Understanding Our Global Payment Systems

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We send money electronically and in person every day, but do we recognize how this system works? Specialty systems are required for individuals and banks to send and receive money, including sending cross-border payments. 

With finance APIs, functionality, and use cases on the rise, it’s important to sit back and reflect on how this system works. After all, while API calls make financial transfer technology easy, it still requires a strong system of technology, compliance, and people to work. 

From transferring money abroad to financial automation, here’s how our global payment systems work:

Tapping Into Global Payment Processing

Payment systems in general are standard operating procedures, stakeholders, and rules for sending money based on global and geographical contexts. These systems typically operate within national borders, while also supplying processes for sending money across those borders. 

These systems are in place in order to standardize the sending of money and to keep the systems tightly regulated. In the U.S., we most commonly interact with the Automated Clearing House (ACH) for bank-to-bank transfers but also with the Federal Reserve which regulates our money and Global Payment Processing. Each country has its own payment system, managing bank, and regulations, and anyone who wishes to participate in that system must comply with the necessary standards. 

International money transfers are possible through international wire transfers, and these transfer processes are easier through the SWIFT network. SWIFT is the messaging system for global payment providers and allows messages to support ongoing money transfers for expedited services. SWIFT and payment APIs allow for easier international money transfers and more open banking.

How Global Payment Processing Works

Global payment processing is a complicated and multi-stage process to get money from one person to another across borders. This is different from the global payment systems which operate in each nation, which we cover in more detail below. 

Global payment processing is the primary way that you’ll get money across these borders and into the other payment systems. 

How this payment process works will depend on the vendors and payment methods, but in general they follow a similar pattern:

  • The request for a money transfer is made. This starts with an Originator (an individual buying an item online) to their Originating Bank, credit card, or other financial institution. 
  • The issuing bank reads the request and, if the right data is submitted, will pass this information along to the next party; this next party also depends on the method, but in general, it will be through the SWIFT system or some financial exchange program. 
  • While the Originator might not see the ongoing transaction in the background, there is a lot that goes into making this process work. For cross border transactions, the Originating bank or credit card must be able to operate in that country so they would need to be pre-approved and eligible through the exchange service or the country. 
  • Since the process to send money isn’t exactly a free service, there are usually fees associated with this kind of charge.

Factors of the Global Payment System

There are several factors that matter for the payment systems, and each varies from country to country and process to process.


There are a number of stakeholders involved with the global payment system. These include stakeholders in each country, including banks and other financial institutions, but also reserve banks, individual account holders, approvers, and more. We talk about the different types of financial institutions in another blog; these are more examples of the stakeholders involved in the global payment system. Third-party vendors can also be a part of the payment systems.

In the U.S., Originating Depository Financial Institutions (ODFIs) and Receiving Depository Financial Institutions) communicate with each other in the process of ACH money transfers. They can also communicate with the debit payment processing systems and credit card payment processing systems in order to relay data and funds transfers. 

Not every stakeholder will take part as a global payment processor. In order to send money globally, you must be approved as an intermediary party who can facilitate payment processor functions between nations. This might include merchant to foreign customer transfers, credit card transactions, and international wire transfers. 

Timing of Money Transfers

The speed of money transfers is a huge factor now that APIs and increased financial technology can boost money transfer speed. Money transfers across internaitonal borders typically take longer to process because there are naturally more steps that the money and data need to go through in order to be completed. 

Additionally, there is usually an added layer of distance, time zones, language barriers, and regulation translation that is needed in order for the transfer to be a success. And of course, there is the aspect of financial conversion that a global payment processor needs to be able to complete.

Data Needed

Certain countries and payment systems need certain data in order for transfers to complete successfully. This data will vary based on the country, payment method, and other needs, but data will help the process in terms of eligibility and concerns. Luckily, a lot of the data transfer services can be completed easily with a payment infrastructure platform.

Compliance Factors

Compliance is mandatory in all respected payment systems because it allows the standards, methods, and regulations of the system to keep out the financial criminals. Compliance typically involves some level of ID verification and ongoing monitoring of activities to limit fraudulent behaviors. 

ID Verification and Eligibility

In addition to compliance reasons, most payment systems require ID verification and a certain level of eligibility in order to participate. For example, you can’t become part of a payment system in one country if you don’t have an eligible bank account there or have yet to reach a certain age. Eligibility helps to streamline payment systems and keep your payment system respectable. 

For example, in the U.S., individuals must go through Know Your Customer for ID verification.

Cost of Money Transfer

Finally, we have cost. The cost of money transfers depends on overhead, ongoing expenses, and fees introduced by external parties. Costs go up for international payments due to the number of stakeholders involved. These costs are volatile based on market fluctuations and other market infrastructures.

How APIs Fit Into the Current Payment Systems

As with the factors listed above, APIs and financial technology also play a supporting role in current payment systems. And as more API technology emerges, and we see stronger, more secure technology in the system, these APIs are already acting as crucial players in this system. 

APIs, or application programming interfaces, are bits of code that allow for the secure sharing of sensitive data. APIs operate through private and public keys and can connect to secure endpoints so that they can even transfer sensitive bank account data for financial remittance. 

Due to their security, APIs are perfect for financial services. They can connect to credit cards, online banks, and more to issue online payments, in-person payments (POS systems) and other money transfer technology services, including:

The current payment systems are not completely reliant on APIs, but we suspect they soon will be. APIs allow access to fast, secure, and affordable digital payment technology in the U.S. and abroad.   

Using Sila to Access the Global Payment System

With Sila, a software as a service, you can use our API codes to send and receive money in the U.S. and send global payments. With our secure API connections, including API and third-party vendors to complete ID verification and bank account linking, our clients can build a financial money transfer app capable of sending money to hundreds of countries all over the world. 

The world of global payment systems is vast and complicated, but it doesn’t have to be. With our global payment processing partner Thunes, Sila users can cut down on the cost it takes to send money globally and also reap the benefits of secure money transfer technology. 

Sila is software where you build the next fintech, not simply access it. Interested in becoming part of this global financial playground? Reach out to a Sila salesperson today!