Most UK businesses use their bank to pay overseas suppliers by default — and it’s one of the most expensive habits in business finance. Banks apply a 2–3% margin above the interbank rate on every currency conversion, plus transfer fees. On £500,000 of annual supplier payments, that’s up to £15,000 per year in avoidable costs. A currency specialist working with FCA-authorised partners charges 0.3–0.8% — and gives you better tools to manage delivery timing and rate risk too.
Why Paying Overseas Suppliers Costs More Than It Should
The visible cost of an international supplier payment is the transfer fee — typically £0–£25 at a UK bank. The invisible cost is the exchange rate margin: the difference between the real interbank rate and the rate your bank actually applies. This margin is where the majority of the cost sits, and it’s rarely disclosed clearly.
On top of this, payments routed through the SWIFT network can pass through multiple correspondent banks, each of which may deduct their own fee before the payment reaches your supplier. The result is your supplier receiving less than the invoiced amount — creating reconciliation issues, relationship friction, and sometimes requiring a top-up payment.
The True Cost: Bank vs Specialist
| Annual Supplier Payments | Bank at 2.5% Margin | Specialist at 0.5% Margin | Annual Saving |
|---|---|---|---|
| £100,000 | £2,500 | £500 | £2,000 |
| £250,000 | £6,250 | £1,250 | £5,000 |
| £500,000 | £12,500 | £2,500 | £10,000 |
| £1,000,000 | £25,000 | £5,000 | £20,000 |
These are margin costs only, before bank transfer fees. For a full breakdown of what UK banks charge, see our guide on the cost of transferring money abroad from the UK.
Should You Pay Suppliers in Their Currency or Sterling?
Paying in your supplier’s local currency is almost always the better commercial decision, for three reasons:
- Your supplier receives the exact invoiced amount — no shortfalls from correspondent bank deductions or unfavourable conversion at their end
- It strengthens the supplier relationship — removing uncertainty about what they’ll receive makes payment disputes less likely
- You control the conversion rate — when you pay in sterling and your supplier converts, they apply their bank’s rate, not yours. Paying in their currency means you choose when and how to convert.
The trade-off is that you take on the FX risk. But as we’ll cover below, that risk is straightforward to manage — and the tools to do so are standard practice for any business working with a currency specialist.
The Main Methods for Paying Overseas Suppliers
SWIFT bank transfer (via your high street bank)
The default for most UK businesses. Reliable but expensive — 2–3% margin plus fees, potentially slower (2–5 working days), and subject to intermediary deductions. Suitable for occasional payments where cost is not a priority. Poor value for regular, high-volume supplier payments.
Currency specialist (recommended for regular payments)
A currency specialist working with FCA-authorised partners provides significantly better exchange rates (0.3–0.8% margin), no platform transfer caps, and direct phone access to a specialist who understands your payment requirements. For businesses making regular supplier payments, this is consistently the most cost-effective option. Your business foreign exchange needs are handled by a real person, not a platform.
SEPA transfer (for Eurozone suppliers)
For payments to suppliers in the Eurozone in euros, SEPA transfers are fast (same or next working day), low-cost, and straightforward. Most UK banks and specialists support SEPA. If you regularly pay European suppliers, SEPA should be your default route for euro payments.
Online platforms (Wise, Revolut Business)
Useful for low-value, frequent payments where simplicity matters more than rate. Typically offer mid-market or near-mid-market rates on smaller amounts. Not ideal for high-value transactions, where the rate difference versus a specialist becomes significant, or where you need a dedicated account manager and hedging tools.
Managing Currency Risk on Supplier Payments
The exchange rate between when you place an order and when you pay can move significantly — especially on longer payment terms of 30, 60, or 90 days. A 3% move in GBP/USD on a $200,000 order changes the sterling cost by £4,600. There are three practical tools to manage this:
Forward contracts
Lock in today’s exchange rate for a supplier payment due in the future — up to 12 months ahead. If you’ve placed a purchase order and know the payment amount and timing, a forward contract fixes your sterling cost immediately. This is the most widely used tool for businesses with regular supplier payments in a fixed foreign currency amount. It removes budget uncertainty and protects margins regardless of what the market does before settlement.
Rate alerts
If your payment timing is flexible, a rate alert notifies you when your target rate is reached. This lets you act at a favourable moment without monitoring the market daily. Useful for ad hoc supplier payments or where you have discretion on timing.
Natural hedging
If your business both receives and pays in the same currency — for example, receiving USD from US customers and paying USD to US suppliers — you can offset the exposure without converting. Only convert the net position. This is the most cost-efficient approach where the currency flows allow it.
Practical Checklist: Setting Up Overseas Supplier Payments
- Collect full payment details before the invoice arrives — supplier’s full legal name, bank name, IBAN, SWIFT/BIC, and bank address. Missing details cause delays.
- Confirm the currency your supplier wants to receive — paying in their local currency avoids unexpected deductions at their end.
- Understand their payment terms — 30, 60, or 90-day terms affect how much rate risk you carry. Longer terms benefit more from forward contracts.
- Check cut-off times for time-sensitive payments — SWIFT payments to China, India, and Australia have earlier cut-offs due to time zone differences. See our guide on the best time to transfer money internationally.
- Keep payment confirmations and MT103 references — if a supplier chases a payment, an MT103 reference lets you trace exactly where it is in the banking chain.
- Set up your currency account before the first payment is due — compliance onboarding takes time for new clients, particularly for first payments over £10,000.
Common Suppliers by Currency: What to Expect
China (CNY/USD)
Chinese suppliers often invoice in USD rather than CNY. China has currency controls that can complicate direct CNY payments from the UK. USD payments via SWIFT are the standard route. Allow 2–3 working days and initiate early in the UK morning given the time zone gap. Banks charge high margins on USD transfers — a specialist adds meaningful value here.
Europe (EUR)
SEPA transfers for Eurozone suppliers are fast (same or next day), cost-effective, and require only an IBAN and BIC. The most efficient corridor for UK businesses. Use SEPA rather than SWIFT for any euro payment to an EEA country.
USA (USD)
SWIFT transfers to US suppliers typically take 1–2 working days. The US has no IBAN system — you’ll need the supplier’s routing number and account number rather than an IBAN. Banks charge significant margins on GBP/USD; a specialist rate saves considerably on larger invoices.
India (INR/USD)
Many Indian suppliers invoice in USD to avoid INR volatility. SWIFT USD payments take 1–2 working days. India has specific banking regulations around inbound foreign currency — ensure your supplier’s bank can receive international SWIFT payments without issues before the first transfer.
Frequently Asked Questions
What is the best way to pay overseas suppliers from the UK?
Use a currency specialist working with FCA-authorised partners rather than your bank. You’ll get a significantly better exchange rate (0.3–0.8% vs 2–3%), dedicated support, and access to forward contracts to protect against rate movements on future payments.
Should I pay my supplier in their currency or in pounds?
Pay in their currency where possible. Your supplier receives the exact invoiced amount, disputes are reduced, and you control the conversion. Manage your FX risk with a forward contract if payment is due in 30+ days.
How long does it take to pay an overseas supplier?
SEPA (euro, EEA): same or next working day. SWIFT (USD, AED, AUD, INR): 1–3 working days. Full delivery time detail in our guide on how long international transfers take.
What details do I need to pay an overseas supplier?
Supplier’s full legal name, bank name and address, IBAN (or account number for US suppliers), SWIFT/BIC code, and the payment currency. Errors in any of these cause delays or returned payments.
How can I protect my business from exchange rate movements on supplier payments?
A forward contract locks in today’s rate for a future payment, eliminating rate risk between order and settlement. For ad hoc payments, a rate alert lets you act when rates are favourable.
What happens if my supplier doesn’t receive the full amount?
Shortfalls are usually caused by correspondent bank deductions along the SWIFT chain. Request an MT103 from your provider to trace the payment. Paying in the supplier’s local currency and using a specialist reduces the likelihood of deductions occurring.
Cambridge Currencies helps UK businesses pay overseas suppliers efficiently — with better rates than banks, no platform to navigate, and a real specialist who understands your payment requirements. We work exclusively with FCA-authorised payment partners, ensuring your funds are fully protected at every stage. Request a free quote or speak to a specialist today.
