Correspondent Banking and Payment Rails
You have a bank account. Your MSB can move money. But what the MSB can actually do with that account depends on the payment rails you have access to through your bank. Different rails enable different transaction types, reach different destinations, and cost different amounts. Understanding these rails and building a multi-rail infrastructure is essential to building a functional MSB business.
A payment rail is a network or infrastructure that enables the transmission of money from one place to another. Domestic rails move money within the US. International rails move money across borders. Some rails are real-time. Some settle in batches. Some are cheap. Some are expensive. An MSB's business model is largely determined by which rails it can access and what it costs to use them.
I opened my first MSB with access to exactly one payment rail: domestic wire transfers. That was it. I could take customer money, hold it, and move it via wire to the customer's destination. Wires were expensive ($15 per wire in 2003) and slow (24-48 hours), but they worked. That single rail was enough to build a $5 million per year business serving a concentrated geographic customer base.
Today's MSBs have access to many more rails: ACH, RTP, SWIFT, card networks, APIs to payment processors, and distributed ledger networks. But access to these rails is not automatic with a bank account. You have to request it, contract for it, and meet the bank's requirements to use it. Some rails are easy to access. Some are nearly impossible.
What Correspondent Banking Means for MSBs
Correspondent banking is the mechanism by which US banks enable each other and foreign banks to access the US payment system and move money internationally. When a foreign bank wants to receive a wire transfer payment from a US entity, it does not connect directly to the US Federal Reserve wire network (Fedwire). Instead, it maintains a correspondent account—basically a deposit account—with a US bank, and the US bank receives the wire transfer and credits it to the foreign bank's account. The foreign bank then credits the actual recipient's account at its own institution.
For US MSBs, correspondent banking works in reverse. An MSB in the US that wants to send money to a foreign country will send a wire to a correspondent account at a foreign bank (the MSB's bank maintains these accounts), and that foreign bank will credit the recipient.
The correspondent banking system is under strain. Major US banks are reducing their correspondent relationships with foreign banks because of compliance costs and regulatory pressure. This means that many destination countries are becoming harder to reach, and the cost of reaching them is going up.
For an MSB, correspondent banking matters because it determines which countries you can send money to and how much it costs. If your bank maintains correspondent relationships with fifty countries, you can effectively reach fifty countries. If your bank maintains correspondent relationships with ten countries, you can reach ten. If you want to reach countries where your bank does not have correspondents, you have limited options: you can work with a payment processor that has broader correspondent networks, you can partner with another MSB that has access to that country, or you can forego that corridor.
ACH Access and How to Get It
The Automated Clearing House (ACH) is the network used for domestic bank-to-bank transfers in the US. ACH transfers are cheap ($0.10 to $0.50 per transaction), relatively fast (one to two business days), and reliable. Most domestic money transmitter businesses rely heavily on ACH for settlement.
To use ACH, an MSB needs ACH origination access from its bank. This is not automatic. The bank has to explicitly approve the MSB to originate ACH transactions. Why? Because ACH transactions involve a reversibility risk: a customer can claim that an ACH transfer was unauthorized, and the transaction can be reversed, leaving the MSB holding the loss. The bank wants to ensure that the MSB has procedures in place to verify customer authorization and to handle reversals appropriately.
Getting ACH access usually requires providing the bank with documentation of your customer authorization procedures, your exception handling procedures, your chargeback dispute procedures, and your customer verification procedures. The bank wants to see that you verify customer identities, that you confirm customer authorization for transfers, and that you maintain records of that authorization.
ACH access also requires maintaining a minimum balance in your bank account. Many banks require ACH-originating accounts to maintain a balance between $25,000 and $100,000 as a reserve against reversals. This is not a fee, but it is a cost, because the bank usually does not pay interest on this balance.
Once you have ACH access, you can originate ACH transactions from your account. You can use ACH to move money from your account to customer accounts, to settle with agents, to withdraw funds from your deposit account, and to receive deposits from customers.
Wire Transfer Capabilities
Wire transfers (technically called Fedwire for domestic wires, SWIFT for international wires) are the other fundamental payment rail for MSBs. Wires are fast (same-day or next-day settlement), reliable, and can reach almost any destination in the world (through correspondent relationships). Wires are also expensive ($15 to $50 for domestic, $50 to $200 for international depending on destination).
Most banks that serve businesses will grant wire capability fairly readily, because wire transfers are standard banking infrastructure. But some banks restrict wire access for MSBs, particularly for international wires, because international wires create larger compliance and correspondent banking risks.
Getting wire access usually requires the same documentation as ACH access: customer authorization procedures, compliance procedures, and operational SOPs. The bank wants to verify that you have controls in place to prevent fraud and sanctions violations.
Wire transfers are essential for an MSB serving international corridors or handling large transactions. A $100,000 transaction is not practical via ACH because ACH limits are lower and because ACH takes multiple days. A wire settles in hours.
RTP (Real-Time Payments) and FedNow
The Federal Reserve launched FedNow in May 2023, creating a new domestic payment rail that settles transactions in seconds, available 24 hours a day, 7 days a week. This is distinct from ACH, which settles in batches, usually within one to two business days.
RTP (Real-Time Payments) is a network operated by The Clearing House, a private banking infrastructure company, that offers similar functionality: real-time settlement, 24/7 availability, minimal fees.
For MSBs, RTP and FedNow create new possibilities. An MSB can settle customer transfers in real-time, which improves customer experience and creates competitive advantage. But access to RTP and FedNow is limited. Not all banks participate yet. Those that do often restrict access to certain customer types and charge per-transaction fees that currently run $0.25 to $1.00 per transaction.
As of 2026, RTP and FedNow are still ramping up in terms of bank participation and MSB access, but they are becoming more available. If your business model requires fast settlement and if your customers expect near-instant transfers, RTP or FedNow access is increasingly important.
SWIFT Access for Cross-Border Operators
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the network used for international payments between banks. SWIFT itself does not move money; it moves messages about payments. The actual money settlement happens through correspondent accounts, but SWIFT messages coordinate it.
Direct SWIFT access (meaning your institution has a SWIFT code and can initiate SWIFT messages) is not available to most MSBs. SWIFT requires a banking license and membership in the SWIFT network, which is limited to banks and certain payment processors. MSBs access SWIFT indirectly through their banks.
An MSB's bank can send SWIFT messages on behalf of the MSB, allowing the MSB to send international wires. But this is not the same as direct SWIFT access. The bank is the actual SWIFT participant, and the MSB is the customer.
For international-focused MSBs, understanding SWIFT is important because SWIFT messaging determines how quickly, reliably, and cost-effectively your international transfers settle.
Payment Processor Relationships
Many MSBs do not rely exclusively on their bank's payment rails. Instead, they partner with payment processors that have their own infrastructure and rail access. A payment processor like Stripe, PayPal, Wise, or a specialized corridor processor can provide access to payment rails that the MSB's bank does not offer.
Payment processor relationships work like this: the MSB integrates the processor's API into its platform, the customer initiates a payment through the MSB's app or website, the payment is routed through the processor, the processor settles the payment, and the processor remits the proceeds to the MSB's bank account.
Payment processors can be cheaper than banks for certain transaction types (international transfers, for example). They can also provide access to destinations that the MSB's bank cannot reach. And they can provide real-time settlement on certain rails without the MSB having to develop its own infrastructure.
But payment processors come with costs. Processors charge per-transaction fees that are usually higher than bank fees. Processors also take margin (the difference between the rate the customer is quoted and the rate the processor actually pays). And processors have their own de-risking pressures, so an MSB relying on a processor faces the risk that the processor will exit the MSB's business model.
A sophisticated MSB will maintain relationships with both a bank (for stable, long-term access to fundamental payment rails) and payment processors (for specialized corridors, real-time settlement, and niche capabilities).
Card Network Access
Visa and Mastercard operate networks that enable merchants to accept card payments and that enable card issuers to offer payment cards. MSBs sometimes access card networks, either to issue prepaid cards to customers or to accept card payments from customers.
Card network access is not directly available to most MSBs. Instead, MSBs partner with payment processors or acquiring banks that have card network relationships. A payment processor will handle the mechanics of connecting to the card network, and the MSB pays the processor for this access.
Card-based payment corridors are becoming more popular for international remittances and cross-border payments, because they leverage an infrastructure that already exists and because they can be cheaper than traditional wire-based corridors for some destinations.
Building a Multi-Rail Payment Infrastructure
A mature MSB business usually relies on multiple payment rails, each serving specific purposes and customer segments. A typical multi-rail infrastructure might look like this:
ACH is the primary domestic rail. The MSB uses ACH for most domestic transfers, particularly those from bank account to bank account. ACH is cheap and reliable. The MSB's bank provides ACH origination access.
Wire transfer is the secondary domestic rail. The MSB uses wires for large transactions, for settlement with agents, for transactions where speed is important, and for customers who do not have bank accounts but who have access to wire transfer services. The MSB's bank provides wire capability.
RTP or FedNow is the emerging real-time rail. The MSB uses this for high-value customers who are willing to pay a premium for near-instant settlement or who demand immediate availability.
For international transactions, the MSB might use a combination of correspondent banking through the bank (for some corridors) and payment processors (for other corridors). The MSB might use multiple payment processors for the same destination to ensure redundancy.
For specialized corridors—like remittances to a particular country or payments to a particular region—the MSB might integrate directly with specialized providers (like a regional money transfer network or a blockchain-based payment protocol) to provide better pricing or features than the bank or general processors can offer.
Building this infrastructure requires technology investment, relationship management across multiple partners, and operational complexity. But it is what enables an MSB to serve diverse customer segments with appropriate pricing and settlement speed for each segment.
The Cost Structure of Different Payment Rails
Payment rail costs vary significantly by rail type and by transaction characteristics.
ACH is the cheapest domestic rail. Banks typically charge $0.10 to $0.50 per ACH transaction, which is effectively free at scale. If an MSB is processing 10,000 ACH transactions per month, the per-transaction cost is negligible.
Wire transfers are more expensive. Domestic wires cost $15 to $50 per transaction. International wires cost $50 to $200 per transaction depending on destination. At volume, these costs add up. An MSB processing 1,000 international wires per month at $100 per wire is spending $100,000 per month on wire fees.
RTP and FedNow are currently priced at $0.25 to $1.00 per transaction, which is more than ACH but less than wires. As these rails scale, pricing should decrease.
Payment processors typically charge higher per-transaction fees than banks, plus take margin on the currency conversion or corridor costs. A processor might charge 2 percent for an international transfer, compared to 0.5 percent margin at a bank with lower wire fees. But the processor might be cheaper overall because the processor's corridors are more efficient.
Card network costs include interchange fees (which go to the card issuer), network fees (which go to Visa or Mastercard), and processor fees. These can range from 2 percent to 8 percent of transaction value depending on the card type and processor.
Blockchain or distributed ledger rails for payments are theoretically cheaper (because they eliminate intermediaries), but they are not yet mainstream for most MSB use cases. They exist for specialized corridors (remittances to countries with high blockchain adoption, crypto-focused payments) but not as a primary MSB payment rail.
Understanding these costs is essential to pricing your MSB's services. If you are paying $100 per international wire and you are charging customers $110 per transfer, your margin is razor-thin. You need to either reduce the cost of the rail (by negotiating with your processor or bank), increase the customer price (which affects competitiveness), or shift your transaction mix to cheaper rails.