Intermediary Banks Explained: How They Work & Fees (2025)
Have you ever wondered how intermediary banks quietly work behind the scenes to move your money across borders? Whether you’re a business owner, freelancer, or part of a finance team, understanding these middlemen can save you unexpected fees and delays—especially when dealing with global business transactions.
For more insights on complex cross-border operations, explore our What Is International Banking and How Does It Work? (Complete Guide).
What Is an Intermediary Bank?
An intermediary bank, sometimes called a correspondent bank, is a financial institution that sits between a sender’s bank and a receiver’s bank in an international wire transfer. Not all bank pairs have direct relationships; if your sending bank (often called the originator’s bank) doesn’t have a direct link to the receiving bank, it may enlist help from one or more intermediary banks.
Key Reasons They Exist
Global Reach: An intermediary bank typically has global ties, allowing it to convert multiple currencies and reach markets that smaller banks cannot.
Network Connectivity: Many regional banks lack direct credit lines or accounts with overseas counterparts. By relying on a well-connected bank (e.g., HSBC or Citibank), they tap into established international networks.
Compliance Support: Financial regulations vary across countries. Intermediary banks monitor transactions for suspicious activity, adhering to AML (Anti-Money Laundering) and KYC (Know Your Customer) policies.
Why Are Intermediary Banks Necessary?
Many assume a simple bank-to-bank route is all that’s needed for cross-border transfers. In reality, banks generally maintain direct relationships in only select countries. When a U.S. bank needs to send funds to a smaller bank in Southeast Asia, it often reaches out to a major global institution with a corresponding account in that region.
Industry Data
Over 70% of international payments still involve at least one intermediary bank, according to industry figures compiled in 2023.
The top five intermediary banks handle about 40% of global cross-border transactions, reflecting a high degree of market concentration.
If you want a deeper look at bank types and what each does best, check out our post on Types of Banks: How They Work & Who They’re Best For.
Key Steps in an International Wire Transfer
When you initiate an international transaction, several entities get involved. Here’s a streamlined overview:
Sender Initiates the Transfer
The originator asks their local bank to send funds abroad. This bank deducts an initial wire transfer fee or may add it to the transaction total.SWIFT Messaging
The sender’s bank sends a SWIFT message to the receiving bank, indicating where to send the funds. If no direct route exists, the payment flows through one or more intermediary banks.Intermediary Bank(s) Process the Funds
During this phase, additional fees (handling charges, currency spread, etc.) can be extracted by the intermediary.
Receiving Bank Credits the Recipient
Finally, the beneficiary’s bank places the funds in the receiver’s account—minus any of its own receiving fees.
To see how timing factors into each stage, our article on How Long Does a Wire Transfer Take? (Domestic vs. International) offers a deeper perspective.
The Role of SWIFT
Though often misunderstood as a payment network, SWIFT is actually a secure messaging system for financial institutions. It standardizes communication across more than 200 countries, including details on bank identifiers, currency codes, and reference numbers.
Additional Entities Involved
Aside from banks, foreign exchange brokers or non-bank providers sometimes step in to handle currency conversions before money even reaches the receiving bank. That arrangement can reduce conversion fees but may incur extra overhead if multiple parties join the process.
Typical Fees in Intermediary Banking
A frequent pain point with intermediary banks is the accumulation of fees. Because the transfer passes through extra hands, charges can surface at multiple spots.
Handling Fees
A base processing charge that might be a flat rate—often $15 to $30 per transaction, though some large banks charge more.Currency Conversion Markups
If the intermediary bank does the currency exchange, it typically applies a margin on top of the mid-market rate. In some cases, this margin eats up up to 80% of the total cost of the transfer.Lifting Fees
Other intermediary banks down the chain can tack on small charges as the funds move through their systems.
SWIFT Fees
This encompasses messaging costs along with any overhead for secure communications. These can be applied at both the sending and receiving ends.OUR, SHA, or BEN Options
OUR: The sender covers all the fees, so the recipient gets the full amount.
SHA: Both sender and recipient split charges.
BEN: The beneficiary shoulders all fees; the transfer arrives net of total charges.
High intermediary costs are precisely why businesses look for solutions that cut down the chain of intermediaries. If you’re navigating different transfer methods, see our resource on Differences Between Wire Transfers and Money Transfers for a clearer picture of your options.
Intermediary Banking Trends for 2025
Financial institutions worldwide are adapting to a changing environment. Rising compliance demands, technology innovations, and shifting deposit costs all influence how intermediary banks operate.
Non-bank Financial Intermediaries: Their share of global financial assets was 47% in 2022, down from over 50% in 2019, yet they remain robust players in cross-border flows.
Deposit Costs: Analysts estimate deposit costs will stay elevated at about 2.03% in 2025, causing banks to remain cautious with liquidity management.
Efficiency Ratio: The average global bank efficiency ratio hovers near **60%**—an indicator of ongoing expense management challenges, according to Deloitte’s financial outlook.
Credit Losses: Global credit losses could rise 7% to reach US$850 billion in 2025. This remains within the current risk appetite for most large banks, yet it prompts more thorough compliance measures.
Regulatory Stress Testing: The ECB will test nearly 96 directly supervised banks in 2025, representing 75% of euro-area banking assets.
Technological Shifts
Blockchain and other distributed ledger solutions are challenging the conventional multi-bank model by syncing real-time data across participants.
ISO 20022 adoption is expected to boost payment processing speed and transparency, improving the clarity around fees and reducing message errors.
(Sources: Federal Reserve and FDIC asset-size thresholds for 2025; Deloitte 2024-2025 banking industry outlook; S&P Global Ratings)
How Mural Pay Helps Businesses Reduce Friction
Traditional wire transfers often require intermediary banks. However, newer fintech solutions allow businesses to bypass multiple middle layers. Mural Pay is a prime example of a company offering business-first global payments that cut out most of the typical inefficiencies.
Reduced FX Costs: Instead of losing money through currency exchange markups, Mural Pay gives you access to near-real-rate conversions in 40+ currencies.
Instant Payouts: With local banking connections worldwide, Mural Pay processes cross-border transactions far quicker than standard SWIFT transfers.
Compliance Readiness: Full KYB/KYC procedures are in place to help with worldwide transfers without juggling multiple correspondents.
Stablecoin On/Off-Ramps: For emerging markets like LATAM, stablecoins can be a lifeline, letting businesses settle funds more predictably. Mural Pay facilitates direct fiat conversions around stablecoins—a niche that few traditional banks handle effectively.
If you’re exploring better options than conventional wire services, see our write-up, Top Wise Alternatives for Businesses (Compare Features & Fees), to see how Mural Pay stacks up against well-known providers.
Final Insights
Intermediary banks serve a pivotal role in cross-border payments but often insert extra fees and complexity into the process. With global banking costs likely to remain elevated through 2025—and regulatory oversight intensifying—businesses must plan their international payment strategies wisely. Ultimately, if you’re tired of old-school wire transfers, modern providers like Mural Pay can help lower costs, accelerate payments, and reduce compliance headaches.
Want more tips to keep your cross-border expenses minimal? Read our guide on Cheap Ways to Send Money Internationally (Edition) to explore additional cost-effective approaches.
References
Federal Reserve and FDIC. (2024). “Community Reinvestment Act Asset-Size Thresholds for 2025.” Available at: https://bankingjournal.aba.com/2024/12/agencies-announce-small-bank-intermediate-small-bank-asset-size-thresholds-for-2025/
Deloitte. (2024). “Banking Industry Outlook.” Available at: https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/banking-industry-outlook.html
S&P Global Ratings. (2023). “Global Bank Outlook 2025.” Available at: https://www.spglobal.com/_assets/documents/ratings/research/101608090.pdf
