Payment Networks: What UK Businesses Need To Know
In this article, we will break down how payment networks work in the UK and what they mean for SMEs in the UK.
January 6, 2026
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Almost every modern transaction revolves around some type of payment network. From a customer tapping a card, to a shop paying an invoice online, to billions of dollars being sent in milliseconds across oceans in underwater cables that can be susceptible to shark bites, payment networks are everywhere. For those of us doing business in the UK, getting a solid grasp of the intricacies of payment networks.
What are payment networks?
A payment network is the system that routes money between the buyer’s bank and the seller’s bank. It's a third party that effectively makes sure that all payments are authorised, verified, settled, and conducted in a transparent manner that all parties are comfortable with. For example, when a customer taps a Visa card in a UK shop, the payment is sent through the Visa network to check approval and move funds from the customer’s bank to the merchant’s bank.
Some networks are domestic, such as the UK’s Faster Payments system. Others are international, such as card networks (Visa, Mastercard), Union Pay for China, and SWIFT for global transfers. Each network has its own rules, timelines, security standards, fees, and systems, which is why not all payment methods behave in the same way. SMEs rely on payment networks as they influence how cash flow is managed, how money moves in and out of the business, how easily customers can pay, and the administrative effort that goes into managing transactions. Again, it's important to note here that although these networks operate in the background, the way they route and settle payments has a huge influence on the operations of the business.
How do payment networks differ from payment processors?
Payment networks and payment processors work side by side. Payment networks are the rails that move money between banks and settle transactions, such as Visa or the UK’s Faster Payments system. Payment processors sit on top of those rails and handle the technical side of accepting and managing payments, like Stripe or Worldpay. Together, the processor manages the transaction, while the network makes sure the money actually moves.
How do payment networks work?
Payment networks move money between the payer’s bank and the recipient’s bank through a set, automated process. A payment is initiated, checked for approval and fraud, routed through the appropriate network, and then settled into the recipient’s account. The main difference between networks is how fast this happens and how many steps sit in the middle.
What happens behind the scenes during a transaction?
Not all payment networks operate the same way, but in the vast majority of cases, they work via the following flow.
1. Payment initiation
A customer taps a card, enters payment details online, or sends a bank transfer. Their bank receives the request to move funds.
2. Verification
The bank or card issuer checks the account balance, assesses fraud risk, and confirms that the payment should be allowed.
3. Network routing
The payment is sent through the appropriate network—such as Visa for card transactions or Faster Payments for bank transfers.
4. Settlement
The recipient’s bank receives the funds. Depending on the network, this can occur instantly or within one to three business days.
5. Reconciliation
On the business side, payments appear in statements or accounting systems and get matched against invoices or sales records.
This is all done autonomously, and none of the above steps require manual intervention. That being said, it's important to grasp the concept so that you can understand why some payments arrive in seconds, and some payments may take longer. There might be a problem in the overall process.
Types of payment networks: card, real-tim and global
Payment networks vary based on how they connect banks, how quickly they move money, and whether they support domestic or cross-border activity. UK businesses commonly interact with three categories of networks.
Each network serves a different purpose, and most UK SMEs use a combination of all three depending on customer needs and whether they operate domestically or internationally.
How UK consumers pay
Before choosing or implementing a payment network of choice, it's important to do due diligence on how people actually pay. You need to look at it from the mind of the customer first and foremost, then act accordingly. UK Finance data shows that card payments dominate everyday spending, while real-time account-to-account payments continue to grow. Cash is still used, but it now represents a much smaller share of total transactions. The chart below summarises the main payment methods used across the UK.
Benefits and challenges of using payment networks
Payment networks offer clear advantages for SMEs, but they also come with practical limitations that can influence how money flows through the business. The speed, cost, and reliability of each network affect everything from day-to-day cash availability to how smoothly customers can pay. Understanding both the strengths and trade-offs helps SMEs choose payment methods that support healthy cash flow while keeping admin fees and delays to a minimum. The following breakdown highlights the key benefits and challenges to consider.
Benefits and Challenges of Payment Networks
Payment networks in all shapes and sizes play an extremely important role in how SMEs move and manage money. Of course, the advantages are numerous; faster payments and customer acceptance, but it's not all smiles and cotton candy when it comes to payment networks. They do have some drawbacks.
BENEFITS
- Faster access to funds: Real-time networks speed up internal transfers and supplier payments, helping SMEs manage cash flow efficiently.
- Broad customer acceptance: Card networks allow customers to pay in familiar, trusted ways, reducing friction at checkout.
- Secure and regulated: All networks follow strict security standards, minimising fraud risk and protecting sensitive data.
- Automation opportunities: Many networks integrate with accounting tools, reducing manual reconciliation and admin time.
CHALLENGES
- Fees vary: Card networks may involve processing costs, while global payments can include intermediary bank fees.
- Settlement timing: Some networks settle instantly; others take days, affecting cash-flow planning and working capital.
- Cross-border complexity: Global networks often involve currency conversion and additional routing steps, increasing transfer times and costs.
Are real-time payment networks better for SMEs?
Real-time payment networks can be a strong fit for SMEs that need fast access to cash and flexibility in day-to-day operations. Instant settlement helps when paying suppliers, fixing payroll issues, or managing tight cash cycles. That said, transaction limits and bank participation can vary, and real-time rails do not replace card or international networks for every use case.
Choosing the right payment network for your business
Selecting the right payment network depends on your business model, customer habits, and cash-flow priorities. There is no single “best” network, only the one that fits your needs.
Some questions to consider:
- How quickly do you need to receive funds?
Real-time payments help during busy seasons or when cash flow is tight. - What payment methods do your customers expect?
A retail shop may prioritise card networks, while a B2B supplier may rely more heavily on bank transfers. - Do you trade internationally?
If so, global networks become essential, but expect longer settlement times. - What are your cost sensitivities?
Card payments include interchange fees; global payments include bank fees; real-time payments are often low-cost.
What to evaluate before choosing a payment option
When comparing networks, SMEs should look at the following:
These elements determine how easy and seamless your payment processes will be, both for your business and your customers. Solutions like iwocaPay’s B2B Buy Now Pay Later work alongside existing payment networks, helping businesses get paid faster while giving customers the flexibility to spread their payments.
Article Sources
- UK Finance – UK Payment Markets 2024 Summary
- ONS – Industry-to-industry payment flows, UK (2017–2024)
- UK Government – National Payments Vision
- ONS – Methodology: UK industry-to-industry monthly payments data (Bacs & FPS)
