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It isn't clear to me if OUR replaces the cost the receiver's bank charges its client for incoming transfers.

E.g. I have 2 banks, A and B in different countries, same currency. In a SHA I expect to pay:

  • A's remittance fee
  • B's receiving fee

but in an OUR I expect to pay:

  • A's remittance fee + some heavy blanket fee

In my case B's receiving fee is much lower (usually waived) than the OUR blanket fee, so am I getting ripped off by OUR transfers or is there more going on?

2

Take a simple example; In most transactions there are 3 to 4 bank involved.

  1. Bank A [Say charges are 5]
  2. Bank A's Correspondent [Say charges are 10]
  3. Bank B's Correspondent [Say charges are 10]
  4. Bank B [Say charges are 5]

When you want to make a payment of USD 1000

  • OUR: All Charges are borne by Bank A's Customer. If its a large corporate, Bank A will wait for the USD 1000 to reach Bank B. Each of the 3 banks will send out a message to Bank A and Bank A will consolidate all the charges and charge the large corporate at a later point in time. The beneficiary will receive USD 1000
  • Guaranteed OUR: On Retail customers, if Bank A charges at later point in time, they are not sure if the customer will still be banking with them / will have funds / to tedious to bill this separately and send a statement etc. So Bank A will make an assumption and levy a charge of USD 50. On some transactions they maybe charged back only 25 in some 75. So it evens out. The beneficiary will receive USD 1000
  • SHA: In this case, Bank A will charge customer separately 5+10. Move USD 1000 ahead. The Bank B's Correspondent will deduct 10 and send 990 to Bank B. Bank B may credit 985 or waive it and credit 990
  • BEN: In this case Bank A will transfer 995 to Bank A's Correspondent, Bank A's Correspondent will transfer 985 to Bank B's Correspondent, and Bank B's Correspondent would credit Bank B only 975. Bank B finally crediting beneficiary 970.
  • This is what I thought. But it doesn't seem fair banks have 2 different OUR versions, I'd much prefer the one where I don't get ripped off. Also do people (e.g. landlords) complain if they have to pay for their own bank's fees? SHA seems fairest, but I think the average recipient will feel stiffed if I don't OUR. – jiggunjer Oct 17 '17 at 11:45
  • Do landlords complain... This depends on what the contract says. Generally on known currencies pair and countries the guaranteed OUR is actual fees as it is known. The other option you can try is SHA, but put the amount as 1015 if you want to transfer 1000 – Dheer Oct 17 '17 at 13:05
0

No, you got it exactly right. With OUR, the sending bank covers all downstream fees, and because there are unknowns (depending on where you send to), they take a hefty blanket fee. Nothing else changes, it’s not faster or better in any way.
The same is true if you let the receiver bank cover it all (BEN); they also need to be prepared to pay an unknown fee to the sender bank, so the will have a blanket fee to cover the worst case.
Generally, SHA = share is the best choice - you pay twice, but each time only the normal fee, not including an ‘insurance for the unknown’.

Note that you will also pay a currency conversion fee (unless there is no conversion), in addition to the two bank’s fees, in all three cases.

  • 1
    I'm not sure why a BEN would have a blanket fee, since bank A could just deduct their fee from the amount sent. Then B deducts their fee. So in my example a BEN would cost me the same as a SHA. – jiggunjer Oct 17 '17 at 10:34
  • Then it would be a SHA and not a BEN - what would be the difference? BEN means the benefitor - the receiving bank - is the only one that touches your money, and it will have to be prepared to pay all intermediate banks’ fees from it afterwards. – Aganju Oct 17 '17 at 10:36
  • As jiggunjer has mentioned, on BEN, when the payment is initiated, the Bank deduct their charges and forward the payment less of charges. – Dheer Oct 17 '17 at 10:57
  • There is no difference because in my example I own A and B accounts. Of course from the perspective of a third party owning B it is different. – jiggunjer Oct 17 '17 at 11:38

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