When you want to make an international payment to a relatively unknown bank in another country, your bank may possibly require the transaction to be carried out via an intermediary bank. This intermediary bank is a financial institution that your bank knows and trusts in the payee’s country. But you can also use an intermediary bank yourself. Find out here when it’s best for you to do this, or not.
The system of intermediary banks in international payments
For international payments made to an account number in a small, local bank that your own bank is not familiar with and for which you don’t have a BIC code, your bank may ask you to work through an intermediary bank. This intermediary bank is located in the same payment area as your payee, but is one that is known to your bank. The intermediary bank then acts as a conduit between your bank and the bank that holds the account to which you wish to make a transfer. This is a way by which financial institutions try to combat fraud.
Be careful: it’s not free of charge!
Calling on the services of an intermediary bank may involve additional costs for the payer. That’s because he or she will also have to pay the payment charges levied by the intermediary bank.
That is why this method is mainly recommended for larger companies that make regular international payments. These companies often go to an intermediary bank with which they can agree a preferential rate. For smaller companies where smaller amounts are involved and these payments are less frequent, it’s not worth the effort.