What is a correspondent bank?
Your bank has no office in Brazil. It has something better: a friend there who owes it a balance.
What the relationship actually is
A bank in India that wants to pay a supplier in Germany has a problem. It cannot hold euros at the European Central Bank, because it is not a European bank. It has no branch in Frankfurt. It has no licence to operate there.
So it opens an account at a bank that does have all three. That German bank is now its correspondent. The Indian bank keeps a euro balance sitting in Frankfurt, and when it needs to pay someone in Germany, it sends a message instructing its correspondent to reduce that balance and increase the recipient's.
Nothing physically travels. A number goes down in one ledger row and up in another, inside a single institution, and the border is never crossed by anything except the instruction.
Why the chain gets long
The awkward part is that no bank has a correspondent everywhere. A mid-sized bank in one country may have relationships with a dozen large banks, and those banks have relationships with others, and so a payment to an unusual destination gets routed through a chain rather than a single hop.
Each institution in that chain is a real business doing real work: it applies a fee, it runs its own compliance checks, and it takes its own view on whether the payment should proceed. Three intermediaries means three fees and three opportunities for someone to hold the payment for a question.
This is the mechanical reason an international transfer costs more and takes longer than a domestic one, and it is why the answer to "where is my money" is so often "at an institution neither the sender nor the receiver has ever heard of".
The relationship is shrinking, deliberately
Correspondent relationships have been closing for over a decade. The industry term is de-risking, and it means large banks ending relationships with smaller banks in markets where the compliance cost of monitoring them exceeds the revenue.
The consequence is uneven. Well-connected corridors got cheaper and faster. Poorly-connected ones lost hops entirely, which raises cost and sometimes removes the route altogether. When you read that remittances to a particular country became more expensive, this is usually the underlying cause, not greed at the retail end.
You want to send a parcel to a town where your courier does not operate. The courier hands it to a second firm at the border, which hands it to a third for the last stretch. The parcel arrives. Three firms handled it, three took a cut, and any one of them could have opened it and asked what was inside.
What the alternatives actually replace
Every "we do not use correspondent banking" claim is really a claim about pre-funding. A money transfer business that holds its own balance in both countries can pay out locally on one side and collect locally on the other, netting the difference later. The customer's money genuinely never crosses.
That is faster and cheaper, and it is also why those businesses need far more working capital than their size suggests. They have not removed the correspondent relationship. They have bought their way past it by holding the balances themselves.
Where you meet it
Every international transfer. Every "intermediary bank charges may apply" line in the small print. Every time a payment arrives a few units short of what was sent, and nobody at either end can tell you which institution took the difference.