Intermediary bank fees explained
What intermediary and correspondent banks do
Intermediary bank fees are charges taken by the banks that work between your bank and the one your recipient uses. They're also called correspondent bank fees, as these correspondents hold accounts for other banks and actually move the money along.
Your bank won't always have a direct tie to every foreign bank. Instead, a correspondent bank in the middle keeps accounts for both sides and moves payments between them. That bank may take its fee directly from the payment, so you don't see a separate charge but the recipient gets less than you sent.
Why deductions catch businesses out
Intermediary fees aren't usually a percentage, they're most often a fixed amount for each transfer. That might not seem like much on a high-value payment, but on a small invoice the deduction can take quite a bite. When your payment passes through several correspondents, the deductions add up and your recipient gets less than you expected.
Most of the time, the sender doesn't actually see these deductions. Your bank shows its own fee, but fees taken by banks in the middle usually aren't visible until your recipient tells you they received less. If your payment has the SHA or BEN code, these intermediary fees normally come out of the amount your recipient gets. You'll find more on that under OUR, SHA and BEN charges.
Practical ways to reduce or avoid deductions
- Choose the OUR code if you need your payment to arrive in full and accept covering the costs yourself.
- Ask your bank if it can use a specific correspondent or if there's a simpler route with fewer banks involved.
- Send the payment in your recipient's own currency, or to a local account, to keep the transfer inside just one banking system. More detail is at local account details for international payments.
- Use SWIFT gpi to trace your payment and check where fees were taken along the way.
Some businesses adjust their invoices to cover expected deductions, so the final amount received matches what’s due, this is sometimes called grossing up. If you do this or change fee handling, spell it out with your client before the payment is sent.
Frequently asked questions
Can I stop intermediary banks from taking fees?
No, you can't completely stop intermediary fees on a SWIFT transfer since the payment route depends on how the banks connect. But you can cut the chance of deductions by selecting the OUR code, looking for a shorter route, or sending the payment from a local account in the right currency. Payment tracking, such as with SWIFT gpi, will also show exactly where a deduction happens.
How can I tell if a payment was reduced by an intermediary bank?
If you compare the payment amount that left your account after your bank’s fee to what your recipient ultimately received, any difference apart from your own fee is probably a deduction from an intermediary or the receiving bank. Ask your recipient for the bank’s credit advice, this document will list the final amount credited along with any fees taken during the process.