnecessary conversions by sending funds in the currency the beneficiary wants to receive.
– Be precise with beneficiary details to avoid return fees caused by errors.

Common problems and how to resolve them

Payment delayed or stuck

Delays often happen due to missing beneficiary details, compliance checks, or intermediary banks taking time. Ask your bank for the SWIFT reference or MT103 so you can trace where the payment is stuck.

Beneficiary didn’t receive full amount

Check whether intermediary fees were deducted and whether conversion occurred at the receiving bank. Clarify who agreed to bear fees (sender or beneficiary). Request a fee breakdown from your bank.

Payment returned

Common reasons include incorrect account numbers, mismatched beneficiary names, sanctions screening, or closed accounts. A returned payment typically comes with a reason; work with your bank to correct details and resend.

Unauthorized or fraudulent transfer

Contact your bank immediately. Many banks have limited liability windows to attempt to recall funds, especially if fraud is reported quickly. Provide transaction references and evidence. For scams, also file reports with local law enforcement and relevant consumer protection agencies.

Special topics: remittances, business payments, and payroll

Remittances are often frequent, smaller-value transfers by individuals to family in other countries. Low-cost remittance corridors have emerged due to fintech competition, but some corridors remain expensive due to limited competition, complex regulation, or high correspondent costs.

For businesses, international payments include supplier invoices, payroll for remote staff, and cross-border investments. Businesses often benefit from volume-based pricing, hedging tools, and payment automation that reduces operational friction and FX risk.

Limits, cutoffs, and settlement timing to watch

Understand daily and per-transaction limits, as well as cutoff times for same-day processing. Some banks process outgoing international transfers only during limited windows. If you’re on a critical deadline, confirm expected arrival times and consider faster rails or premium services that guarantee faster delivery.

Security and fraud prevention in cross-border payments

International transfers attract scams because reclaiming funds is harder once they cross borders. Protect yourself by:

– Verifying beneficiaries independently (especially for large business payments).
– Using confirmed payment channels and two-factor authentication when authorizing transfers.
– Being wary of urgent last-minute changes to payment details — verify changes through a trusted channel.
– Keeping documentation and transaction references to support disputes or recalls.

Many banks also employ transaction monitoring systems that flag unusual behavior, which can delay legitimate transfers but helps prevent fraud.

When to use foreign exchange hedging tools

If you conduct regular large payments in foreign currency, hedging tools such as forward contracts, limit orders, and options can protect against adverse currency movements. These tools are common for businesses that need predictability in costs. For one-off or small personal transfers, hedging is typically not cost-effective.

International transfers to and from the U.S. — special considerations

U.S. banks commonly use ABA routing numbers for domestic transfers and SWIFT/BIC for international. The U.S. banking system has extensive correspondent relationships, but some foreign banks maintain limited U.S. access, leading to intermediation fees. Also note that U.S. regulations on sanctions and reporting mean transfers involving U.S. dollars often undergo additional scrutiny.

Emerging trends: instant cross-border payments, CBDCs, and blockchain

The cross-border payments landscape is evolving. SWIFT, central banks, and fintechs are investing in faster, more transparent rails. Central Bank Digital Currencies (CBDCs) could enable programmable cross-border payments and settlement in central-bank money, reducing reliance on correspondent banking. Blockchain and tokenized assets offer promise for near-instant settlement and reduced intermediaries, but regulatory, liquidity, and interoperability challenges remain.

For now, the most practical change many consumers see is improved fintech options offering cheaper, faster transfers and growing adoption of SWIFT gpi for better traceability.

Checklist for making a smooth international transfer

Before you hit send, ensure you have:

– Correct beneficiary full name and address.
– Accurate IBAN or account number and SWIFT/BIC, or local bank identifiers as required.
– Clear payment reference or invoice number so the recipient can match the funds.
– Agreed currency (who will pay the conversion and which currency the beneficiary should receive).
– Confirmed expected fees and the total amount the beneficiary will receive.
– An understanding of expected transfer time and tracking reference if available.

How to resolve disputes and request refunds

If something goes wrong, act quickly. Gather transaction references, copies of instructions, and any correspondence. Contact your sending bank and, if needed, the recipient’s bank. If funds were sent in error or fraudulently, banks may attempt recalls, but recovery is not guaranteed and depends on the cooperation of intermediary and receiving banks and local laws. Escalate to national financial regulators or ombudsman services if the banks cannot resolve the issue.

Practical examples — common scenarios

Paying an overseas supplier

Agree on currency and payment terms in advance. For predictable costs, negotiate who bears fees and consider using a forward contract if regular payments expose you to FX risk.

Sending money to family abroad

Compare remittance providers and banks for the specific corridor. Small, frequent transfers may be cheaper via specialized remitters or apps; larger lump-sum transfers may be cheaper through bank special rates or negotiated business accounts.

Receiving salary from a foreign employer

Clarify whether the employer will pay in your local currency or pay you in a foreign currency to be converted; also confirm payment timing, tax reporting implications, and any payroll withholding requirements.

Questions to ask your bank or provider

Before initiating a transfer, ask:

– What is the total cost (fees + exchange rate markup)?
– What is the expected delivery time?
– Will the money be converted by you or the recipient’s bank?
– Which banks or intermediaries will be involved?
– How do you handle refunds or recalls if something goes wrong?
– Do you provide a tracking reference (UETR or MT103)?

With these answers, you can compare providers more effectively and choose the best option for speed, cost, and certainty.

International transfers no longer need to be mysterious. By learning the roles of SWIFT, IBAN, correspondent banks, and exchange rate spreads, you can choose the most cost-effective route, avoid common pitfalls, and protect yourself from fraud. Whether you stick with your traditional bank for convenience or use a fintech for lower costs, the key is to compare total costs, confirm beneficiary details, and keep transaction references until the payment is complete. That attention to detail can save time, money, and stress when moving funds around the globe.