Charges and foreign exchange

IN ONE LINE

Send the equivalent of 100 abroad, and the beneficiary — the person being paid — may receive 91.

Two forces eat the difference: fees and currency conversion.

Analogy: a parcel through several couriers.

Each courier in the chain can charge for its leg.

Either you prepay the whole journey, or you split costs with the recipient, or the recipient pays on delivery — three arrangements, three different amounts arriving.

Currency conversion is the second force: somewhere along the way your money is exchanged, like at a bureau de change, and the rate used includes a margin for whoever converts.

Neither force is hidden magic — both are recorded in the payment's details — but unless you know who charged what and where the conversion happened, the missing 9 looks like a mystery.

WHAT IT ACTUALLY IS

The payer is the ordering customer in classic terminology; the receiver is the beneficiary.

Between them, each institution in the chain may levy charges, and who bears them is set by the payment's charge option.

Three arrangements exist: the sender pays all charges, charges are shared — each side pays its own institution — or the beneficiary bears everything, in which case banks along the way may deduct fees from the amount itself.

The party responsible is called the charge bearer.

Foreign exchange is a separate decision: conversion can happen at the sending bank, an intermediary, or the receiving bank, and whichever institution converts applies its own rate, typically a market rate plus a margin.

Amount sent, amount converted, and amount delivered are three different numbers.

HOW IT WORKS

For operations, charges and conversion generate a steady stream of claims.

Beneficiaries complain about short payments; tracing the deductions means reading the charge details each bank recorded on its leg.

Corporates negotiate charging terms and escalate when a deducted fee breaks an exact-amount invoice.

Regulation constrains the menu in some corridors — within the European Economic Area, for example, shared charging is the standard arrangement for most payments — so not every option is always available.

Conversion disputes are thornier: the applied rate sits buried in the payment record, and 'your rate was worse than the internet rate' is a conversation every service team knows.

Institutions differ on where they convert and how they disclose margins, so learn your own bank's model first.

THE WORDS

Beneficiary

The party who ultimately receives the funds — the traditional SWIFT MT name for what ISO 20022 calls the creditor.

Ordering customer

The party who orders the payment — the traditional SWIFT MT name for what ISO 20022 calls the debtor.

READ FIRST

• Correspondent banking, nostro & vostro

CONNECTED TO

• MT103 MT103 — Single Customer Credit Transfer
• CHECKPOINT Payments basics checkpoint
• COMPARE OUR vs SHA vs BEN

SOURCES

• Swift Standards MT (annual standards releases) — Swift
• Payments Signal editorial teaching models — Payments Signal