Intermediary bank fees: why an overseas supplier can receive less

An international payment can leave your account for the correct amount and still arrive short. The missing amount may come from intermediary or recipient-bank fees, foreign exchange, or the charging instruction used for the transfer.

Understand that a SWIFT payment may pass through more than two banks

Your bank and the supplier's bank do not always have a direct correspondent relationship for the currency and destination involved. A payment can therefore pass through one or more intermediary banks. Those banks help route and settle the transfer, and a fee may be deducted somewhere in that chain. The sender can see a completed debit while the beneficiary sees a smaller credit.

This matters most when an invoice requires an exact net amount. If a supplier invoices USD 25,000 and receives USD 24,975, it may continue to show USD 25 outstanding even though your finance team initiated the full invoice value. The payment has not necessarily gone wrong technically. The commercial problem is that the parties did not agree who would absorb third-party bank charges.

Know what OUR and SHA mean before releasing the payment

International payment screens may offer charge instructions such as OUR or SHA. Broadly, OUR means the sender chooses to bear applicable bank charges, while SHA means charges are shared so the recipient may bear charges deducted from the payment. Availability and implementation vary by bank, currency and payment route, so the labels should not be treated as a guarantee without reading the provider's terms.

The FCA has highlighted intermediary and recipient-bank fees as an important part of international payment transparency. Its good-practice examples show that customers should be told when third-party charges may reduce the amount the recipient receives. Some providers offer an upfront charge intended to cover intermediary costs and help ensure a fixed amount arrives. Ask what the instruction actually guarantees on your specific route.

Separate transfer charges from the foreign-exchange cost

A low transfer fee does not mean a low-cost international payment. If pounds are converted to euros, dollars or another currency, the exchange rate can contain a margin over a reference or wholesale rate. The FCA has specifically warned against presenting a transfer as low-cost or "zero fee" where the provider earns money through an exchange-rate markup that is not clearly presented as a cost.

Use a two-line comparison. First calculate how much foreign currency the provider gives you for a fixed pound amount. Then add the transfer and third-party charges. For a large payment, a 1 percent difference in the exchange rate is £200 on £20,000 before any SWIFT fee is considered. The exchange rate can therefore matter far more than a visible £10 or £20 transfer charge.

Decide in advance who absorbs a shortfall on supplier invoices

Put the rule into purchase terms or supplier instructions instead of arguing after the payment. If the supplier requires the exact invoice value net of bank charges, the business may need to use an available sender-pays option or gross up the payment where appropriate. If charges are contractually shared, the supplier should know that the amount credited may be lower than the amount initiated.

Do not solve every historic shortfall by sending a second small international payment automatically. A £20 top-up can itself attract another transfer charge. Ask the supplier and the bank whether the deduction can be identified first. For recurring payments to the same beneficiary, record the route and actual received amount so the next transfer is based on evidence rather than guesswork.

Keep evidence from debit to beneficiary receipt

For material payments, retain the payment confirmation, amount sent, currency, exchange rate, fees charged by your provider, beneficiary details and payment reference. If the beneficiary reports a shortfall, ask for evidence of the amount credited and any bank charge shown on its statement. That creates a complete trail for bookkeeping and makes it easier to distinguish FX differences, sender fees and third-party deductions.

This also matters for invoice reconciliation. The accounting system may show a £20,000 supplier invoice fully paid because £20,000 left the bank, while the supplier ledger still shows a balance because a correspondent bank deducted a fee. Finance teams should record the commercial treatment consistently rather than leaving small unexplained balances across multiple suppliers.

Compare providers using the same real corridor and beneficiary

Do not compare international payment providers with generic phrases such as "competitive FX" or "low SWIFT fees". Pick a real route, for example £25,000 from the UK to a US supplier in dollars, and ask each provider for the amount converted, exchange rate, sender fee, expected intermediary charges, charging options and expected amount received. Repeat the comparison for the currencies that actually matter to the business.

Also ask what happens when a payment is delayed for compliance review or a beneficiary claims non-receipt. A cheap international transfer is not cheap if staff spend hours investigating it. The best route combines transparent pricing with predictable receipt, usable tracking and a support process that can trace exceptions quickly.