Taxation & Compliance
Posted on Dec 1, 2025
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You send an invoice for $1,000. Your client pays on time.
But when the money finally lands in your bank account, it’s a little less than you expected; an intermediary bank is likely the reason.
So what exactly is an intermediary bank, when does it come into the picture, and how much can it really cost you?
Let’s break it down.
What is an intermediary bank?
An intermediary bank is a third-party bank that sits between your client’s bank and your bank to route an international transfer when the two don’t have a direct relationship.
Each intermediary in that chain can deduct a handling fee (typically $15–$50) and add its own FX spread, so freelancers often receive less than the amount on their invoice.
A typical flow can look like this:
Client’s Bank → Intermediary Bank → Your Bank → You
You don't see this intermediary step, but you pay for it. Each intermediary bank involved can deduct its own fee, reducing the amount you receive.
When Do Intermediary Banks Come Into the Picture?
Intermediary banks show up when the SWIFT network is used for international transfers. The following are some typical reasons for this:
1. No Direct Banking Relationship
Many banks don’t have a direct tie-up with every foreign bank.
So when your client’s bank needs to pay your bank, it routes the transfer through an intermediary bank that already has that connection.
2. No USD Clearing Partner
To send US dollars, a bank usually needs to use US payment systems such as Fedwire or CHIPS.
Most non-US banks don’t connect to these systems directly, so they use a large US intermediary bank to clear the USD leg.
3. Currency Conversion Needs Routing
If your client pays in EUR and you receive in INR, the payment may be routed through a third currency (often USD).
An intermediary bank handles that conversion and settlement before the funds reach India.
4. Global Reach
Banks rely on a small network of global intermediary banks, rather than maintaining thousands of one-to-one relationships, to reach different countries and currencies.
It’s faster for them, but it adds an extra routing layer for you.
5. Network Connectivity
Intermediary banks are at the centre of the international payment network,bridging gaps between banks, settling funds, and passing communications needed for secure, compliant cross-border transactions.
6. Compliance Support
Cross-border payments must pass checks like AML (Anti-Money Laundering) and KYC (Know Your Customer).
Large intermediary banks run these screenings for smaller banks, which is why banks continue to rely on intermediaries despite the associated costs and complexity.
Examples of Intermediary Banks
You usually won’t see these banks in your dashboard, but they’re often the ones sitting in the middle of SWIFT routes:
JPMorgan Chase
Citibank
Bank of America
HSBC
Standard Chartered
Types of Fees Associated with Intermediary Banks
Handling fees (also known as intermediary or correspondent fees):
This is a fixed fee charged by the intermediary bank for processing your international transfer. Fee amounts usually range from $15 to $50 per intermediary, depending on the banks and the specific route used.
Currency conversion fees / FX spread:
If the intermediary bank handles currency conversion (FX), it often applies a markup to the exchange rate, making it 2–4% less favourable than the mid-market rate.
Banks may add several percentage points to the FX cost, increasing your total charges.
Lifting charges( agent bank charges):
These are fees deducted by the receiving or intermediary bank when transferring the funds to the next bank. These usually range from $10 to $30 per transaction.
Incoming wire transfer fees (beneficiary bank):
Fee charged by your own bank in India while receiving an international SWIFT transfer (e.g., ₹300–₹1,000 per incoming wire).
These are separate from intermediary fees but stack on top of them.
What are the factors that impacts intermediary fees?
Number of banks involved: the more intermediaries, the higher the fees.
Currency and amount: Smaller payments or less liquid currencies and small tickets often incur higher proportional fees.
Payment corridors: Fees can rise for corridors that require additional compliance checks or use fewer trusted banking partners.
Payment method matters: SWIFT wires usually have the highest fees due to more intermediaries, while local systems such as ACH (USD), SEPA (EUR), and Faster Payments (GBP) can help you avoid intermediary bank fees.
How does intermediary bank fees eat into a freelancer’s income?
Intermediary bank fees may look small on a single transfer, but they compound into a significant loss over time.
Here’s the frustrating bit: intermediary bank fees are taken without any clear notice.
Typical deduction: $10–$30 per intermediary
No invoice or alert: These fees don’t appear on your or your client’s bank statement
Multiple intermediaries = multiple deductions.
Example: If an intermediary bank deducts $25 per payment, and you receive 10 international payments a month
That means:
Monthly loss: $25 × 10 = $250
Yearly loss: $250 × 12 = $3,000
In INR (₹83/USD) roughly ₹2,49,000 lost in a year
That’s why intermediary bank fees matter; they compound quietly and reduce what you earn over time.
How to Avoid Intermediary Bank Charges?
✔ 1. Use a provider that offers direct receiving accounts in major currencies.
This avoids the need for intermediary routing altogether.
✔ 2. Choose payment methods that don’t rely on legacy correspondent banks.
Examples: local ACH, Fedwire partners, SEPA, Faster Payments.
✔ 3. Send in the right currency.
Tell clients to send USD via ACH, GBP via Faster Payments, and EUR via SEPA — not SWIFT.
✔ 4. Share complete payment details with clients.
Missing details can lead to extra repair fees by other banks along the way.
✔ 5. Avoid banks that rely on US or EU partner banks for every corridor.
If your Indian bank uses a single US partner for all USD flows, you will always get intermediary fees.
Why Intermediary Bank Charges Matters for Freelancers?
You might already be under-pricing your work
Most freelancers quote based on the invoice amount, not the final amount received.
When intermediary bank deductions shave off 3–6% per payment, your real hourly rate drops without you noticing.Margins are thin
A few percentage points might not matter to a large firm, but they do to a freelancer.Tax and accounting become messy
Matching the invoices for income tax or GST reporting becomes extra work every month.You don’t control the fees
The bank makes the deduction in transit without you even realising it.
That’s why understanding intermediary bank charges and knowing how to avoid them matters for every freelancer getting paid internationally.
How Infinity Helps Freelancers with International Payments
Infinity offers a faster, more transparent alternative to traditional SWIFT transfers for Indian freelancers and businesses. Here is how Infinity helps freelancers deal with international payments:
✅ Virtual bank accounts in 50+ currencies
These accounts run on Infinity’s partnerships with regulated global and Indian banking partners, so funds move over local rails rather than long SWIFT routes with multiple intermediaries.
✅ No hidden intermediary deductions
Funds are sent end-to-end without intermediary fees, reducing the final amount you receive.
✅ Flat 0.5% all-in fee
Infinity charges just 0.5% (inclusive of all charges) as a transaction fee, one of the most competitive rates in the market.
✅ 24-hour settlement
Payments settle within 24 hours, whereas traditional methods typically take 2–5 working days to process international transfers.
✅ Automatic, free FIRA
Infinity automatically generates your FIRA (Foreign Inward Remittance Advice) at no extra cost after every successful transaction.
✅ Fully compliant
Infinity provides global payment services in partnership with RBI-regulated AD banks and operates as a compliance-first platform, following all applicable RBI, FEMA, and cross-border payment guidelines.
Comparison:Infinity vs Traditional Banks
Feature | Traditional bank (SWIFT) | Infinity |
Intermediary banks | 1–3 common on many corridors; multi‑hop chains frequent | Designed to avoid intermediaries by collecting locally |
Intermediary fees | Typically $15–$50 per intermediary; deducted from proceeds | None on local collections; transparent platform pricing |
FX markup | Often several percentage points off mid‑market | Offers live exchange rate without any FX markup |
Transparency | Low; fees visible only after credit; harder reconciliation | High; route and fees known upfront |
Speed | 1–5 business days; each hop adds delay | within 24-hours |
Intermediary banks may sit quietly in the background, but their fees and delays add up fast, especially when you’re getting paid internationally every month.
Infinity is built to eliminate those hidden intermediary bank deductions, so you receive the full amount, with transparent pricing and one-day settlements.
If you want a simpler, faster way to collect global payments, try Infinity for your next payment and keep more of your next invoice.
Sign up today!
Frequently Asked Questions
What is an intermediary bank?
An intermediary bank is a middle bank that helps move money between your client’s bank and your bank when they don’t have a direct relationship
How do I know if an intermediary bank is involved?
You usually won’t be told directly, but if the amount you receive is lower than what your client sent and there’s no clear fee breakdown, intermediary bank fees are likely the reason.
What fees do intermediary banks charge?
Yes, intermediary banks can charge handling, lifting and partner bank fees, and sometimes add FX-related costs; for India-linked transfers, these charges often come to around ₹1,500–₹4,000 per intermediary.
How can I avoid intermediary bank fees as a freelancer?
Yes, you can reduce them by using local virtual receiving accounts (so clients pay via USD ACH, EUR SEPA, or GBP Faster Payments instead of SWIFT), sharing complete payment details, avoiding SHA/BEN fee options, and comparing the invoice amount with what actually lands in your account.
What is the difference between an intermediary bank and a correspondent bank?
A correspondent bank is any foreign partner bank that holds accounts (Nostro/Vostro) for another bank, while an intermediary bank is the specific correspondent bank used in the routing path of your payment.
