A cross-border wire, and where the money really goes

1. 1

   message

   Your company instructs its Canadian bank to pay a US supplier. An instruction in Canadian dollars; nothing has crossed a border yet.

2. 2

   money

   The bank converts your CAD to USD at its own rate. The FX spread and the wire fee are taken here, which is why the supplier often receives less than you'd expect.

   ▸Read the margin · 1 note

   ▲Where people get burned

   The fee is in the rate, not the line item

   The visible wire fee is usually small next to the FX spread baked into the exchange rate, and intermediary correspondents can deduct their own charges along the way. The result is that the supplier receives materially less than you sent. Quoting someone the wire fee while ignoring the spread is exactly where senders, and the people waiting to be paid, get burned.

   • Correspondent banking ↗ · Bank for International Settlements
3. 3

   message

   Your bank sends a SWIFT message. This is the part people picture as 'the money flying overseas,' but SWIFT only carries instructions, never funds.

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   ✗Myth vs reality

   SWIFT doesn't move money

   Myth: SWIFT sends your money abroad. Reality: SWIFT is a messaging network. It carries the payment instruction (an MT103, or its ISO 20022 successor pacs.008), not funds. The money itself moves through the accounts banks hold with each other; the message just tells them to do it.

   • SWIFT messaging (MT103 / ISO 20022) ↗ · Swift (operator)
4. 4

   message

   The message reaches a US correspondent bank that holds US dollars on your bank's behalf.

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   ❖Why we're sure

   Why we're sure

   The correspondent-banking model, nostro and vostro accounts, and SWIFT operating as messaging rather than value transfer are documented by the messaging network and by the Bank for International Settlements.

   • Correspondent banking ↗ · Bank for International Settlements
5. 5

   moneySame day (nostro books)← the gap most people miss

   The actual money moves here: your bank's US dollar account at the correspondent (its nostro) is debited to cover the payment. The 'overseas transfer' is really a debit to a pre-funded US account.

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   ↳Going deeper

   What a nostro account is

   Your bank keeps a US dollar account at a US bank: its nostro. A cross-border payment is a debit to that pre-funded account, not dollars travelling across the ocean. If your bank has no direct relationship with the destination bank, the payment hops through a chain of correspondents, and each link can add time and cost.

   • Correspondent banking ↗ · Bank for International Settlements
6. 6

   moneyReal-time

   The correspondent pays the supplier's US bank, settling in US dollars on domestic rails.

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   ↳Going deeper

   Where settlement really happens

   The 'international' leg resolves into a domestic US dollar settlement: the correspondent pays the beneficiary bank over US rails in central-bank or clearing money. Cross-border, in practice, is two domestic legs joined by a messaging network and a pre-funded account.

   • Payment systems & settlement ↗ · Federal Reserve
7. 7

   moneyT+0 (before wire cutoff)

   The supplier's bank credits their account. From their side, dollars simply arrived.

See it in the studio

The same grounded flow, as a live diagram you can re-route, dim to one layer, or push to its exception path.

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