International payment rails: what are they and how do they work?

Have you ever wondered how money is transferred digitally, between companies around the world?

street lights representing the payment rails that Andaria uses

Enter ‘payment rails’; a complex set of networks which allows money movement globally, across any entity or location. They link financial institutions and banks, permitting money to travel in between. Amongst the most popular payment rails, one finds:

SWIFT – The dominant mode for cross-border money transfers.
SEPA & SEPA Instant – which are native to the European Union.
Faster Payments, BACS & CHAPS – enabling money movement in the UK.

How do you choose the right payment rails?

Primarily, the selection should be based on these key criteria:

  1. Cost: How much can your business afford paying to receive and send funds?
  2. Location: Where is your business located, from where will you be receiving funds, as well as where you will be sending funds to?
  3. Timing: How quickly do you need your funds to be sent and received?

The SWIFT and SEPA networks are amongst the best-known payment rails on an international scale, allowing firms to make payments to other businesses around the world. But how do you get access to these networks? In essence the bank or Financial Institution (FI) who you have an account with provides you with options to both receive and send funds. Depending on which network your bank or FI is integrated with, you can then use these networks for money movement – all handled seamlessly in the background.

Let’s look at a practical scenario. You are in the UK and need to receive a payment from an EU customer. Both banks are in the Single European Payment Area, so the payment is sent via the SEPA payment rail. If you wish to send money to one of your suppliers in the UK, you will probably choose to use the Faster Payments network, to transfer the money instantly. In order to conduct a payment to your US suppliers, payment is sent via the SWIFT network.

Why aren’t all payments instant?

A frequent issue with B2B transactions is incompatibility – resulting in extra fees and complexity. To tackle this problem, several European countries planned their own payment solutions within national borders, which unfortunately led to a fragmented European landscape. As a solution, several European authorities worked close together to develop a harmonised system.

SEPA Instant and Faster Payments are considered as the preferred means of payments in Europe due to their real-time money transfer possibilities (circa 10 seconds). These are payment networks that let you send and receive bank payments in Euros or GBP, 24/7. Whilst traditional banks typically put transactions into a big batch and submit them to the clearing and settlement processes at the end of the business day, the processing of SEPA Instant and Faster Payments, in contrast, are done on a transaction-by-transaction basis – there’s no waiting around to be batched up.

In the case of SEPA Instant, the benefits of instant cross-border payments in Euros are obvious. Businesses can start moving more quickly than before, which in turn can increase efficiency and competitiveness in the international market. The additional benefit is getting an even better service at the same (or lower) cost.

It is worth noting, however, that the maximum transaction amount for SEPA instant is €100,000 and up to £1,000,000 on the Faster Payments System. Organisations offering the service can set their own limits, depending on how the payment is sent, and the type of account their customer is sending from. These instant payment methods are ideal for any industry, including the likes of c-commerce, igaming, insurance, travel and much more.

How can Andaria help?

With so many options and factors to consider, it is crucial to choose your payments provider prudently. Choosing a partner like Andaria that offers simple API integration, an easy-to-use online banking platform and all the above-mentioned payment rails, is essential. This will allow your business to optimise on speed and cost, within a world-class secure system.

Get in touch with our team of experts on LinkedIn or via e-mail on to explore how an account with Andaria can give you all the tools to handle all your payments needs in a smart, simple and secure way.

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