The Hidden Costs of Cross-Border Payments: How to Reduce Them

For companies looking to reduce these costs, focusing on the payment flow as a whole, rather than just on visible charges, can yield significant savings.

What are cross-border payments?

Cross-border payments refer to transactions where the payer and the recipient are in different countries, which may require currency exchange and one or more intermediaries, depending on the payment corridor and provider model. These payments are critical in B2B sectors for supplier payments, marketplace settlements, and treasury operations.

Unlike domestic payments, cross-border transactions often involve multiple layers of financial infrastructure: payment service providers, correspondent banks, clearing and settlement systems, and compliance controls such as AML/KYC may be involved, depending on the route used.

For B2B businesses, cross-border payments fees are not just transaction charges. The costs include everything from compliance fees to delayed settlement times, which compound over multiple transactions and affect operational efficiency. These costs are exacerbated when businesses rely on inefficient methods for accepting online payments or when they face long settlement cycles in global payouts.

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How do cross-border payments work?

A typical cross-border payment journey consists of several stages:

1. Payment initiation: The sender submits a request to their bank or PSP.
2. Sanctions and compliance checks: The transaction undergoes Anti-Money Laundering (AML) and Know Your Customer (KYC) screening.
3. Routing: The payment is sent through the relevant bank or payment network, which may include correspondent banks.
4. Currency conversion: If required, the provider applies an FX rate that may include a markup over the mid-market rate.
5. Clearing: The payment is cleared through the required intermediary banks.
6. Settlement: The beneficiary bank receives the funds after clearing and any intermediary processing is completed.

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How currency conversion fees can add up

The FX conversion is one of the most impactful costs in cross-border payments. While the fee for transferring funds may appear small, the FX spread (the difference between the wholesale exchange rate and the rate applied by the bank) can significantly affect the final amount received by the beneficiary.

Here are some of the key factors that affect FX costs:

• The conversion rate: The spread added by banks and intermediaries above the mid-market rate.
• Market liquidity: In less liquid corridors, conversion rates can be more volatile, leading to higher spreads.
• Multiple conversions: If a business requires multiple currency exchanges (for instance, from USD to EUR, then to JPY), each conversion adds an additional spread.

These hidden fees often go unnoticed, but they can accumulate over several payments, especially if the conversion is handled by multiple intermediaries or forced through one provider. This makes it crucial for businesses to explore more efficient ways of accepting online payments, which could significantly reduce unnecessary conversion fees.

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How much do cross-border payments actually cost for businesses and what hidden costs are there?

In reality, the true cost of cross-border payments often includes much more than just the headline fee. Besides the visible charges, hidden costs include:

• Transfer fees: Deducted by banks and intermediaries.
• FX spreads: The difference between the market exchange rate and the rate applied by the financial institutions.
• Settlement delays: Cross-border payments typically take longer to process, which impacts cash flow.
• Reconciliation costs: Manual efforts to track down incomplete payment references or resolve discrepancies.

A business may believe it's paying a low visible fee for a transfer, but inefficiencies like settlement delays and FX markup can make the effective cost higher than expected.

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International bank transfers: how SWIFT payments are reducing conversion rates

International payments often use SWIFT as a messaging network, not a payment processor. However, SWIFT payments rely on correspondent banking relationships, which can reduce the conversion rates for cross-border payments. In many cases, SWIFT transfers still rely on correspondent banks, which can add fees, FX markups, and processing delays.

By exploring alternative methods for online payments or leveraging real-time payment systems, businesses can reduce these inefficiencies and potentially save on fees.

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3–7 day settlements for global suppliers

One of the hidden costs of cross-border payments is the delayed settlement time. Settlement times vary by corridor and provider, and they can range from same-day or next-day in some cases to several business days in others. Traditional cross-border wires often take one to five business days, depending on the route, currencies, and any checks along the way. During this period, businesses must manage liquidity buffers to cover the time lag.

Some of the operational costs associated with delayed settlement include:

• Working capital drag: Businesses must keep extra cash reserves to cover the waiting period.
• Increased administrative workload: Teams spend more time tracking and reconciling payments.
• Disruption of supplier relationships: Suppliers may request expedited payments or higher fees to offset the delay.

This delay can be minimized by switching to a real-time payment system, which accelerates settlement and improves cash flow predictability. In practice, faster settlement depends on the specific market, network, and provider connectivity.

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FX losses in emerging markets

Emerging markets are more exposed to FX risks due to the higher volatility of their currencies. Even if the visible cost of a cross-border transaction appears low, the underlying FX losses in these regions can significantly impact profitability.

Some emerging market challenges include:

• Higher spreads: Due to lower liquidity in some markets, FX spreads can widen, meaning businesses lose more value during conversion.
• Currency volatility: Currency rates can fluctuate rapidly, leading to unexpected losses if settlements happen at unfavorable times.
• Multiple conversion points: Payments to or from emerging markets often pass through multiple intermediaries, each adding a margin to the FX rate.

These factors can make the cost of cross-border payments in emerging markets far more significant than anticipated. By using more direct routes, businesses can avoid some of these hidden costs.

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How to reduce cross-border fees

There are several ways businesses can reduce the costs associated with cross-border payments:

• Use local payment rails: Where available, businesses can use local payment rails or provider networks that reduce the number of intermediaries involved. The best option depends on corridor coverage, regulation, currencies, and settlement needs.
• Negotiate FX rates upfront: Transparency in FX rates is key. Negotiate fixed or transparent rates with your bank or payment provider.
• Optimize payment routing: Use payment orchestration platforms to streamline the routing process, reducing unnecessary intermediaries and lowering associated fees.
• Speed up settlements: Working with partners who offer real-time settlement options can reduce the liquidity buffer needed and lower operational overhead.

By integrating efficient payment infrastructure, businesses can minimize cross-border payment fees. Implementing solutions like real-time payment systems enables faster and more cost-effective transactions.

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How Limepay can help B2B cross-border payments

Limepay offers a range of payment solutions designed to address the inefficiencies that often increase the cost of cross-border payments. By offering local payment methods, global payout solutions, and fast payment processing, Limepay helps reduce the typical costs associated with international transactions.

Key benefits of Limepay's cross-border payment solutions include:

• Local payment methods: Enable your business to collect payments locally, reducing unnecessary currency conversion costs.
• Real-time payment systems: Limepay supports real-time payment systems, ensuring fast settlement and reducing liquidity burdens.
• Global payouts: Distribute payments worldwide via global payouts, bypassing traditional correspondent banking systems.
• Custom APIs: Limepay's API ensure seamless, scalable integration with existing business systems, improving payment efficiency.

By redesigning cross-border payment flows, Limepay enables businesses to reduce both visible and hidden costs, improving cash flow and operational efficiency.

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References

Bank for International Settlements. (2019, May 27). Press release: CPMI publishes new data on correspondent banking networks showing 20% reduction in relationships over seven years. https://www.bis.org/press/p190527.htm

Bank for International Settlements. (2020, August). New correspondent banking data - the decline continues at a slower pace*. https://www.bis.org/cpmi/paysysinfo/corr_bank_data/corr_bank_data_commentary_2008.htm

Financial Action Task Force. (2025, June). FATF updates standards on Recommendation 16 on payment transparency. https://www.fatf-gafi.org/en/publications/Fatfrecommendations/update-Recommendation-16-payment-transparency-june-2025.html

Financial Stability Board. (2025). Cross-border payments. https://www.fsb.org/work-of-the-fsb/financial-innovation-and-structural-change/cross-border-payments/

PCI Security Standards Council. (2024). PCI Data Security Standard (PCI DSS). https://www.pcisecuritystandards.org/standards/pci-dss/

SWIFT. (2026). ISO 20022 for financial institutions: Focus on payments instructions. https://www.swift.com/standards/iso-20022/iso-20022-financial-institutions-focus-payments-instructions