For the past 700 years, processing payment transactions has largely relied on correspondent banking arrangements. Yet, this critical banking business has been unduly neglected by researchers. Much of the meagre literature on it has failed to provide a consistent definition of correspondent banking that clearly identifies protagonists, possible structures and differences to other forms of representation. Often the invention of correspondent banking is linked to the banking practice of Renaissance Italy. However, correspondent relations are much older. Thus a more comprehensive history of correspondent banking is needed. In addition, there has been a dearth of analytical work on the precise - and multi-faceted - market micro-structure of correspondent banking mechanisms to achieve international fund transfers. In this thesis, first, the scale of the correspondent banking model, its advantages and risks are laid out within the context of the current regulatory environment. Then the analytical framework, including new classifications and criteria, is developed to examine the nature, scope and significance of correspondent relationships. Based on this, an early history of correspondent banking is offered, which includes ancient and Arabic precedents that are often overlooked. Adopting a historical methodology and making use of important case studies, we contribute to filling the gap in the literature on market microstructure, offering a hitherto missing analysis of the various transaction and interaction modes in correspondent arrangements. This covers the role of agents, bills and other financial instruments used in correspondent transactions. One case study from the late 17th century, based on original archival work, involves the newly founded Bank of England. Established to raise money to fund a war and pay the troops abroad, we show it used international fund remittance methods that had been in operation well before the Bank of England was established - and on several occasions did not act as the principal source of the funds; instead, in key cases foreign correspondents were used. We conclude that a new classification of remittance payments is required that allows for transaction cycles, mainly involving bills of exchange and letters of credit.