Intermediary Bank Fee

An intermediary bank fee is a charge taken by a bank that handles an international payment between the sending bank and the receiving bank. In a typical cross-border wire transfer, the money passes through one or more intermediary banks, often correspondents in the currency's home country, which process the payment and pass it on. Each may deduct a fee from the amount being transferred, so the beneficiary receives less than the sender sent. These fees are also called correspondent bank fees, lifting fees or intermediary charges.

Intermediary fees are one of the main reasons international bank transfers can be expensive and unpredictable. They are separate from the sending bank's fee, the receiving bank's fee and any exchange rate margin. How they are handled depends on the charge option chosen by the sender, described under OUR, SHA and BEN charge codes.

Many banks do not hold accounts with each other directly. To pay a beneficiary at another bank in a different country or currency, the sending bank uses its correspondent bank, which may in turn use another bank to reach the beneficiary's bank. Each bank in the chain performs work, including processing the message, screening for sanctions and anti-money laundering risks, and moving funds through local clearing systems, and charges for it. Fees are typically a fixed amount per payment rather than a percentage, which makes them especially costly for small transfers.

• OUR. The sender pays all charges, including intermediary fees. The sending bank usually charges an extra fee upfront to cover expected deductions, aiming for the beneficiary to receive the full amount. In practice, intermediaries sometimes still deduct fees, which may later be claimed from the sending bank.
• SHA (shared). The sender pays its own bank's fee, and the beneficiary bears the receiving bank's fee and any intermediary fees, which are deducted from the payment along the way. This is the default in many countries and, for payments within the European Economic Area, generally required.
• BEN. The beneficiary bears all charges, including the sending bank's fee, which is deducted from the amount before it is sent.

Each option is described in more detail in the entries on the OUR fee option, SHA fee option and BEN fee option.

For businesses, intermediary fees can cause short payments, where an invoice is not settled in full because deductions reduced the amount received. This creates reconciliation work and disputes between buyers and sellers. Exporters may ask buyers to use OUR to receive the full invoice amount. For individuals sending money to family abroad, deductions reduce the value of remittances, and unpredictable deductions make it hard to know how much will arrive. Fees are often not shown in advance, because the sending bank may not know which intermediaries will be used.

Industry initiatives have made intermediary fees more visible. SWIFT gpi requires participating banks to pass on details of fees deducted and allows senders to track where a payment is and how much has been taken. The richer data in ISO 20022 messages includes structured charge information. In the United States, the remittance transfer rule requires providers to disclose fees, including those imposed by intermediaries where known, for consumer remittances. The G20 programme for enhancing cross-border payments includes targets for transparency and cost that cover these charges.

• Choosing banks or providers with direct relationships in the destination currency, reducing the number of intermediaries.
• Sending in the beneficiary's local currency through a provider that pays out via local clearing, avoiding international correspondent chains.
• Using payment services that convert funds and make domestic payments in the destination country.
• Agreeing charge terms with trading partners and choosing OUR where the full amount must arrive.
• Holding multi-currency accounts to receive payments without conversion or extra intermediaries.

Critics argue that intermediary fees are poorly disclosed, unpredictable and disproportionately costly for small transfers, contributing to the high cost of remittances to developing countries. Banks counter that intermediaries bear real costs, especially for compliance. The growth of fintech providers using local payout networks, along with stablecoin settlement and linked instant payment systems, has increased pressure on banks to reduce or eliminate these charges.