What Is an Intermediary Bank and How Does It Work
You send $500 to a supplier overseas. They receive $453. No explanation, no warning, just a shortfall that neither of you expected. Somewhere between your bank and theirs, one or two intermediary banks quietly took their cut.
An intermediary bank is a third-party financial institution that sits in the middle of an international wire transfer when the sending bank and the receiving bank have no direct relationship. Most people don't know they exist until they see the missing money. This guide explains what intermediary banks do, how the fees work, how to find your intermediary bank's details, and what you can actually do to keep more of your money.
What Does an Intermediary Bank Do
Most banks around the world don't hold accounts with each other directly. A small regional bank in Vietnam and a community bank in Canada almost certainly have no bilateral relationship. When you ask your bank to send money abroad, it needs a way to route that payment to a banking system it isn't connected to. That's where the intermediary comes in.
An intermediary bank is a relay point in the international payment chain. It holds accounts with both the sending bank and the receiving bank, or connects through other intermediaries, and passes the funds along. The technical term for this arrangement is correspondent banking.
During an international wire transfer, an intermediary bank does several things at once:
- Routes the funds from the sender's bank through to the beneficiary bank across different countries
- Converts currency when the transaction involves two different currencies and the originating bank lacks direct conversion capability
- Checks regulatory compliance through anti-money laundering controls and sanctions screening at each hop
- Collects fees for bridging two otherwise disconnected banking systems
- Transmits SWIFT messages carrying payment instructions along the chain
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the messaging layer that connects banks globally. It doesn't move money itself. It sends standardized electronic messages between institutions telling them how and where to move funds. Intermediary banks are the nodes in this network, and every hop through one adds time, cost, and complexity to your wire transfer.
How Intermediary Banks Work Step by Step
The payment flow matters. Understanding it makes it much easier to track delays, diagnose fee deductions, and talk to your bank when something goes wrong.
From the moment you initiate an international wire transfer to when funds land in the recipient's bank account:
- You initiate the transfer. You instruct your bank to send funds abroad, providing the recipient's bank account number, SWIFT/BIC code, and banking details.
- Your bank generates a SWIFT message. Specifically an MT103, the standard single customer credit transfer, which contains all payment instructions.
- Your bank identifies the route. If it has a direct account with the recipient's bank, funds go straight there. If not, it forwards the MT103 to an intermediary bank it does have a relationship with.
- The intermediary bank processes the payment. It deducts its fee, converts currency if needed, then either sends funds to the beneficiary bank directly or passes them to another intermediary.
- The beneficiary bank receives the funds. It credits the recipient's account, sometimes after deducting its own incoming wire fee.
- The recipient gets the money. Depending on how many hops were involved, this takes 1 to 5 business days.
Each intermediary bank that touches the transaction adds its fee and its processing time. An international transfer from the US to Southeast Asia might pass through two intermediary banks, adding $30 to $100 in fees and two extra business days. The sender rarely gets a breakdown of where the deductions happened.
The MT103 document is your best tool for tracking a wire transfer. It's the official SWIFT record and contains the routing path, reference numbers, and fee instructions. If a transfer is delayed or the recipient got less than expected, request the MT103 from your bank. It shows the complete picture.
Intermediary Bank vs. Correspondent Bank
These two terms cause real confusion, even among people who work in banking. In practice they often refer to the same institution, but they describe it from different angles.
| Feature | Intermediary Bank | Correspondent Bank |
|---|---|---|
| Role | Routes a specific transaction in progress | Maintains an ongoing account relationship |
| Scope | Transaction-level involvement | Long-term institutional relationship |
| Direction | Often one-directional (for that transfer) | Bilateral, holds nostro/vostro accounts |
| Visibility | Named in that specific MT103 message | Listed in bank's standing instructions |
| When used | Describing a bank mid-transfer | Describing a standing banking arrangement |
A correspondent bank is a financial institution that maintains a long-term account relationship with another bank, typically holding a nostro account (an account held in a foreign currency at another bank) or a vostro account (an account a foreign bank holds with yours). That relationship is what makes cross-border routing possible.
An intermediary bank is what a correspondent bank becomes in the context of a specific transaction. When a payment flows through the correspondent bank on its way from sender to receiver, it's functioning as an intermediary. Same institution, different framing.
Concrete example: your bank has a correspondent relationship with JPMorgan Chase. When you send a USD wire, JPMorgan Chase acts as the intermediary bank for that specific transfer.
How Much Are Intermediary Bank Fees
Intermediary bank fees are among the least transparent costs in international banking. They're charged by institutions you never agreed to work with, for a service you didn't explicitly request. Because they're deducted from the transfer amount mid-chain, the recipient just receives less, with no obvious explanation.
Each intermediary bank typically charges between $15 and $50 per transaction. When an international transfer passes through two intermediary banks, which is common on less-traveled corridors, total intermediary fees alone can reach $30 to $100 on top of whatever your own bank charges to initiate the wire.
75% of SWIFT transfers involve at least one intermediary bank. For three out of four international wire transfers, there's a hidden deduction happening somewhere in the chain.
Fee types you'll encounter:
- Handling fee — flat charge for processing through the intermediary's system
- Lifting charge — fee deducted from the transfer amount directly by the intermediary, rather than charged upfront
- Currency conversion spread — markup on the exchange rate when currency changes hands at the intermediary level
- Incoming wire fee — sometimes charged by the beneficiary bank on top of everything else
Here's what the compounding looks like in practice. You send $1,000. Two intermediary banks each charge $25. The beneficiary bank adds a $15 incoming wire fee. Your recipient gets $935. That's a 6.5% loss with no line-item breakdown unless you specifically request the MT103.
Who Pays Intermediary Bank Fees: OUR, SHA, BEN
When you initiate an international wire transfer via SWIFT, you'll typically select a fee option. That choice determines who absorbs the intermediary bank fees along the chain.
| Option | Who Pays | Transfer Amount Arrives | Best For |
|---|---|---|---|
| OUR | Sender covers all fees | Full amount reaches recipient | Supplier payments, invoices with exact amounts |
| SHA | Sender pays sending bank; recipient pays intermediary fees | Slightly reduced | General transfers where recipient can absorb small deductions |
| BEN | Recipient covers all fees | Reduced by all bank charges | Rare; when sender wants minimal upfront cost |
OUR is the most predictable. You pay a higher upfront fee, typically $60 to $70 covering your bank's charge plus an estimate for intermediary costs, but the recipient gets the exact amount you specified. For business payments where invoice amounts are fixed, OUR is the cleanest option.
SHA (shared) splits the burden. You pay your sending bank's wire fee; the recipient's account gets reduced by whatever intermediary banks deduct along the way. This is the default on most personal transfers. The recipient often has no idea deductions are coming until the money arrives short.
BEN (beneficiary) puts the entire fee burden on the recipient. From a business relationship standpoint, this creates problems. Imagine a client tells you they sent $100 and $85 shows up. BEN is rarely appropriate for commercial payments.
One thing to know: even with OUR selected, some banks pass along unexpected deductions if actual intermediary costs exceed their estimate. Always confirm the exact fee structure before sending.
Examples of Major Intermediary Banks
Not every bank can function as an intermediary. It requires significant correspondent banking infrastructure, regulatory standing across multiple jurisdictions, and enough capital to process large transaction volumes daily. A small number of global financial institutions handle the majority of correspondent flows worldwide:
- Citibank — One of the dominant USD clearing banks globally, with a physical presence in over 90 countries and enormous volume in US dollar correspondent transactions.
- Deutsche Bank — A primary hub for EUR-denominated payments and a key intermediary bank for European corridors.
- HSBC — Strong particularly in Asia-Pacific, Middle East, and Africa. A frequent intermediary for transfers between Western banks and recipients in Southeast Asia.
- JPMorgan Chase — One of the largest USD correspondent banks in the world by volume.
- Bank of America — Major correspondent bank for USD payments, especially in Latin American corridors.
- Wells Fargo — Solid US correspondent banking network that appears frequently as an intermediary on domestic and international USD transfers.
Your bank selects the intermediary based on its existing correspondent relationships. You have no say in which intermediary bank handles your transfer, which is a big part of why the fees feel unpredictable.
How to Find Your Intermediary Bank Information
You'll often need to provide intermediary bank details when receiving an international wire transfer, especially if your bank isn't well-connected in the sender's country. Most people have no idea how to find this information. Here's how:
- Call your bank's wire transfer department. Ask specifically for their intermediary bank details for incoming USD (or whichever currency you expect). Many banks publish this, but buried in wire instruction PDFs.
- Check your bank's wire instructions page. Look for the section on incoming international wires for business customers. It should list the intermediary bank name, SWIFT/BIC code, and the account number your bank holds there.
- Request the MT103 for outgoing transfers. If you already sent a wire and want to trace what happened, ask your bank for the MT103 document. It shows every institution the payment passed through.
- Look up SWIFT/BIC codes. The SWIFT BIC directory lists financial institutions globally. If you know the intermediary bank's name, you can find its BIC code on swift.com.
- Ask the recipient's bank. For incoming transfers, the recipient's bank can usually tell the sender exactly which intermediary bank to route through for their specific currency and account type.
When providing your intermediary bank details to an overseas sender, they'll typically need:
- Intermediary bank name and full address
- Intermediary bank SWIFT/BIC code
- Your bank account number at the intermediary (the nostro account your bank holds there, not your own account number)
- ABA routing number for USD transfers in the US
Getting any of these wrong can delay the transfer, trigger a return, or cause funds to sit in limbo. When in doubt, call your bank and ask them to confirm the exact format for the specific sending country.
How to Reduce Intermediary Bank Fees
The intermediary banking system isn't going away. But there are practical ways to reduce what you pay, and on some corridors, avoid the costs altogether:
- Choose OUR for business payments. More expensive upfront, but your recipient gets the exact amount. Avoids disputes, especially on fixed-price invoices.
- Find banks with direct correspondent relationships. Some banks maintain direct accounts with foreign banks, cutting out one or more intermediary hops. Ask your bank how many intermediaries are typically involved on your specific corridor before you send.
- Use fintech platforms for personal transfers. Wise and Revolut bypass the traditional SWIFT intermediary chain on popular corridors by routing through local banking networks in each country. For personal international transfers, this is almost always cheaper.
- Batch your payments. Ten payments of $100 means ten sets of intermediary fees. Where possible, consolidate into fewer, larger transfers.
- Negotiate if you're a high-volume sender. Business customers sending significant monthly volumes can often negotiate reduced wire transfer fees or access to more direct correspondent relationships.
- Use crypto for cross-border B2B payments. Cryptocurrency transfers have no intermediary bank layer. The sender's wallet and the recipient's wallet transact directly on the blockchain, with no SWIFT involvement, no correspondent chain, and no hidden deductions.
Crypto as an Alternative to Intermediary Banks
The intermediary banking system exists because banks need trusted third parties to bridge relationships they don't have directly. Cryptocurrency removes that requirement entirely.
When a payment moves on a blockchain, there's no sender's bank, no intermediary bank, and no beneficiary bank in the path. The transaction goes from one wallet to another, validated by the network. Transfer times on modern networks range from seconds to a few minutes, against 1 to 5 business days for SWIFT transfers involving multiple hops.
For businesses making regular international transfers — supplier invoices, contractor payroll, marketplace settlements — the math is different. No $15 to $50 intermediary fees per transaction. No exchange rate markup applied mid-chain without your knowledge. No MT103 request needed to figure out where the money went.
Cross-border payments exceeded $190 trillion in 2023 and are projected to reach $290 trillion by 2030. A growing share of that volume is moving to crypto rails because the traditional correspondent banking system is expensive, slow, and genuinely hard to audit.
Plisio lets businesses accept and send payments in over 20 cryptocurrencies through a single integration, with no monthly fees and no intermediary chain. For businesses tired of watching 5 to 10% of their international payment volume disappear into correspondent banking fees, it's worth looking at.
The intermediary bank system is a structural feature of global banking, built to bridge a world where most financial institutions don't have direct relationships with each other. Understanding how it works, and what it costs, is the first step to managing it intelligently. Whether that means picking the right fee option, batching payments, or switching to a payment rail that bypasses intermediary banks entirely, the options are there.
