Your International Payment Arrived. So Why Did You Receive Less?

An international payment can lose value before it reaches the recipient, even when the sender has paid the amount shown on the invoice. The difference can come from the exchange rate, transfer fees, intermediary charges, or a combination of these costs. Regular international payments in the UK can add up quickly, especially when you’re losing a little on fees or exchange rates each time.

A £10,000 Payment Can Tell a Very Different Story

Imagine a UK design company paying a US supplier £10,000. At a reference rate of £1 = $1.30, the supplier should receive $13,000. But if the provider applies a 2% exchange-rate markup, the effective rate falls to about $1.274, producing roughly $12,740.

That is a $260 difference before any separate payment fees.

The example shows why a visible transfer fee does not always represent the full cost. The FCA has warned that payments can appear to have no fixed fee while costs are built into the exchange rate.

The Exchange Rate Can Matter More Than the Transfer Fee

Businesses often compare payment providers by looking at the transfer fee first. That makes sense because a £5 or £10 charge is easy to see, while an exchange-rate difference can be harder to notice because it is built into the conversion.

Consider the £10,000 example again. Provider A charges a £5 transfer fee and offers an effective rate of $1.274 per pound, producing about $12,740. Provider B charges £15 but offers $1.295 per pound, producing about $12,950. Despite the higher fee, Provider B could leave the business with around $210 more from the conversion.

This is why the transfer fee should not be the only comparison. The exchange rate matters just as much, particularly for businesses making regular international payments. A small difference on one transaction can become a high cost when repeated across dozens of payments.

Where Can the Missing Money Go?

An international payment can involve several stages. Each stage can affect the final amount.

The main areas to check are:

• Exchange-rate markup: The provider may apply a rate that differs from the reference market rate.

• Transfer fee: A fixed or variable charge may apply to the payment.

• Intermediary bank fees: Another bank involved in routing the payment may deduct a charge.

• Recipient bank charges: The receiving bank may apply its own fee.

• Currency conversion: Converting money from one currency into another can change the amount received.

• Payment instructions: The way fees are allocated can affect how much reaches the recipient.

The FCA's guidance on international payment pricing specifically points to exchange rates, markups, fixed fees, variable fees, and intermediary or recipient-bank fees as costs that can affect the final amount.

Why “No Transfer Fee” Does Not Always Mean Free

A provider may advertise no separate transfer fee, but the cost can still be built into the exchange rate. Suppose the reference rate is £1 = $1.30, while the provider offers £1 = $1.26. On a £10,000 conversion, that difference is $400.

There may be no visible transfer fee, yet the exchange rate creates a significant cost. The FCA says firms should clearly show exchange rates, markups and other relevant charges so businesses can understand the total cost.

The Timing of the Conversion Also Matters

Currency rates change, so the sterling cost of the same foreign-currency payment can vary from day to day.

If a supplier invoices your business for $13,000, a small exchange-rate movement can change how much you need to pay in pounds. You may need to decide whether to convert immediately, hold the foreign currency, or convert when payment is due.

The right approach depends on cash flow, payment frequency, currencies used and currency exposure. A good business payment solution in the UK should make these costs easier to understand.

Receiving Money Can Create the Same Problem

The issue is not limited to businesses sending payments abroad.

A UK company might invoice a US customer for $20,000. The customer pays the full invoice, but the business receives less after conversion or other charges. This can create confusion during reconciliation.

The accounts team sees a $20,000 invoice and expects the equivalent amount to appear in the business account. The actual amount may be lower.

Instead of treating this as a minor banking issue, businesses should understand the complete payment route.

Ask:

• What currency is the customer paying in?

• What currency will the business receive?

• Where does the conversion happen?

• What exchange rate is being used?

• Are any fees deducted before the money arrives?

These questions become more important as international sales grow.

What Should Businesses Compare Before Choosing a Provider?

Choosing an international payment provider in the UK should not come down to the lowest advertised fee. Compare the exchange rate, fixed and variable charges, intermediary or recipient-bank fees, and the amount the recipient will receive. 

Also consider how often your business makes international payments. A company making occasional payments may prioritise simplicity, while businesses making frequent, high-value payments may focus more on FX costs, multiple currencies and payment management.

Look at the Payment Process as a Whole

The way a business handles overseas payments can influence more than the cost of one transaction. It can affect supplier relationships, cash planning and how easily the finance team keeps track of money moving across borders.

As international payments in the UK become a regular part of day-to-day business, payment arrangements deserve a review. What works for a company making five overseas payments a month may not be suitable once that number becomes fifty.