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How to Avoid Intermediary Bank Fees

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Last editedJul 20222 min read

If your business collects payment from customers in international countries, you are likely to run across the issue of intermediary bank fees. The cost of wire transfers quickly adds up, between intermediary fees, currency conversion fees, and outgoing transfer fees. Fortunately, there are a few ways to cut the cost of cross-border payments – starting with how to avoid intermediary bank fees.

What is the intermediary bank in a wire transfer?

A wire transfer moves funds from one bank to another. On paper, it seems like there should only be two parties involved:

  1. The sending (remitting) bank

  2. The receiving (beneficiary) bank

However, when it comes to international bank transfers there are often additional parties involved. So, what is the intermediary bank in a wire transfer? This term refers to any third-party or additional banks that stand between the remitting and beneficiary banks. The intermediary or correspondent bank works as a middleman between the two endpoints, and its services are rarely free.

How do intermediary banks work?

The reason why intermediary banks are needed for many wire transfers is that two banks based in different countries don’t always have an existing financial relationship. They might work with different currencies and networks. You’ll essentially need a third-party bank that communicates effectively with both parties to translate and facilitate the transaction. Some international banks can handle direct transfers without the middleman. So, when is an intermediary bank required? You’re more likely to come across an intermediary bank if you’re sending or receiving money from a localized, domestic bank or credit union.

How do intermediary banks work in terms of fees? A single wire transfer might involve several intermediary banks, each one charging its own flat fee. This is just one of the reasons why wire transfers are such an expensive payment method for businesses.

How much are intermediary bank fees?

Fees will vary depending on the start and end point of the transfer. Intermediary banks used to route payments charge different fees depending on several factors including:

  • The payment currency

  • Beneficiary bank location and relationship

  • Remitting bank location and relationship

Intermediary bank fees might be a flat fee or a percentage of your transfer. While $20 might be a somewhat standard fee for large transfers, it can reach upwards of $100 or more. Another thing to keep in mind is that intermediary bank fees aren’t the only fee associated with international payments. You’ll also need to factor in:

  • Outgoing wire transfer fees

  • Currency conversion fees

  • Incoming international transfer fees

Be sure to look beyond the market exchange rate when calculating foreign currency costs. When banks convert currency, they’ll charge a markup to the interbank rate.

How to avoid wire transfer fees

Perhaps unsurprisingly, all these fees make international wire transfers a tough prospect for profit-minded businesses. In fact, 49% of businesses report being frustrated by the cost and hassle of collecting international payments. While you can’t avoid these fees entirely, there are many ways to cut down on the cost of international bank transfers.

One of the best ways to avoid wire transfer fees is by accepting payments in your local currency. For example, GoCardless allows businesses to collect recurring payments from over 30 countries from a single bank account and use local accounts to keep payments in the original currency. Another hassle associated with intermediary bank fees is the fact that they can vary so widely. With GoCardless, fees are kept transparent at the real FX rate. You’ll pay a flat 2% plus $0.25 per transaction, without any additional hidden charges. Save on the cost of international payments by using GoCardless to collect payment at the real exchange rate.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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