What Is an Intermediary Bank? How It Works & Fees Explained

If your international transfer arrived with a lower amount than sent, higher fees, or delays, an intermediary bank might be the reason.

These banks step in to help process international transfers when the sending and receiving banks don’t have a direct relationship. While necessary in some cases, their involvement can result in additional costs and longer processing times.

So, what exactly is an intermediary bank? Let’s take a closer look at what intermediary banks do, how they work, and how much they charge. We’ll also give tips on how you can avoid surprises on your next transfer.

An intermediary bank is a third-party bank that facilitates transfers between banks that don’t have a direct relationship, such as between a domestic bank and a foreign bank.  It acts as a go-between or middleman, commonly used in international transactions

Depending on the locations and banking networks involved, some transfers may pass through more than one intermediary bank, which can increase costs and processing time.

Retail bank customers usually don’t interact with intermediary banks, as these banks operate behind the scenes. However, customers may notice the influence of intermediary banks through added fees or delays in their transactions.

Intermediary banks are most often used when:

• The transfer is international, and the banks lack a relationship.
• Smaller banks are more likely to need intermediary banks. Conversely, Larger banks have extensive networks, including their own branches in different countries or partnerships with local banks, that can reduce their reliance on intermediary banks. 
• The sending bank routes the payment through the SWIFT network. Most international wire transfers go through the SWIFT network. 

Less frequently, intermediary banks might be involved in domestic transactions if the domestic banks involved don’t have any connection, are particularly small, or lack the infrastructure for certain types of transfers

In a cross-border transaction, money does not move directly between accounts. Instead, the sending bank instructs the receiving bank to credit the recipient’s account and later settle the balances owed.

If the sending bank (Bank A) has a direct relationship with the receiving bank (Bank B), the transfer is straightforward. Bank B can credit the recipient’s bank account immediately and settle the amount with Bank A.

But if they don’t, an intermediary bank steps in to bridge the gap. The intermediary receives the payment instruction from the sending bank and forwards it to the receiving bank.

In some cases, a transfer may pass through multiple intermediary banks, each deducting fees before passing the instruction along. This is why international transfers can arrive with reduced amounts or delays.

Intermediary banks tend to be among the world's largest banks. This is because, as intermediaries, they need connections to a vast number of accounts across many different countries in order to facilitate payments being routed between the initiating and receiving banks.

Examples include:

Each intermediary bank charges its own handling fee. When you initiate a transfer, you usually do not know how many intermediary banks will be involved or how much each one will charge exactly. 

On average, intermediary bank fees range from USD 15 to USD 30 per bank. This means you have fees on top of the sending and receiving bank fees. Considering that several intermediary banks can be involved in a singular transaction, banking fees can end up quite significant. 

• Number of banks involved: More intermediaries mean higher total payment processing fees.
• Route and location: Geographic location and banking relationships affect costs. Certain corridors have fewer direct relationships.
• Currency: Fees vary by currency pair. Major currencies such as USD, EUR, or GBP usually incur lower fees because they are widely traded. Less common or exotic currencies often have processing complexity and lead to higher fees.
• Amount:  Higher transfer amounts may attract higher fees, especially when fees are charged as a percentage, while smaller transfers often feel more expensive relative to the amount sent.
• Payment method: Fee structures differ between wire transfers and online payment platforms.

Either the remitter (sender) or the beneficiary (receiver) may pay the intermediary bank fees, or they may share the cost. Who pays the intermediary bank fees depends on the “details of charges” selected when the transfer is initiated.

There are three standard fee options:

With the OUR option, the sender covers all fees, including:

• Sending bank fees
• Receiving bank fees
• Any intermediary bank fees

Because banks don’t know in advance how many intermediary banks will be involved, they may charge the sender a fixed upfront fee, typically USD 60–70, based on average transfer costs. These fees are added to the transfer amount.

Example:
If you send USD 1,000, your account may be debited USD 1,070, and the recipient likely receives the full USD 1,000.

This option helps keep the amount received the same or close to the amount sent - a very useful factor to consider when paying suppliers.

With SHA, fees are split between the sender and the recipient:

• The sender pays their own bank’s fees (usually USD 15–30)
• The recipient pays the receiving bank and intermediary bank fees

The fee may also be deducted from the initial fund, so the amount received will be less than the amount sent.

Under BEN, the beneficiary pays all fees, including intermediary and receiving bank charges.

The sender will not have to pay any fees.

This means that the amount sent will be less than the amount received. By choosing this option, the difference between the amount sent and the amount received will be the greatest. 

To find the intermediary bank information for your transfer, you can contact your bank or the financial institution handling your payments through your relationship manager or their customer support channels. 

However, note that senders don’t need intermediary bank information to initiate a transfer. Intermediary banks operate behind the scenes, and you only need the beneficiary bank’s details to send money.

If you've made a transaction through SWIFT and want to track its path, request the document called “MT103”. The intermediary bank's information should be in an MT103 field named “56A”. 

Both "intermediary banks" and "correspondent banks" facilitate international financial transactions and are often used interchangeably, and there are only subtle differences.

In the US, correspondent banks are usually larger institutions that provide a wide range of services to other banks, often across multiple currencies, such as cash management or trade finance. In contrast, intermediary banks usually step in specifically to route a transfer, often in a single currency.

International fund transfers can be unpredictable due to intermediary bank fees and complex routing, especially for businesses sending or receiving money overseas.

If your company is registered in Hong Kong, Singapore, or the BVI, Statrys offers a simpler alternative. Statrys is not a bank, but a payment service provider providing a multi-currency account for business payments. 

With Statrys, you get:

✅Local business payments in 12 currencies, processed through local partners. There are no intermediary bank fees on local payments, so you can be sure the recipient will get the full amount

✅Fixed, transparent SWIFT fees when international wires are required. You can also track SWIFT payments in real-time. 

✅Multi-currency accounts to hold 11 major currencies, so you can choose to convert only when the rate is favourable.

✅Competitive exchange rate and currency conversion fees

✅A dedicated account manager and customer support via email, phone, WhatsApp, WeChat and email

✅Sync with Xero accounting software