Intermediary Bank Charge: How It Works & How to Avoid It?
TL;DR - Summary
- What is an intermediary bank charge? - An intermediary bank charge is a fee that a bank acting as a bridge between a sender's bank and a receiver's bank deducts from an international wire transfer, cutting the amount that reaches the recipient below what the sender sent.
- How much do intermediary bank charges typically cost? - Intermediary banks typically charge $15 to $50 per transaction per intermediary, so a transfer that passes through more than one intermediary bank loses money at each hop.
- How can Indian businesses avoid intermediary bank charges? - Indian businesses can avoid intermediary bank charges by using a virtual account provider like Skydo, which routes payments through local rails instead of the SWIFT intermediary chain and charges a flat fee instead.
- How does an intermediary bank work in a SWIFT transfer? - An intermediary bank receives a SWIFT message (an MT103) from the sender's bank, runs compliance checks, deducts its fee, and forwards the payment to the next bank in the chain until it reaches the recipient's bank.
What Are Intermediary Bank Charges?
An intermediary bank charge is the fee an intermediary bank deducts for routing and clearing an international wire transfer between a sender's bank and a receiver's bank that don't have a direct relationship with each other. SWIFT itself only carries the payment instructions; it doesn't move money, so the actual funds travel through a chain of correspondent and intermediary banks, and each one takes its fee out of the amount before forwarding what's left. On a $500 transfer routed through two intermediary banks charging $25 each, the recipient ends up with only $450, a 10% reduction from what was sent.
- Intermediary banks typically charge $15 to $50 per transaction per intermediary, and that fee is deducted directly from the transfer amount rather than billed separately, which is why it shows up as one of the hidden fees in international bank transfers that senders and recipients rarely see coming.
- The sender doesn't choose or arrange the intermediary bank. The routing happens behind the scenes, decided by whatever correspondent banking relationships already exist between the two banks involved.
💡 QUICK INSIGHT
A $3,000 invoice sent via SWIFT can arrive as $2,925 to $2,970 after intermediary deductions, and your FIRC reflects the lower credited amount, not your invoice value.
Who Pays Intermediary Bank Charges?
Who pays intermediary bank charges depends on the SWIFT fee instruction the sender selects when setting up the transfer, and it comes down to one of three options: OUR, SHA, or BEN. Under the most common default, SHA, the recipient absorbs the intermediary and receiving bank fees, which is why the credited amount usually comes in lower than the invoice.
OUR: Sender Pays All Fees
- Who pays: the sender pays all fees, including the sending bank's fee and every intermediary bank charge along the way.
- Impact on recipient: the recipient receives the full amount sent, with no deductions.
- Note: senders often pay an extra flat fee upfront to use this option.
SHA: Shared Fees (Default Option)
- Who pays: the sender pays only their own bank's outgoing wire fee; the recipient pays the intermediary bank fees and the receiving bank's incoming fee.
- Impact on recipient: intermediary banks deduct their fees directly from the transfer amount, so the recipient receives less money than what was originally sent.
- Note: SHA is the most common default setting used by banks globally.
BEN: Beneficiary Pays All Fees
- Who pays: the recipient covers all fees.
- Impact on recipient: sending fees, intermediary charges, and receiving fees are all subtracted from the transfer total before it hits the recipient's account, so they receive significantly less than the amount sent.
What Are the Components of Intermediary Bank Charges?
Intermediary bank charges aren't a single flat invoice. They're an accumulation of separate cost components deducted at different points in the payment chain, including routing fees, SWIFT network fees, FX margins, lifting charges, and a compounding multi-hop penalty when more than one intermediary is involved.
- Routing and handling fees: the basic service charge an intermediary bank levies for moving funds, typically a flat $10 to $30 per hop.
- SWIFT network fees: since banks move standardised messages like an MT103 rather than cash, an intermediary bank may charge a processing fee to validate and route the payment instruction through its own SWIFT gateway.
- Foreign Exchange (FX) margins and spreads: when money crosses currency lines mid-transit, the intermediary bank handling the conversion uses its own exchange rate instead of the mid-market rate, building in a markup of 1% to 3.5% on top, which is part of why banks differ from live FX rates in currency exchange.
- Lifting charges: a specialised processing fee for receiving and clearing foreign currency before local release, charged either as a flat fee or a percentage-based charge such as 0.1% of the total volume.
- The multi-hop penalty: large transfers to less common corridors can pass through two or three intermediary banks, and each one deducts its own routing fee independently, so the shortfalls compound with every hop.
- The no-central-directory problem: banks route payments dynamically based on liquidity and clearing hours, so the originating bank often can't predict which intermediary banks will handle the wire, making the exact final fee impossible to calculate in advance.
How Do Intermediary Bank Charges Affect Indian Business?
Intermediary bank charges affect Indian businesses by automatically deducting $15 to $30 per hop through the SWIFT network, which lowers the amount credited to the Indian recipient below the invoiced amount and creates knock-on problems in reconciliation, cash flow, and compliance.
- Revenue shrinkage: unannounced deductions mean Indian recipients collect less than the billed invoice amount, losing up to 5% or more once transaction fees and forex costs are combined across multiple transfers, part of the broader international bank transfer fees for freelancers in India.
- Reconciliation headaches: the credited amount and the invoice value don't match, forcing finance teams into manual troubleshooting to find where the shortfall occurred.
- Settlement delays: multi-tier correspondent routing adds 1 to 3 extra business days per transfer compared to a direct route, stalling working capital cycles.
- Obscured visibility: traditional SWIFT networks don't reveal exact routing fees until after the transaction completes, so the Indian receiver has no way to predict the final credited amount upfront.
- FIRA/FEMA compliance risk: when intermediary deductions reduce the credited amount below the invoice value, the FIRA (Foreign Inward Remittance Advice) or e-FIRC reflects the lower figure rather than the invoiced amount. This mismatch can create problems during GST refund claims or income tax assessments.
Intermediary charges are easy to miss because they are often taken out before the payment ever reaches you. Factor those deductions in when you decide how you receive international payments, not after the money lands short.
How Can Indian Businesses Avoid Intermediary Bank Charges?
Indian businesses can avoid intermediary bank charges by using a payment platform that routes inbound payments through local payment rails instead of the traditional SWIFT intermediary chain, since the charges exist only because there's no direct relationship between the sender's bank and the receiver's bank.
- Root cause: the missing direct relationship between the sender's bank and the receiver's bank is what creates the intermediary hop. Any solution that closes that gap, whether through direct correspondent ties or local virtual accounts, removes the hop entirely.
- Use a virtual account provider like Skydo: Skydo gives Indian freelancers and exporters virtual accounts in USD, GBP, EUR, SGD, AUD, and CAD, free of cost. The foreign client pays into a local-equivalent account in their own country, so the money never has to travel through SWIFT intermediaries to reach India, and the amount the client sends is the amount that arrives.
- Predictable flat fees instead of mystery deductions: Skydo charges $19 for payments under $2,000, $29 for payments between $2,000 and $10,000, and 0.3% for payments above $10,000, with no monthly fees and no hidden intermediary cuts.
- FIRC FIRA & FIRC compliance protected: because Skydo routes payments without intermediary deductions, the credited amount matches the invoice value, and every transaction comes with a free, digitally generated FIRA (Foreign Inward Remittance Advice), closing the compliance mismatch that SWIFT deductions can create.
- Settlement within 1 working day: unlike SWIFT transfers that can take 1 to 5 business days through multiple intermediary hops, Skydo settles within 1 working day, keeping cash flow predictable.
- Quick setup: onboarding takes 10 to 15 minutes, fully digital with automatic tracking, with no RM calls and no SWIFT copy chasing.
| Feature | Traditional SWIFT (inbound) | Skydo Virtual Account |
|---|---|---|
| Fee predictability | Unpredictable — varies by number of hops | Fixed flat fee per transaction |
| Intermediary involvement | 1–3 intermediary banks possible | No intermediary hops |
| FIRC/FIRA value | Reflects deducted (lower) amount | Reflects full invoice amount |
| Settlement time | 1–5 business days | Within 1 working day |
| Fee visibility | Revealed only after transfer completes | Known upfront |
How Does an Intermediary Bank Work in a SWIFT Transfer?
In a SWIFT transfer, the sender's bank first checks whether it has a direct relationship with the recipient's bank. If it doesn't, the bank routes the payment through an intermediary bank that has relationships with both sides, and that intermediary verifies the payment, deducts its fee, and forwards it on until the funds reach the recipient's bank.
- The sender's bank checks whether it has a direct relationship with the recipient's bank. If it does, the transfer is routed directly. If it doesn't, the bank identifies an intermediary bank that has relationships with both sides of the transaction.
- The sender's bank sends a SWIFT message, specifically an MT103 (the standard format for single customer credit transfers), to the intermediary bank with the full payment details.
- The intermediary bank verifies the transaction, runs compliance checks including AML (Anti-Money Laundering) and KYC (Know Your Customer) screening, deducts its fee, and forwards the payment to the next bank in the chain.
- If the transfer involves a currency conversion, the intermediary bank may handle this step, converting the funds at its own exchange rate before forwarding them.
- The recipient's bank finally receives the funds and credits them to the beneficiary's account.
A single wire transfer can involve more than one intermediary bank, and each one adds time and fees. The entire process can take 1 to 5 business days depending on the number of intermediaries, the currencies involved, and the compliance checks required at each stage.
A typical route for a US client paying an Indian freelancer looks like this:
How fees get deducted along a SWIFT payment to India
The US client's bank sends the payment.
The US client's bank sends the payment.
A US correspondent bank. Fee deducted
A US correspondent bank.
Fee deductedAn intermediary bank, possibly in a third country. Fee deducted
An intermediary bank, possibly in a third country.
Fee deductedThe India receiving bank. Fee deducted
The India receiving bank.
Fee deductedWhat is left lands in the Indian freelancer's account.
What is left lands in the Indian freelancer's account.
Each stop along that chain is a point where a fee can be taken out before the payment reaches its destination.
Intermediary banks are typically large banks with strong international presence, including names like HSBC, Citibank, Deutsche Bank, Barclays, Bank of America, Wells Fargo, JPMorgan Chase, BNP Paribas, and Standard Chartered, because they need to maintain global ties, handle multiple currencies, and support compliance across jurisdictions.
How do I get my intermediary bank details before a transfer?
Ask your bank directly; they can give you the intermediary bank's name, SWIFT/BIC code, and routing details. You can also request an MT103 document after the transfer completes, since it lists every bank in the chain along with the fee each one deducted.
Is an intermediary bank required for every SWIFT transfer to India?
How do I know which intermediary bank was used for my payment?
How much do intermediary bank charges typically cost?
What is an MT103 document and why does it matter for Indian recipients?
Can I instruct my foreign client to use a specific SWIFT charge code to protect my full payment?
