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How to Avoid Intermediary Bank Fees

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Last editedAug 20222 min read

Sending money overseas can be very expensive — and this is largely due to intermediary bank fees. Whether you're making international payments on a recurring basis or as a one-off, avoiding these fees can save you a lot of money.

In this post, we’ll take you through some of the ways you can bypass intermediary bank fees and make international payments more cheaply.

What are intermediary banks?

In order to understand why intermediary bank fees are so expensive, we need to understand the role that intermediary banks play in international money transfers.

With both domestic and international bank-to-bank transfers, there are at least two central parties involved: the remitting bank (which is sending the money) and the beneficiary bank (which is receiving the money).

What you might not be aware of, however, is that an intermediary correspondent bank is also required for international transfers. This is the case whether currency conversion is required or not. This intermediary bank acts as a kind of middleman between the remitting and beneficiary banks. They are most often required when two banks, usually from different countries, do not have any established connection or relationship. If you are sending money from or to a domestic-only bank, your transfer will most likely have to pass through an intermediary bank as well.

Internationally operating banks, meanwhile, may hold established relations with overseas banks which may mean your payment won’t be wired via an intermediary bank.

How much are intermediary bank fees?

Unfortunately, intermediary bank fees are not transparent, with neither remitting nor beneficiary banks being able to tell clients exactly how much the fees will be.

This is largely because the intermediary bank that will be used will vary according to the currency of the payment, the beneficiary bank as well as the destination country. Fees will also vary depending on the relationship an intermediary bank has with the relevant remitting/beneficiary bank. For example, if an intermediary bank is regularly used by either party, then the fees may be slightly lower.

On average, intermediary fees are between £12-25. However, this can vary greatly.

Remember that intermediary fees are fees additional to the bank's own charges for carrying out international transfers. This can make sending money overseas using traditional banks very costly indeed.

How to avoid intermediary bank fees

The best and simplest way to avoid intermediary bank fees for international wire transfers is using international money transfer providers. These providers simply debit one bank account locally using your payment then credit the beneficiary's bank account using a domestic transfer made from a bank account in that country in the local currency.

While these services do still incur fees, reputable providers will be fully transparent about costs, unlike with intermediary banks. They will also typically be lower than with regular banks. Examples of such providers include Moneycorp,TorFX and Currencies Direct.

If you are sending money or taking payments within Europe, you may also avoid paying intermediary fees by making a SEPA (Single Euro Payments Area) transfer. With SEPA, the fees are the same as a domestic transfer — which is typically free. A list of SEPA scheme countries can be found here.

Bear in mind, however, that you may still be subject to currency exchange fees if customers are transferring payments in Euros to a GBP account. In order to minimise currency exchange fees, you can either open a Euro-denominated account at your local UK bank, or use a peer-to-peer transfer platform, such as Wise.

If you’re a business owner that collects payments abroad, you may also benefit from GoCardless services. GoCardless allows businesses to collect payments from over 30 countries 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.

Article Sources

  1. https://www.europeanpaymentscouncil.eu/document-library/other/epc-list-sepa-scheme-countries

  2. https://www.moneycorp.com/en-gb/

  3. https://www.currenciesdirect.com/en

  4. https://www.torfx.com/

  5. https://wise.com/ 

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